The European Federation of Retirement Provision(EFRP) is closely watching the stance the EC takes on insurance and pensions products in its proposals for a draft directive on pension investments. Confirming proposals for the directive, DGXV Commissioner Monti said same products would be subject to the same prudential rules whether provided by a pensions body or insurance company.

EFRP vice president Ray Martin says: We are concerned that our definition of a product is different from the EC's definition. He adds: "There are some pension funds which give guarantees and we see the logic of treating those as insurance products. But there are many pension funds where there are no guarantee of re-turns or capital and funds have to go to the employer if they cannot deliver."

In his view, there are three different products that must be considered re-gardless of who provides them. "Those who provide guarantees; those on a 'best endeavours, with no guarantees and separate assets' basis, and unfunded promises. The EC needs to treat these as three separate products, because at the end of the day it is between the employer and employee as to which they go for."

Monti, when speaking in London last month about the need for some prudential rules, said: "It is too simple for member states who want to resist the liberalisation process on the asset side, to point out that we are putting pensioners at risk." He added: "There should be some prudential level playing field between pension funds, in-surance companies and other financial institutions that might essentially provide for the same product."

More recently, when speaking in Milan, (see page 7) Axel Oxter, also with DGXV, said that the freedom of investment had to take into consideration the nature of the pensions product - who bore the investment risk? "The pensioner, or pension provider, the employer or whether the future pensioner is given a guarantee for a certain minimum amount for his re-tirement by his employer or pension provider. This will probably be the dividing line justifying the different prudential treatment for pension schemes."

The EC would be examining how prudential rules could apply to products, so the same product is subject to the same prudential rules regardless of the provider. "In this context, it might be helpful to find an appropriate definition of the pension scheme."

In Paris, the Comité Européen des Assurances, representing insurers, said it basically welcomed the guidelines is-sued by Monti. Insurers "are particularly happy to see the 'same products/ same rules' principle confirmed resulting from a recognition of the fact that there must be a level playing field for all second pillar operators." Fennell Betson"

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