In our input to the European Commission, PensionsEurope supports the Commission’s objective to simplify the life of taxpayers operating in the single market and we welcome the review of the VAT rules. In general, we believe all pension fund participants should be protected from unnecessary VAT burdens, regardless the character of the schemes as well as the Member State in which the services are being received. The current exemption for special investment funds should be extended to all pension schemes.
Even though the VAT exemption is in place, in some countries there is a stamp duty (for instance 4%) that is not subject or exempt from VAT and there is no possibility of any deduction. We urge the EC to recommend Member States to exempt (at least) pension schemes from this duty (or decrease their duty to no more than 1%).
Finally, we believe that establishing a cross-border investment-friendly tax environment in the EU not only requires removing unfair tax treatment but also introducing tax incentives.
In a press release issued today, PensionsEurope corrects the conclusions from Better Finance on the Bulgarian pension funds. Making use of incorrect data, Better Finance declares that Bulgarian private pensions have failed and goes as far as to recommend reversing the private pension reform of 2000 which means nationalising individual pension savings in Bulgaria. Not only would this have a detrimental effect on Bulgarian pensions, it also strongly contradicts with numerous European policy recommendations that highlight the importance of strengthening supplementary pensions in order for all Europeans to have adequate and sustainable income in old age. Read more in our press release.
PensionsEurope submitted its response to the ESAs’ survey on their mandatory templates of pre-contractual and periodic disclosures for products that “promote” ESG characteristics and products with sustainability objectives (articles 8, 11 and 9 of the Sustainable Finance Disclosure Regulation, SFDR).
In its response, PensionsEurope emphasises that a highly standardised presentation of the information in product disclosures is undesirable as the templates seem to be designed for classic investment products and are therefore not adequate for most pension plans. The proposed draft RTS and templates do not provide any differentiation between the various types of financial products, although SFDR requires the ESAs’ to take account of the various types of products and their characteristics when designing the new disclosure requirements and templates.
The response also draws attention to the need to simplify the templates and rejects the graphical representations proposed in the illustrative mock-ups as they would not adequately reflect IORPs’ investment strategies and would therefore be somehow misleading.
You can read our response to the ESAs' survey here.
PensionsEurope welcomes the ECB review of its monetary policy strategy which has undergone a process of gradual transformation since it was adopted in 1998. Today the euro area is facing various new economic challenges, such as the COVID-19 crisis, and there will be many new challenges to overcome in the upcoming years which need to be jointly tackled by monetary, economic, and fiscal policies.
As despite negative interest rates and QE programmes the ECB has not achieved its inflation target over the last years, possibly the ECB could be more flexibility around its inflation target and consider targeting price growth in a band, in full respect of the ECB’s price stability mandate as enshrined in the Treaty.
In general, we believe that unconventional monetary policies have had effect in many areas, including various positive and negative side effects. This applies for the economy at large, as well as for pension funds more specifically in the form of preventing a (severe) recession, realising relatively good returns but also substantially more expensive liabilities. You can read our input to the ECB review of its monetary policy strategy here.
PensionsEurope submitted its response to the ESAs' consultation on their joint draft RTS on ESG disclosures. You can read our response here.
The draft RTS will define the content, methodologies and presentation of disclosures under the Sustainable Finance Disclosure Regulation (SFDR). The most important elements under discussion in the draft RTS relate to the requirements on disclosures of principal adverse impacts (article 4 SFDR) and product pre-contractual disclosures (articles 8 and 9 SFDR).
PensionsEurope recognises there is a need to increase transparency in the field of sustainability risks and sustainable investment opportunities in order to mobilise capital from the financial services sector and foster the green transition. Notwithstanding this, the lack of flexibility of the new disclosure requirements raises concerns as a “one-size fits all” approach does not always reflect market realities and would not fit the information needs of pension funds’ members and beneficiaries.
PensionsEurope submitted its response to the European Commission consultation on the renewed sustainable finance strategy. You can find our comments here.
In this consultation, the Commission opens the debate on a broad range of relevant questions such as the potential extension of the EU Taxonomy to social objectives and the potential adoption of a Brown Taxonomy, the establishment of a common EU ESG database, as well as other issues related to sustainability ratings, ESG accounting standards, EU green bonds, benchmarks and potential actions to mitigate short termism.
The consultation also includes a section on the specific case of IORPs. In view of the review of the IORP II Directive planned in 2023, the consultation paves the way for the introduction of new mechanisms to further improve the integration of members’ and beneficiaries’ ESG preferences in the investment strategies and the management and governance of IORPs as well as other considerations to improve ESG integration and reporting beyond what is currently required by the regulatory framework.
On June 30, PensionsEurope submitted its feedback to the High-Level Forum CMU report. You can find our feedback here.
PensionsEurope submitted its comments to the EIOPA consultation on the PEPP ITS supervisory reporting and cooperation. You can find our comments here.
Together with various firms and institutional asset managers, PensionsEurope, Pensioenfederatie, iapf and Insurance and Pension Denmark submitted a joint response to the ESMA consultation on central clearing solution for pension schemes arrangements. The response highlights that if pension funds are required to clear their derivatives and to post cash as variation margin, we need to ensure that liquidity will be granted in the repo markets in times of market distress and set up collateral transformation arrangements with central banks. Central banks would provide a facility that would allow pension funds to transform high quality collateral to cash, at a haircut and cost. A high credit-quality, regulated entity would intermediate between pension funds and central banks. This entity could be an existing CCP, or any other regulated entity set up purely for this purpose
PensionsEurope responded to the European Commission’s consultation on the review of the Non-Financial Reporting Directive (NFRD).
The goal of the NFRD review consists of ensuring that companies disclose adequate ESG (Environmental, Social, and Governance) information on their activities. In particular, the review would ensure that pension funds as well as all investors have access to adequate non-financial information from investee companies to be able to take account of sustainability-related risks, opportunities and impacts in their investment decisions, such as required by the new regulatory framework on sustainable finance.
The whole framework on sustainable finance needs to adopt a holistic approach. There are significant gaps between companies' current reporting and the information financial institutions need to be able to comply with the obligations imposed by the Sustainable Finance Disclosures Regulation (SFDR) as well as the Taxonomy Regulation.
- The mandatory indicators to be used under adverse impact due diligence under SFDR should be reported by companies and stored in a central European database.
- Geographical reach: The Taxonomy and SFDR apply to the entire portfolio, NFRD only to EU companies. How will pension funds as well as all investors achieve the necessary ESG data on their non-EU investments?
- Timing gap: The new disclosure requirements for investors will be implemented in March 2021 while the legislative process on the reporting requirements for companies has just started.
A common standard for non-financial corporate reporting would be very helpful to satisfy the needs and obligations of the financial sector and enable the allocation of private capital to sustainable companies. Any common European ESG reporting standard should incorporate the principles and content of existing standards and frameworks.
It is necessary to differentiate different types of companies and to discuss the approach EU legislation should take:
- Companies which are capital-market-oriented should be required to provide a set of core data points and additional information specific to their sector, reflecting the respective company’s material ESG topics.
- The inclusion of large private companies could be useful, as ESG data can be particularly problematic to get in private equity investments. It is also problematic that most private equity funds are domiciled outside the EU.
- Non-listed small companies should be subject to non-binding guidelines to avoid onerous administrative burden.