UK pensions experts have given a distinctly lukewarm reaction to the latest EU plans for a pan-European pension product
Passing somewhat under the radar this side of the Channel, in early July the European Insurance and Occupational Pensions Authority published today a consultation paper on the creation of a standardised pan-European Personal Pension Product (Pepp).
The proposal is to encourage EU citizens to save for an adequate retirement income by creating a simple, transparent, cost-effective and trustworthy product.
To achieve this, Eiopa suggested the creation of a harmonised legal framework for an internal European market for Pepps, ensuring a level playing field between all providers by removing existing barriers to cross-border business.
The consultation period will end on 5 October and the process follows the European Commission asking Eiopa in July 2012 to develop technical advice on an EU internal market for personal pension products. This led to a discussion paper in May 2013 and a preliminary report in February 2014.
Eiopa intends to submit its final advice to the EC at the start of next year.
The National Association of Pension Funds’ EU policy lead James Walsh told FTAdviser the regulation of Group Personal Pensions is already pretty complex in the UK, so Eiopa should beware further muddying of the waters.
“It’s not clear what the demand will be for this product, as there will presumably still be national level tax barriers.”
He suggested that a legal framework would have to be created to overcome this problem, which in turn would have to be imposed in EU-wide legislation, so there are clearly “many more hoops that need to be jumped through”.
Steven Cameron, regulatory strategy director at Aegon, said: “While we understand the benefits in this initiative, there is a potential conflict between making changes that will help internationally mobile workers save continually into a personal pension while not adding complexity to individual countries’ domestic pensions legislation.”
Martin Tilley, director of technical services at Dentons Pension Management, said the proposal is for something “very bland”, with very limited investment options, capped and transparent charging structures, making it as simple as possible for the consumer to understand.
He noted that there was very limited mention of advice within the document, so it looks as if these would be direct to consumer products, with mention made of mandatory return guarantees, default funds and lifestyling investment mandates.
“From a provider perspective, I can see there is little if any input,” he opined, adding that if the proposals get off the ground, there is likely to be minimal impact on the UK market and advisers.
“I cannot see how, with the multi-jurisdictional tax policies of individual European countries, a consensus could be achieved to make this work.
“It’s a nice idea in principle, but destined I’d guess to not seeing the light of day, due to the non-consensus of taxation/benefit features of member states, the reliance of decision making by individuals and the lack of provision for advice.”
David Trenner, technical director at Intelligent Pensions, also doubted the paper’s relevance to the UK pensions advisory market.
“If we all used the euro and had harmonised tax laws, then this idea might be workable, but we do not. Who would explain to a customer that their €100,000 fund, which was worth about £90,000 a couple of years ago is now worth less than £70,000 - currency risk is a huge issue.”
peter.walker@ft.com
