In its answer to the European Commission (EC) public consultation on the Capital Markets Union (CMU) mid-term review 2017, PensionsEurope lists numerous actions that the EC should take in order to complete the current CMU programme. Particularly, PensionsEurope gives policy recommendations on fostering long-term investments in infrastructure and real estate, on sustainable investments and on the use of derivatives to hedge risks. For example, PensionsEurope notes that there should be enough “big” investment opportunities available across Europe that match pension funds’ needs.
After two years from the publication of the EC’s green paper Building a capital markets union, PensionsEurope stresses that there is still a lot to do for the EC and Member States. PensionsEurope calls for them to remove all the remaining barriers to cross-border investment, and particularly:
- More standardization and transparent information would increase pension funds’ investments in alternative investments, such as: non-listed companies, private equity and debt, real estate, and infrastructure;
- The upcoming code of conduct on withholding tax (WHT) relief principles should be ambitious and PensionsEurope would also welcome a Directive in this field.
PensionsEurope highlights that legislation should never discourage long-term investments. Therefore, imposing inappropriate quantitative measures or capital requirements on pension funds, or imposing a short term risk free discount rate to value their liabilities would have negative effects on pension funds’ investment capabilities. Furthermore, because of negative consequences to the real economy and pensions, a Financial Transaction Tax (FTT) should not be introduced, or at least pension funds should be fully excluded from it.
As promoter of workplace pensions, PensionsEurope invites the EC to investigate how to increase the good implementation of the IORP II Directive in countries with low or no workplace pensions.
PensionsEurope welcomes that the European Commission provides an overview of the social acquis as well as of the current social policy challenges.In this respect, we would very much welcome a strong commitment at EU level to promote workplace pensions considering it already contributes to adequate benefit provision in Member States and should play an even larger role. PensionsEurope then supports policy measures aiming at increasing the access, the coverage and the attractiveness of workplace pensions.The right to be informed on future public pension benefits should be granted at EU Level, as a measure of transparency and as a way for citizens to take timely and informed decisions to cover their future needs.Particular attention should be paid to those who do not automatically have access to workplace pensions as more and more people are working as self-employed or short term working contracts. Good solutions have to be found to that regard.
At the same time we remind you that social and labour laws are an exclusive competence of the Member States. PensionsEurope thus recommends that the share of best practices between the Member States should be fostered trough for instance rejuvenating the Open Method of Coordination.
To consult the PensionsEurope contribution please click here
The obstacles with the withholding tax refund processes pose a major barrier to cross-border investments in the EU and to build the CMU. In order to boost the economic growth in the EU, PensionsEurope calls on the Member States and the European Commission to remove all the withholding tax barriers to cross-border investments.
PensionsEurope emphasizes that relief-at-source systems for the withholding tax are the most effective way to promote cross border investment and therefore calls upon the Commission to study the possibilities for a Directive to facilitate this, for amongst others pension funds, in the internal market. Meanwhile, PensionsEurope welcomes the initiative of the Commission to establish relief at source, quick and standardized refund procedures through best practices and a code of conduct. You can find PensionsEurope’s position paper and proposals on the Code of Conduct for withholding tax here.
Together with Centre for European Policy Studies PensionsEurope organises an event on ”Asset Allocation in a Low Interest Rate Environment: Where do we stand?“ in Brussels on 1 December 2016 at 13:00-14:30. The event is part of the Invest Week and you can find the agenda of the event here.
PensionsEurope’s representative in the event is Amundi’s Head of Global Research, Strategy and Analysis Mr Philippe Ithurbide. You can register to the event here.
Group of Nine published today a joint statement and broadly welcomed new rules for EU pension funds. Employer, worker and industry representatives from nine European umbrella organisations state that the IORP II Directive should help to reach the overall goal of the European Commission of facilitating the development of occupational retirement savings, promoting the integration within the Internal Market of the IORPs’ activities e.g. by clarifying the current rules, and providing the conditions for provision of sustainable and adequate occupational pensions to European workers.
The final plenary vote of the EP on the IORP II Directive has been scheduled for Thursday 24 November. Afterwards the Council of the EU still has to approve the new legislation before it is finally approved and published in the Official Journal of the European Union (probably at the beginning of 2017). The IORP II Directive shall enter into force on the twentieth day following that of its publication in the Official Journal. Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with the IORP II Directive by 24 months after the entry into force of the Directive.
