EU eyes pan-Europe personal pensions

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The European Commission is aiming to introduce standard personal pension products that could be sold across Europe.

A consultation launched today by the European Insurance and Occupational Pensions Authority considers new legal frameworks that aim to boost retirement savings, consumer protection and cross-border pension provision.

The Commission is planning to introduce a “second regime” of rules on product features and information disclosure and a “product passport” to allow providers easy access to multiple markets.

Eiopa says a “harmonised legal framework” for pan-European pension products should ensure a level playing field between providers, remove existing barriers to cross-border business and encourage people to save through multiple “pillars”.

However, Eiopa says it does not expect to standardise rules for decumulation products and will leave regulation to national bodies.

It says providers of pan-European products will need to be authorised by Eiopa. Firms who are not currently authorised under existing EU directives, such as Mifid II, could still sell the products, Eiopa adds.

The regime would exist in parallel with national personal pension laws, but Eiopa warns there is a risk of “regulatory arbitrage”.

It says there should be a common “high level investment policy” and a limited number of investment options within each pension product, including a default. In addition, unless there are guarantees, there should be a de-risking strategy for at least the default fund.

UK providers are currently redesigning default strategies originally constructed to target 25 per cent cash and annuity purchase at retirement.

In terms of distribution, Eiopa says the regime should be robust enough to allow widespread distribution over the internet and without advice. But it says investment options without guarantees or de-risking strategies “will need to be carefully considered” before being sold online or non-advised.

It also proposes the introduction of a “product passport” should will savers to buy a Pepp in one country and continue saving while in another.

Zurich principal of government and industry affairs Matthew Connell says the document is an “early stage exploration” that is probably more than four years away from implementation.

He says a key debate is how far the Commission wants to extend a standard framework.

He says: “There’s a decision to be made about how complete the standardisation should be in terms of harmonising. We’ve got enough harmonisation to produce fund management products, how much more harmonisation are we going to aim for to produce pension products?

“Will it be modest in just defining what investment approaches and member communications should look like and leave a lot to the member states, or be very ambitious and have a harmonised tax regime and labour laws?”

He adds other European legislation could conflict with Eiopa’s proposals and take pensions and investment rules away from each other.

He says: “If it goes in the direction this consultation seems to be pointing in, and the investment world goes in the direction that Mifid II and the insurance distribution directive are pointing in, you might get two very different worlds.

“One where it’s becoming easier and easier to buy pensions on the internet without advice, but harder to buy investments with advice – it’s an interesting trajectory.”

The consultation closes on 5 October 2015.