EIOPA published the results of 2019 IORP stress test on 17 December 2019, and you can read PensionsEurope press release here. The stress test results confirm IORPs’ countercyclical behaviour. It is important that legislation continues to allow that, as IORPs have an important role in stabilising financial markets.
PensionsEurope is happy that EIOPA also used the cash flow analysis approach to assess the financial position of IORPs, as it sheds new and more relevant light on the financial position of DB and hybrid schemes. It gives more insight in the timing and size of cash flows and can be related to economic indicators such as GDP and consumption.
PensionsEurope is willing and ready to provide its expertise to EIOPA to further define its stress testing methodology in order to address all specificities of the IORPs sector.
PensionsEurope paper on Good Decumulation of Defined Contribution Pension Plans throughout Europe, published on 10 December 2019, explores the pros and cons of decumulation options, both in cases where there is no (or very limited) choice available to members at retirement and cases where members have choice. It continues the series of PensionsEurope publications on DC issues which include Principles for Securing Good Outcomes for Members of Defined Contribution Pension Plans throughout Europe, Pension Design Principles applied to modern Defined Contribution solutions and Key Principles of Good Governance for Workplace Defined Contribution Pension Plans throughout Europe. These papers are addressed to regulators and policymakers across the EU, researchers, and not least to social partners and those running pension plans.
A large group of financial services trade associations— including PensionsEurope — has raised concerns in a joint letter to the European Commission regarding the current application timeline for new EU disclosure rules for sustainable investments and sustainability risks.
Yesterday EIOPA published four Opinions to assist National Competent Authorities (NCAs) in the implementation of the Institutions for Occupational Retirement Provisions - the IORP II Directive.
You can find PensionsEurope press release here.
PensionsEurope’s brochure “Europe needs to shift gears in pensions” contains PensionsEurope’s policy recommendations for the EU’s next 5-years programme by highlighting why supplementary pensions matter, and why and how EU policy needs to support supplementary pensions. It e.g. stresses that the EU should support the development and strengthening of supplementary pensions. Pension system design is a matter of national competence, but the EU should act as a facilitator to exchange information and best practices on how to ensure the long-term sustainability and adequacy of pension systems.
The brochure also contains various concrete proposals for the new EC. For instance, based on the outcome of the EC’s fitness check on the supervisory reporting, we expect concrete actions from the new EC. Furthermore, we invite the EC to include in its next 5-years programme our proposal on an EU tax register of recognised pension institutions. You can find our press release here.
PensionsEurope’s brochure on supervisory reporting discusses appropriate reporting requirements for pension funds. It stresses that relevant and comparable information about pensions in Europe is needed, but the requirements need to be fit for purpose, as all costs will ultimately be paid by pension fund members and/or any associated plan sponsor (the members’ employer).
Pension funds are, first and foremost, institutions with a social purpose active on the financial markets. Therefore, they cannot be compared directly to financial institutions such as banks and insurers. A one-size-fits-all approach to applying European legislation and supervisory requirements to pension funds would be detrimental as it would not consider the heterogeneity and complexity of the different combined first and second pillar systems.You can find the press release here.
Today the European Parliament adopted the text of the trilogue agreement on the EU Regulation on a Pan-European Personal Pension Product (PEPP). PensionsEurope welcomes the agreement reached by the EU legislators as we consider it well-balanced and meaningful.You can find our press release here.
PensionsEurope welcomes the endorsement earlier this week in the European Parliament’s Economic & Monetary Affairs (ECON) Committee of the PEPP Regulation negotiated with the EU Council. This follows the EU Council’s own approval that took place earlier in February.
PensionsEurope commends the work of the EU Council negotiators and MEP Sophie in’ t Veld, who have reached a balanced and meaningful consensus.
PEPP is a significant contribution to diversifying and strengthening Europe’s pension systems. It will be particularly important for those who do not have access to workplace pensions, as self-employed and workers in new forms of employment, or where personal pensions offered are not reliable or attractive.
PensionsEurope looks forward to the final approval of the PEPP Regulation by the Parliament’s plenary session, so that this product can help address Europe’s pension gap.
Matti Leppälä, Secretary General/CEO of PensionsEurope, said: ‘With PEPP the EU is delivering on Commission President Juncker’s promise to support citizens in retirement whilst increasing long-term funding of the EU economy. If technical measures complementing the PEPP Regulation are appropriately designed and allow all PEPP providers to build on the strengths of their business models, PEPP will bolster pension savings and long-term investment across the EU.’
Today on 13 February 2019, PensionsEurope published a brochure on cross-border pension funds that has been prepared by PensionsEurope Standing Committee DC. It explores (i) what is a cross-border occupational pension fund, (ii) how does a cross-border occupational pension fund practically work, (iii) what are the main pros and cons of a cross-border occupational pension fund, and (iv) a case study how a company would implement a cross-border occupational pension fund for its employees.
PensionsEurope brochure concludes that a cross-border DC occupational pension fund can be an efficient and innovative solution for multinational corporations with different local pension schemes in the EU. It can be an opportunity to improve overall cost efficiency and to better monitor the different pension schemes with more centralized management and oversight. In addition, it could also help multinational corporations to allow easier mobility of their employees. However, companies putting in place cross-border schemes have to be well prepared and/or supported to handle the implementation process which can be complex and lengthy.
Today on 11 February 2019, PensionsEurope published its annual statistics and Report on Pension Funds Statistics and Trends 2018, and you can find them here.
The tightening monetary policy attracts more investments in bonds, and this applies for pension funds as well. However, many pension funds have indicated that they do not expect significant changes to their investments in sovereign bonds, and in some countries these investments are even expected to continue to decline in spite of the increasing interest rates.
Pension funds have increasingly moved their assets to equities or (from equities) to alternatives or they have invested more in both equities and alternatives. In some other countries, there has been an increasing interest in illiquid assets (such as private debt, private equity, and real estate). Pension funds do not aim to make significant changes to the share of their investments in public equities in the upcoming years.
Pension funds’ stabilizing and countercyclical investment behavior is expected to continue. The main risks to this behavior are the growing popularity of low-cost passive investments (although the rebalancing/countercyclical behaviour could very well be continued) and the gradual shift towards DC/hybrid schemes instead of DB schemes (although many DC schemes pursue a lifecycle approach implying a countercyclical rebalancing strategy). Furthermore, legislative capital requirements or accounting rules may drive pension funds away from equities (including long-term sustainable investments) in favour of other investments (including sovereign bonds).