PensionsEurope welcomes the European Commission’s works on an EU initiative in the field of personal pensions as a way to increase the overall pension savings and also as one of the building blocks of the Capital Market Union.
PensionsEurope promotes good pensions for the people in Europe in different shapes and forms. Most of the retirement income is and will continue to be provided by social security pensions and workplace pensions but voluntary personal pensions are particularly needed and useful for those who don’t have access to workplace pensions or where personal pensions offered are not reliable or attractive.
PensionsEurope believes that a standardised pan-European personal pension product regulated by a second regime - with a defined set of flexible elements - could contribute to the policy objectives of ensuring of high minimum standard of consumer protection. It appears as a much more feasible way and would promise superior outcomes than harmonizing regimes.
The impact of any EU initiative on personal pensions is likely to depend on the maturity of the markets: It would be particularly useful serving as a model for EU countries currently building up their complementary pension savings system and could also help enhancing the quality of products in more developed markets.
PensionsEurope believes that a supportive tax treatment is essential for the attractiveness of personal pension products compared to other saving products available at national level and that a Personal Pension initiative must respect the exclusive competence of the Member States in the field of taxation and of statutory public pensions. You can find our answer to the consultation here.
The ESRB should not impose a bank-bias approach to other financial sectors, PensionsEurope e.g. stresses in its answer to the EC consultation on the EU macro-prudential framework. The current structure and organisation of the ESRB does not ensure that the ESRB is an independent body.
Policy coordination of the ECB and the ESRB with the EC, the EP, and Council should be improved to ensure financial stability. However, PensionsEurope urges to refrain from using tools or implementing measures beyond banking without evidence of systemic risk.
Due to their long-term investment perspective, pension funds pose low risk to global financial stability. Pension funds’ main investment choices are not significantly affected by temporary fluctuations of the markets. In addition to this, the regulatory framework requires that pension funds are transparent, low leveraged and diversified with prudence.
Secondly, pension funds have limited short-term liquidity needs, which make them more inclined to buy and hold assets across the entire economic cycle. They also have an ability to behave counter-cyclical. As pension funds pose no systemic risk, there is no need to include pension funds in the ESRB work.
Furthermore, PensionsEurope stresses that the impact of QE on pension funds needs further investigation and statistical reporting requirements should be coordinated. PensionsEurope does not see the merits of the envisaged ECB Regulation on statistical reporting requirements for pension funds.
7 October 2016 - The Norwegian government plans to introduce a simplified Solvency II requirement for pension funds in January 2018. PensionsEurope warns that Solvency capital requirements at national or at EU level would have significant negative impacts on pension funds, sponsors, and members. They significantly increase pension funds’ costs and decrease their possibilities to invest long term in real economy and to contribute to jobs and growth in Europe. Furthermore, they decrease the willingness of employers to provide occupational pension schemes, and therefore, also the future coverage of occupational pension schemes. You can read the press release here
PensionsEurope has submitted its response to the Financial Stability Board’s (FSB) consultation paper on proposed policy recommendations to address structural vulnerabilities for asset management activities.
PensionsEurope welcomed the FSB’s statement that pension funds contribute to the stability of the financial system thanks to their long term horizon and due to the fact that their investment choices are not significantly affected by temporary fluctuations of the markets.
Some asset managers seems to generalize or overestimate the risk that pension funds could pose to the financial system and request the FSB and IOSCO to also include pension funds in the NBNI-work. We note that pension funds are - as opposed to asset managers - subject to extensive regulatory (prudential) oversight, based on the European IORP Directive and on national regulations. Controlling the assets does not mean that pension funds reallocate assets in a non-prudent manner or are a source of systemic risk.
In Europe, in its first European IORP Stress Test Report conducted in 2015 with the objective among others aims of asssessing the potential for systemic risk that may be posed by financial institutions to increase in situations of stress, the European Insurance and Occupational Pensions Authority (EIOPA) recognised that IORPs do not pose systemic risk, but vice versa, they are able to mitigate financial shocks and work as stabilising factor for the financial sector.
You can read the document here.
The plenary vote in the European Parliament on the IORP II Directive has been scheduled for October 2016. In its brochure published on 26 September 2016, PensionsEurope recommends the MEPs to vote in favour of the modernised rules for pension funds. PensionsEurope shares the goal of the rules to facilitate the development of occupational retirement savings and to provide sustainable and adequate occupational pensions to the European citizens. PensionsEurope looks forward to sharing the best practices on the implementation of the IORP II Directive. You can find the brochure here.