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Survey launched on pan-European pension

The European Insurance and Occupational Pensions Authority (EIOPA) has asked for feedback on the idea of a pan-European pension product (PEPP) and how this could be offered. 18 Nov 2015

EIOPA has published a survey asking the insurance and pensions sectors, plus the asset management industry, for their thoughts on the proposal.

EIOPA's ambition, it said, is to create a "simple, trustworthy, standardised and fully transparent PEPP in the format of a long-term retirement savings product". This would reduce costs and provide better returns to consumers by increasing economies of scale, it said.

Pension scheme expert Matthew de Ferrars of Pinsent Masons, the law firm behind Out-Law.com said: "Over the years EIOPA, and other European-level bodies, have pushed the concept of the pan-European pension plan, even sponsoring the set-up of one for academic researchers across Europe. However, the idea has consistently failed to gain traction with corporates and insurers, not least because of the differences in tax treatment of pensions and also social and labour law across member states. It will be interesting to see whether this latest survey will reveal an increased appetite for the continuing dream of the pan-European pension plan."

Pensions development expert Robin Ellison, also of Pinsent Masons, said: "Cross-border pension freedoms have been promoted for around thirty years. The EIOPA consultation is a useful addition to the debate, but it misses the point. It assumes that the impediment for multinational establishing cross-border personal and workplace pensions is that of the consumer-protection legislation. The only real impediments are in fact fiscal. Most tax authorities are already in breach of European Court of Justice decisions allowing people in one country to have pension provisions in another country. All that EIOPA needs to do is to enforce the existing freedoms, rather than introduce yet another raft of regulations – which is what it is exploring."

Simon Laight, also of Pinsent Masons said that there are, broadly, two different models for achieving a PEPP.

"Under model one, you treat the scheme as an extended regular UK platform where a person's wealth across several tax wrappers is managed on a pooled basis, with the platform tracking separately wealth relating to each wrapper. With PEPPs, there are simply more tax wrappers to track - the money in, growth and money out tax rules for each jurisdiction represent a wrapper," he said.

"Under model two, which is what the EIOPA survey is discussing, you seek common tax rules across all European jurisdictions that take part, meaning there is one wrapper only and wealth accrued in any participating jurisdiction is drawn in any other without having to apply radically different rules," Laight said.

"If UK moves to a ISA-style pensions tax system as mooted in the UK Treasury's green paper Strengthening the Incentive to save, we move away from, rather than towards, achieving model two. We might know more after the Autumn statement on 25 Nov," he said. 

Responses to the survey should contain a clear rationale for each answer and describe any alternatives that EIOPA should consider, the authority said. The deadline for responses is 30 November.

EIOPA published a consultation paper on the PEPP proposal in July. Harmonised rules would ensure a level playing field for all providers, remove barriers to cross-border business, and allow an approach combining state, workplace and personal pensions, EIOPA said.  

"Benefits could be expected both for providers of PEPPs (mainly through the possibility to target wide sections of the European working population with the same pension products) and for individuals (the standardisation of PEPPs would allow cost-effectiveness and the availability of value-for-money products)," EIOPA said in July.

In February EIOPA warned that consumers who buy insurance and pensions products online are at risk because they often do not do enough research and may sign up to contracts without knowing it.