Two years after the new law came into force, the much-hyped pan-European pension product still has just one provider in just four member states.
advertisementFive years after the EU finalized its new pan-European pension product, PEPP, its uptake has been disappointing.
Currently, there is only one provider: Finax. CEO Juraj Hrbaty said the company’s PEPP has assets under management of around 11 million euros and is currently only available to savers in the four member countries.
“After a year of hard work, we have about 5,000 customers,” Hrvati told Euronews. “Less than we expected.”
By his own admission, his start-up is still “peanuts, no man” in the context of the bloc’s multi-trillion euro pension industry.
When PEPP launched, it didn’t suffer from a lack of hype. Just before the last European elections in 2019, former European Commission Vice-President Jyrki Katainen said the PEPP would “give all citizens the opportunity to save for retirement” and open up “a truly pan-European market”. He said it would be.
MPs such as Brian Hayes (Ireland/European People’s Party) pointed to the need for a diverse range of providers, including asset managers and insurance companies.
Subsequently, a February 2022 survey conducted by EU pensions authority Eiopa, just one month before the regulation came into force, found that 21 entities, mainly insurance companies and asset managers, were considering EU-approved retirement plans. was suggested.
However, it seems that this wish has not yet come true. Perhaps the potential provider was deterred by his long list of EU legal requirements to provide advice to savers and guarantee returns while keeping fees to less than his 1% of capital.
To some extent, these may be the kinds of teething problems that are inevitable as new laws are implemented. Pension plans last for decades, so it can take time for the market to adjust.
But it comes as Brussels bids to attract private investors to its capital markets. Ministers are already talking about: Savings products across Europe It could be PEPP’s hopefully more successful younger brother.
bumpy
And Finax’s experience shows how difficult that can be when political aspirations and bureaucratic realities collide.
Hrvati says he “fell in love” with the PEPP’s equity-focused, pan-EU concept for young working executives planning to build their careers across borders.
But obtaining a license from national regulators is already “quite complicated”. He is happy to detail the many hurdles faced in bringing this product to other countries, including financial, logistical, and linguistic regulations.
In Poland, where half of Finax’s PEPP customers are located, the relevant law only came into effect in September. In Belgium it doesn’t exist at all. He says there are no tax incentives for using the product in Germany, Sweden or Austria, but in his home country of Slovakia it’s worth just 34 euros.
Regulators do not always have statistical models to verify compliance with EU law, and in some cases they may not even agree on the meaning of the law.
Hrvati said he has been waiting for months to get a clear answer on whether businesses can sign up on behalf of their employees, and that even major banks don’t seem to be aware of the product’s existence.
EU differences
Even the law’s authors admit that its results have been disappointing.
“The end result is certainly incomplete… Of course we expected more than just a single PEPP provider,” says Sophie in ‘t Veld (Netherlands/Renew Europe), who plays an important role as a staff member. said Jorik van Zanden, who played the role. In drafting the law.
advertisementVan Zanden, currently a PhD candidate at Utrecht University, said the EU’s work on pension law was “already a step in the right direction” and said he would consider launching a PEPP in countries with pension systems in place. He said he is aware of other providers who are doing so. A more developed market.
But we can see why plans to unify EU pensions are struggling. Member countries vary widely in industry structure, consumer expectations, and tax relief. Individual retirement savings range from 1% of GDP in some countries to over 200% in others.
In developed markets like the Netherlands, there is less demand for EU alternatives, while others expect to rely on national provisions.
Meanwhile, few governments have any interest in reforming their fiscal structures to cater to the whims of Brussels. “As far as I know, no country has changed its tax treatment to apply to PEPP products,” Nicola Janmaat, head of personal and non-life insurance at lobby group Insurance Europe, told Euronews. . “I don’t think insurance companies will be offering PEPP in the near future,” Janmaert added, noting that regulatory constraints preclude a viable business model. “There are many challenges that need to be overcome to fundamentally change the situation.”
Five years after the law took effect, some hope that a legislative review the commission is expected to conduct soon may bring redemption.
advertisementBroken market?
But for others, it’s the industry, not the law, that needs fixing.
“The problem is not with PEPP,” Sebastian Coman, head of research and policy at Better Finance, told Euronews. He pointed out that there is a possibility that the market. “
And Commain, whose lobby group represents financial services users, sees good prospects from new market entrants like Finax. The EU pension system is a “very nice wrapper for investments that can be made with robo-advisers and neo-brokers”, he said, and is simple, cheap and transparent.
“We imagine such offers will be rolled out in the coming years” as online fund supermarkets expand to cover retirement savings, he added.
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Correction (March 7, 12:14 CET): Correct the spelling of Jorik van Zanden.
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