The European Fund and Asset Management Association (Efama) has published its proposals for advancing the role of funds in the area of pensions or long term savings, as the landscape changes significantly across Europe in response to regulatory and legislative changes.
The Association’s recommendations are published in a report – Towards a Single Market for European Personal Pensions: building blocks for an EU framework – in which it argues for a standardised pension product across the region, which is proposes be called the European Personal Pension.
The report follows work done by the European Insurance and Occupational Pensions Authority (Eiopa) to create a single market in personal pensions, and follows a previous report published by Efama on the Officially Certified European Retirement Product (OCERP).
Peter De Proft (pictured), director general of Efama, said: “The idea of a European Personal Pension – if implemented with an EU passport for cross-border selling – holds significant promises in the contribution it can bring to the Capital Markets Union project, and to the European Commission’s broader goals to stimulate jobs and growth creation in the EU as well as retirement savings. Efama is eager and well-placed to participate in such an ambitious project. We believe our industry has a crucial role to play in this initiative which has the potential to significantly improve the well-being of European citizens.”
Key points noted by the report include:
- A survey used in the report shows that 100% of asset managers would want to take part in the European Personal Pension market as providers of investment solutions, and that one-third of these would also wish to act as distributors.
- Such a market would equally help personal pension providers operating on a cross-border basis to achieve economies of scale, as is cleared from the survey: 94% of the respondents would centralize investment management and 65% would centralise the administration function.
- A framework for an EU-wide personal pension product has real potential to achieve a more efficient environment for personal pensions, enhancing the choice between different types of pension products and providers.
- By removing barriers for cross-borders flows of pension savings, the creation of a European Personal Pension would contribute to a well-functioning Capital Markets Union and enhance the flow of capital to long-term investment projects.
- Finally, the EPP would improve the portability of pension saving across borders. This would simplify life for people working and living in more than one EU member country – a trend that will only become stronger, as more and more people spend a period of their life working abroad.
In the report, Efama recommends the following measures:
- An EPP should specify an appropriate investment default option. This could include life-cycle strategies or balanced funds and would be designed to ensure an acceptable level of risk for pension savers.
- Pre-enrolment communication should be standardized and applied uniformly by all providers in a way that facilitate the comparison between EPPs, to help consumers make the right choice.
- The EU framework for an EPP should be sufficiently standardized to reduce distribution costs and in this way encourage more consumers to save for retirement.
To read the full report click here:EFAMA EPP Report FINAL (4 March 2015)