Brussels wants to promote private pension plans as a complement to retirement

The European Commission wants to give a boost to complementary pension plans, whether company or personal, in order to complete public retirement pensions, for which it recommends that States report the coverage of your systems and automatically include to workers in voluntary pension plans. The idea is not to replace state pensions, but to complement benefits that “in many cases they could not be sufficient to maintain adequate standards of living, especially among vulnerable people and women,” explained the community Executive.

“The pensions state will continue to be the backbonebut when you combine a long life expectancy with the increase in flexible and non-standard forms of employment, you have to think about how to increase opportunities so that citizens complement their retirement“said the European Commissioner for Financial Services, Maria Luís Albuquerque. Currently, only 20% of Europeans participate in a company pension plan and 18% have subscribed to a personal planrecalls Brussels, which believes that strengthening this sector would reduce the risk of citizens seeing their income fall and, at the same time, would benefit the EU’s investment environment by mobilizing more savings.

To achieve this, the Commission seeks to boost both demand such as the offer of this type of financial products. On the one hand, it recommends that the Member States – which have the majority of powers in the matter – implement systems of automatic affiliation of workers to complementary pension plans, from which they could leave if they wish. This mechanism would allow to tackle the low participation in these pension plans, which is often due to ignorance or a tendency to postpone retirement decisions, and has already demonstrated good results in countries such as the United Kingdom and New Zealand, the Commission argues.

Likewise, Brussels urges the Twenty-seven to create “monitoring” systems of free pensions that inform citizens of what rights they will have and what amounts they can expect when the time comes to collect their retirement, ideally, also showing what they would receive of your private or business plans. In addition, it suggests that they create platforms with indicators on their national pension systems, with data such as coverage, contributions, income in different population groups or fiscal costs, which would later be added to create a European panel in order to help the design of policies or reforms.

The organism community recognizes that there are important differences among the Twenty-seven (some require subscription to private plans and others depend more on public systems) and insists that the powers of social agents will be respected, but emphasizes that in general these measures would improve transparency and provide more tools to Europeans to decide whether to invest in supplementary pensions.

On the other hand, the European Commission proposes to amend the regulation on the so-called PPan-European Pension Products (PEPP)which the EU launched in 2019, but they have had little reception in the market, among other reasons due to their complexity, cost restrictions and authorized investments, or the lack of favorable tax treatment, according to a community analysis. To alleviate these problems, it proposes creating two categories: a “basic” plan whose investments would be almost exclusively (95%) in “simple” products such as stocks, exchange-traded funds or bondsand could be subscribed without the need for financial advice, and a “tailored” plan that could include more complex assets and would require advice.

Furthermore, the States will have to ensure that this European product They receive “comparable” tax treatment and the same incentives as national private pension plans. Finally, Brussels proposes to modify the directive on Employment Pension Funds to eliminate barriers to certain investments and make it easier for them to grow and diversify their portfolios.