Brian Hayes MEP for Dublin today said that EU plans to develop to develop a pan-European personal pension product will assist in creating a genuine single market for pensions in Europe.
“The European Commission this week indicated that it is ready to proceed with plans for an EU-wide personal pension product. Personal pensions are different to State pensions (pillar 1) and occupational pensions (pillar 2) and represent the third pillar of our pension system. A pan-European personal pension product would be licensed to operate throughout the EU, operating as an alternative to current personal pensions which are regulated Member State by Member State.
“The EU’s pension authority (EIOPA) is currently conducting a consultation process with pension industry stakeholders to examine how a pan-European personal pension product could be developed. The European Commission’s pensions unit confirmed this week that they expect EIOPA to provide their final advice in early 2016, after which the Commission will start to develop its legislative proposal on a pan-European personal pension.
“A pan-European pension product would ensure that there is a level playing field for all pension providers across Europe and it would remove barriers for people who want to avail of pensions in different countries. Consumers would be able to shop around and get value-for-money products – essentially that’s why we have a single market. The biggest obstacle in this exercise is tax treatment – each Member State has different ways of applying tax to pensions and the EU has very limited competence in the area of tax. However, EIOPA hopes that a pan-European pension product could operate through a single and separate tax regime.
“If they get this right, a pan-European pension product could provide valuable benefits for consumers and for the stability of the EU’s financial system. A pan-European pension product would not be the silver bullet to the EU’s pension time bomb. But it would give consumers different investment options for retirement savings and could encourage citizens to develop their future.
“In Ireland, only 41% of the working population is covered by a private pension scheme, whether that is a workplace pension or a personal pension. About 900,000 private sector workers currently have no private pension plan in place and will be looking at the contributory state pension to provide for them in retirement.
“We should be looking to countries like Netherlands where about 90% of the population is covered by private pension schemes. In the Netherlands, although there is no general obligation to be a member of a workplace pension scheme, there is a system in place where there is mandatory participation in certain sector-wide pension schemes. This has led to a situation where pension assets in the Netherlands are worth about 130% of GDP. In Ireland pension assets are worth just over 40% of GDP.