In its feedback to the European commission, PensionsEurope welcomes the Commission’s roadmap on the new EU system for the avoidance of double taxation and prevention of tax abuse in the field of withholding taxes (WHT). We support the current Commission´s mandate call for removing all barriers to the completion of the Capital Markets Union (CMU) – particularly in the field of simplifying taxation.
PensionsEurope agrees with the objective that a standardised relief at source system becomes the principal mechanism for WHT relief procedures and their streamlining. We have stressed for a long time that the relief at source is the best practice for pension funds. We warmly welcome the action of the Commission ‘Action Plan for fair and simple taxation supporting the recovery strategy’ to introduce a common, standardised EU-wide system for withholding tax relief at source.
However, there are also many other recent WHT proposals which the EC should thoroughly consider. PensionsEurope has proposed to the Commission to establish an EU tax register of recognised pension institutions in order that Member States can reciprocally and automatically recognise pension institutions. Furthermore, in many countries pension institutions invest cross border via specialised investments funds and/or vehicles to increase the economies of scale, and it is important to ensure a tax-neutral treatment of these investment structures as well.
Today, PensionsEurope sent a letter to Commissioner Mairead McGuinness on pension scheme arrangements' (PSAs) clearing with the UK CCPs. In that letter, PensionsEurope requested the Commission to grant one year extension to the current equivalence decision in relation to UK CCPs. In exchange, PSAs are willing to continue actively reducing their exposures to UK CCPs, and open and hold active accounts within the EU based CCPs. You can read the letter here.
In the joint stakeholder feedback by PensionsEurope & AEIP to EIOPA Discussion Paper on a Methodological Framework for Stress-Testing IORPs, we make recommendations on the toolbox of common methodological principles and guidelines but also suggestions for its use in the next IORP stress test exercise in 2022. We support the consideration by EIOPA of the creation of a toolbox and believe that it can allow introducing further proportionality and create a better cost-benefit ratio by considering the specific pension scheme/IORP characteristics in different Member States.
In general, we welcome the EIOPA paper as it recognises the heterogeneity of the IORP sector, the important characteristics of IORPs, and multiple and various criteria for future IORP stress tests. Particularly we support developing cash flow analysis further, as cash flows are the starting point of many tools. For almost all methods mentioned in the EIOPA paper, IORPs would have to use the underlying cash flows to perform the calculations.
PensionsEurope welcomes the opportunity to comment on the consultation regarding the EFRAG Due Process Procedures on EU Sustainability Reporting Standard-Setting.
The European Commission’s proposal for a Corporate Sustainability Reporting Directive (CSRD) envisages the adoption of EU sustainability reporting standards (ESRS). The proposal for a CSRD requires that EFRAG’s Technical Advice is prepared with ‘proper due process, public oversight and transparency, and with the expertise of relevant stakeholders.
Climate change is a pressing political issue that requires swift political action. We note that this urgency is reflected in the consultation paper as well. However, we would like to stress the importance of leaving stakeholders sufficient time to respond to public consultations.
Moreover, the development of sustainability reporting standards is linked to the development of the European Single Access Point. Content-wise, the two projects should be consistent. As a result, we expect regular exchanges ensuring this consistency as well as reaping synergies in the process of developing the future EU Sustainability Reporting Standard. Read our response here.
PensionsEurope welcomes the European Commission’s initiative to assist the EU and Member States in monitoring the adequacy and sustainability of pension systems at macro-level through the development of a pension dashboard. We also support the development of national PTSs and the European Tracking Service project, as we believe that the PTS can be a very powerful tool to make people aware of their financial situation for the old age and can help them to take the right financial decisions. We stress that the PTS is one important element in a retirement system, and it should of course be accompanied by other measures fostering good retirement provisions.
