BETTER FINANCE welcomes the European Commission’s intention to review the EU’s legal framework for supplementary pensions—the IORP II Directive and PEPP Regulation—as well as promote measures for the development of pension tracking systems and pension dashboards.
As BETTER FINANCE research has shown for years, the EU’s supplementary pensions landscape is characterised by pervasive underperformance. We, therefore, strongly support measures that would enable occupational and personal pension product providers to increase nominal performance for the benefit of their members and customers. Enhanced transparency on costs and risks, through the disclosure of reliable, actionable information in Pension Benefit Statements, annual statements, Key Information Documents and Pension Tracking Systems. Crucially, though, pension savers need to have the possibility to transfer their savings from underperforming schemes to those that offer better value-for-money.
On occupational pensions, we call upon the legislator to enhance the information disclosure requirements set upon IORPs and harmonise them further. On personal pensions, BETTER FINANCE remains a strong supporter of the PEPP, a product which, we believe, has the potential to constitute a competitive alternative to the crowd of overpriced, underperforming products currently shoved onto customers. To realise this potential, however, the PEPP needs to be simplified to the extent that it could be distributed online, without advice.
Automatic enrolment in occupational pensions, we believe, can contribute to increase occupational pensions coverage and get younger workers to start saving early for their retirement. Nevertheless, we urge caution upon imposing automatic enrolment before the right conditions are in place to make it acceptable, starting with the existence of high-performing, cost-efficient occupational pension systems.
We suggest looking at the reforms engaged in France by the “loi Pacte”, which made the “Plan Epargne Retraite” (PER) a success thanks to what we see as a few key factors:
- a universal contract, the PER, which is then adapted for use in different context (PERIN, PERCO, etc.) ;
- no mandatory subscription for personal pension products (PPPs), but incentives to start saving early and make regular contributions ;
- transparency on and a soft regulation of costs of products, enabling providers to offer a variety of solutions while allowing clients to compare these offers ;
- investment policies that integrate the long-term horizon of pension savings, the need for derisking and diversification ;
- various pay-out options ;
- the involvement of independent associations of pension savers in the governance of the products and;
- subjecting PER to value-for-money supervision.
We look forward to engaging with the European Commission, the EU legislator as well as national authorities in the Member States to continue the debate on the measures that would improve the outcome of supplementary pensions for all.