Progress for the Pan European Pension Plan may be slow, but the status quo is not an option.

In our most recent post on the European Union’s pension system — “Putting PEPP in Retirement Planning” — we discussed the EU’s suggesting PEPP (the Pan European Pension Plan) last June. We also mentioned that, while the EU regulates PEPP across country borders and changes in statutory retirement ages and life expectancies, it continues to face challenges in getting all member countries to adopt it. 

In this post, we update the status of PEPP and highlight the latest PEPP-related information from the European Parliament’s Economic and Monetary Affairs Committee (ECON). (For precise language and details, the ECON working document is here.) We also provide a synopsis of information originally presented in IPE, the leading European publication for institutional investors and those running pension funds. 

Hills to Climb 

Dutch Member of the European Parliament Sophie In ‘t Veld, the person responsible for compiling and presenting that body’s reports, as well as leading and coordinating ECON’s work on the PEPP proposal, said: “There is broad support for the idea of PEPP, but the context is extremely complex and politically sensitive. … However, the status quo is not an option.” 

Nevertheless, the German occupational pension fund association (as an example) opposes PEPP in favor of expanding workplace pension provisions. Other countries are open to PEPP but question its design and feasibility. In still others, institutions for occupational retirement provision (IORPs) had exclusive rights to provide occupational pensions, which PEPP is not intended to jeopardize. Further, IORPs with exclusive rights would have an advantage over other providers. But excluding IORPs from providing PEPPs would reduce competition, diminish choice, and exclude experienced retirement providers. 

Brass Tax 

PEPP also faces discrepancies among EU countries about taxation. While everyone seems to agree that PEPP could (or should) include tax incentives to encourage contributions, incentives would add complexity and create opportunities for tax evasion. Both issues might be mitigated, if not resolved, with a multilateral tax agreement between participating member states or with EU instruments for exchanging and coordinating information. ECON has suggested that member countries offer tax relief. 

ECON also suggested that PEPP providers offer up to five investment options, including a default option to ensure capital protection. However, common standards and coordination of national supervisors by the European Insurance and Occupational Pensions Authority (EIOPA) have yet to be established or clarified. Stand by. 

While there is progress, it’s halting. We’ll help you keep track of it here. Or join in the discussion at our annual PENSCON 2018 Conference. To learn more or register, click here.