German occupational pensions association aba has spoken against European Union-driven second pillar pension products following the unsuccessful launch of the Pan-European Personal Pension Product (PEPP).
“Current proposals to use similar [PEPP] EU-wide pension products in company pension schemes are out of place,” said aba’s deputy chair Dirk Jargstorff referring to pensions policy proposals for a stronger Capital Markets Union (CMU), while also noting the reform of the second pillar pension system drafted by the German government.
According to aba, recent proposals to introduce EU pension products are likely “helpful” to spread funded pensions in “very few” member states because of different three-pillar pension systems within the bloc.
A lack of products is not the reason why funded pensions struggle to take off in the European Union,it added.
The PEPP, which was created a few years ago at the suggestion of the pensions industry, has so far fallen well short of expectations, Aba added. For this reason, EIOPA has proposed a broad reform of the product.
Aba believes, instead, that strengthening funded pensions requires a “holistic framework” on tax, social, labour and supervisory laws – a path followed by the German government to reform the second pillar.
The association is convinced that this approach can only succeed at country level, in individual member states, it said.
It backs the suggestion of EU finance ministers body Eurogroup to assess ways to better cover people with company pension schemes, looking also at new rules for automatic enrolment in Ireland.
Aba’s position on EU pension products contrasts with Mario Draghi’s plan for a more competitive EU suggesting to offer second pillar pension products at EU level to retail investors, an approach that has been successful in some EU member states, wrote the former chief of the European Central Bank in his latest report.
Draghi also underlined that pension assets are “highly concentrated in a handful of member states” with stronger private pension systems.
Earlier this year, former Italian prime minister Enrico Letta suggested launching EU-wide auto-enrolment Long-Term Savings Products to stimulate retail investment, and improving the PEPP.
Discussions on pensions for a stronger CMU come as a “surprise” to Jargstorff, who believes that company pensions, especially in Germany, are or could be the ideal solution for most employees to strengthen funded pensions. EU member states should work to implement pension principles included in the European Pillar of Social Rights, he said.
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