PensionsEurope welcomes the opportunity to comment on the IFRS Foundation Exposure draft (ED) which proposes amendments to the IFRS Foundation Constitution that would enable the creation of a new sustainability standards board under the governance of the Foundation. PensionsEurope believes that broadening the scope of the IFRS to include non-financial / sustainable reporting standards is a step in the right direction both from the perspective of international companies as well as pension funds. Considering that the IFRS sets international accounting and reporting standards, this can ensure comparability in this area between different jurisdictions.
PensionsEurope welcomes the initiatives and the proposed amendments and will continue monitoring the new relevant developments and initiatives. You can read our comments here.
PensionsEurope submitted its feedback on the proposal of the EU Corporate Sustainable Reporting Directive (CSRD). IORPs as investors are users of the data which companies will be required to provide under the legislative proposal for a Corporate Sustainability Reporting Directive.
PensionsEurope is pleased that the intention is to create consistency between the Taxonomy Regulation and the Sustainable Finance Disclosure Regulation (SFDR) on the one hand and the Corporate Sustainability Reporting Directive and the future sustainable reporting standards on the other.
We welcome the clear link with the SFRD in the CSRD proposal. The SFRD introduces reporting requirements on principal adverse impacts (PAIs) along with a broad set of 18 quantitative and qualitative indicators. Therefore, the financial sector essentially is required to report on information that does not yet need to be made public by companies. This means that pension funds will need to obtain information, partially based on estimates, from specialized data providers. As a result, data sets can diverge significantly and come at a significant cost.
For the implementation of the responsible investment policy and own reporting obligations under the SFDR, pension funds need information on the companies they invest in across the spectrum of asset categories. The majority of these investments are in listed companies that would have already been subject to reporting under the NFRD, but some other investments may be brought in scope. This applies to private equity investments and smaller listed companies. It is good to note that a very significant share of investments is located in the US or emerging markets and these will remain out of scope.
We welcome the extension of the scope as it helps to develop responsible investment strategies in areas where data may still be lacking, such as private equity. At the same time, broad coverage of companies should not come at the expense of the depth of information.
To conclude, PensionsEurope supports the introduction of the European Single Access Point and we support the proposal’s requirement for the limited assurance of sustainability reporting. You can read our feedback here.
PensionsEurope welcomes the EC Communication which aims to take next steps in the EU Sustainable Finance Strategy. Private finance has an important role to play in the recovery from the COVID pandemic and in the transition to a sustainable economy.
The new strategy is calling for the publication of a report for activities which sounds like a “brown taxonomy”. PensionsEurope believes that while a brown taxonomy would provide further indications concerning environmental risks, its development might produce negative consequences, especially if not complemented by consistent indicators promoting the greening of enterprises.
Pension Funds also worry on how double materiality may be regulated. The IORP II Directive already requires IORPs to consider ESG risks and disclose information to current and prospective. PensionsEurope believe that the IORP II Directive clarifies that the measures should be proportionate to the nature, scale and complexity of the IORP. Any EU action has to be in accordance with the principle of proportionality and it would also be preferable for any action to take first into consideration the upcoming revision of the IORP II Directive. You can read our press release here
In our input to EIOPA, we find it important that financial entities can be unequivocally identified, and we agree that it would be useful to have one worldwide identifier for that purpose. PensionsEurope would like to thank EIOPA for having considered proportionality in its draft guidelines on the use of Legal Entity Identifier, and we agree with the EIOPA proposal.
In general, we find proportionality of the utmost importance when introducing any new requirements to IORPs. Particularly the current low/negative yield environment has made small IORPs very sensitive to any additional fixed costs, on top of the already existing investment, administration, governance, and communication costs.
Today, the PensionsEurope Board of Directors accepted Svensk Försäkring (Insurance Sweden) as its newest member. Svensk Försäkring is the industry organisation for insurance and occupational pensions companies in Sweden. They have about 50 member companies representing more than 90 percent of the Swedish insurance and occupational pensions market. Recent developments in the Swedish occupational pensions market due to the Swedish implementation of the IORP II Directive have triggered the decision by Svensk Försäkring to join PensionsEurope. Read more in our press release here.