In the paper on “The negative effects of a Financial Transaction Tax on pension provision”, published on 4 December 2015, PensionsEurope welcomes the EU institutions’ commitment to get Europe growing again, foster investments and create jobs. PensionsEurope supports the Capital Markets Union initiative as well as the Better Regulation agenda. PensionsEurope however feels that the Financial Transaction Tax (FTT) will be contra-productive in this respect.
The FTT is widely known as a tax on financial services. That is a misapprehension – it actually is a tax on savings and retirement incomes. The FTT will ultimately be paid by pension funds’ members and beneficiaries. The FTT would penalise the substantial transaction volumes of pension funds which are a result of the size of their assets under management, the need to match assets and liabilities and to mitigate risks, and not as a result of excessive search for return or risk-taking.
PensionsEurope call on the 11 Member States participating in the enhanced cooperation on the FTT to withdraw the initiative. Pension funds would at least need to be exempt in case that the withdrawal of the FTT proposal will prove to be unfeasible.
PensionsEurope launched on 4 November 2015 a Paper on the Pension Design Principles applied to modern Defined Contribution solutions.
The paper pinpoints three elements that are essential for the design of modern DC schemes, which consist in taking into account the employer’s and employee’s perspective on retirement benefits, following the pension design principles and applying these principles in a straw man model.
1. The employer’s and employee’s perspective on retirement benefits
The paper looks into the developments that have had an impact on occupational retirement provision in the recent years, including those related to the objectives of employers and employees.
2. The Pension Design Principles which are based on:
Employees need to have enough freedom to choose tailored pension solutions. The behavioural principles help achieve the balance between offering choice and ensuring that employees are protected against undesirable outcomes.
While absolute certainty is unobtainable in any form of retirement provision, a relatively stable level of retirement income is achievable with the right tools.
A DC scheme can offer risk sharing between members based on the risk-reducing benefits of diversification, economic efficiency and fairness.
3. A straw man model
The paper presents a model for the application of the pension design principles. This is achieved by first identifying the design criteria and subsequently following 6 steps, which consist in:
1: Understanding the needs of the members
2: Identifying the basic risks that the member is exposed to
3: Designing a default
4: Designing a choice architecture around the default
5: Monitoring outcomes
6: Implementing the model
Please find a press release here.
In July 2015 EIOPA published the Consultation Paper on the creation of a standardised Pan-European Personal Pension products, which relates back to the Call for Advice (CfA) DG FISMA sent to EIOPA on technical advice on an EU internal market for personal pension schemes or products (PPPs). PensionsEurope provided input to EIOPA, which can be found here.
A statement on PensionsEurope's response to the consultation can be found here.
PensionsEurope has responded to a European Commission’s consultation on the review of the European Market Infrastructure Regulation (EMIR). Here you can read our paper which explains that pension funds need a stable financial system. PensionsEurope sees the benefits of EMIR, however it is crucial that pension funds get an appropriate treatment. A robust solution needs to be found for the cash variation margin (VM) issue. Otherwise, applying EMIR towards pension funds will not increase the stability of the financial system, but will affect long term investments by PSAs and hence will increase the costs of pensions.
PensionsEurope calls on the Commission to maintain the exemption for pension funds from the central clearing obligation in place until a suitable clearing solution has been found. The market has not yet developed a practicable and efficient process for central clearing of pension scheme’s OTC derivative transactions. In addition to this, the existing exemption has not delivered a relief from mandatory clearing for three to six years as originally envisaged, as the clearing obligation is still not effective.
PensionsEurope is currently looking to reinforce its Brussels team with an economic adviser in a full-time permanent position.
For more information, take a look at our vacancies section or contact the pensionseurope secretariat.
Workplace pension funds play an important social role in the European economy: they contribute to ensure that European citizens have an adequate retirement income.
Pension funds are important investors in the European economy. Pension fund capital contributes – and could even more than today – to growth and jobs. Here you can read our paper which explains what should be done to increase the flow of capital to European projects and companies. You can also find our press release here
PensionsEurope welcomes the opportunity to reply to the “consultation on the Assessment Methodologies for Identifying Non-Bank Non-Insurer Global Systemically Important Financial Institutions - Proposed High-Level Framework and Specific Methodologies”, published on 4 March 2015 by the Financial Stability Board (“FSB”) and the International Organization of Securities Commissions (“IOSCO”).
Increasing long term investments in the real European economy is the core policy of the CMU initiative, and this means it is vital that the CMU works for pension funds. Many pension funds currently encounter barriers in the form of a mismatch between their own long-term investment horizons and the short-term focus of much of the regulatory framework. Furthermore, political and regulatory risks are a key source of uncertainty for investors and can undermine pension funds’ willingness to invest.
PensionsEurope’s position and response to the consultation explore these and other issues. Such as why and for whom pension funds invest. Under the right conditions, pension fund capital can contribute to the future growth of the EU real economy. However, this will only happen if EU policies take into account the characteristics of pension funds.
The current low-interest rate environment and the Quantitative Easing (QE) policy of the ECB put severe pressure on both Defined Benefit (DB) and Defined Contributions (DC) pensions funds. While PensionsEurope does not question the ECB monetary policy as such, we warn against the damaging impact of QE on pension funds and European pensioners. We therefore call the national and European regulators to consider this issue. PensionsEurope also provides some recommendations in order to find an adequate balance between the short/medium term challenging environment and the sustainability of pension promises.
You can find the paper here
In January 2015 EIOPA published the consultation paper report on Good Practices on individual transfers of supplementary occupational pension rights, which relates back to the Call for Advice (CfA) on portability EIOPA received from DG Employment and Social Affairs. PensionsEurope provided input to EIOPA, which can be found here