Fleur van Dalsem werkt ruim tien jaar bij IEX en is sinds haar studietijd actief in het wereldje van de financieel economische journalistiek. Als redacteur werkte zij voor verschillende financieel economische tijdschriften en websites.

Fleur schrijft voor meerdere IEX-websites, vooral voor IEXProfs, en voor het IEXProfs magazine.


One Europe, one pension?

There are very few European-level arrangements on the pension fund front. But that looks set to change with the arrival of the Pan European Personal Pension, or PEPP in short.


Fleur van Dalsem werkt ruim tien jaar bij IEX en is sinds haar studietijd actief in het wereldje van de financieel economische journalistiek. Als redacteur werkte zij voor verschillende financieel economische tijdschriften en websites.

Fleur schrijft voor meerdere IEX-websites, vooral voor IEXProfs, en voor het IEXProfs magazine.

The financial crisis of 2008 has only increased the stridency of the calls for universal regulations in Europe, or a level playing field, says Josina Kamerling, Head of Regulatory Outreach EMEA at the CFA Institute, an umbrella organisation for professional investors. We have just as many problems in Europe as we had 10 years ago, she says.

“Add to that the globalisation and digitisation of the world. You’d think regulators would want to keep a short rein on things after the crisis, but there is still a lot of room for improvement. Fintech is a great example. Regulators want to encourage fintech and are trying not to immediately overwhelm the sector with rules and regulations. That’s great, but without clear rules you’re going to see uncontrolled growth, and we’ll have to clean the mess up afterwards.”

Josina Kamerling will be moderating a panel debate about the European Investment Landscape on the WorldPensionSummit 2017 on october the 25th in The Hague. 

Brexit could still throw a spanner in the works, too, when it comes to the harmonisation of European regulations. “The Capital Markets Union is based on Anglo-Saxon ideas about investments, but what happens on the European continent when the founders of that Union leave? Will be then return to cooperating more as a banking union?” Plus many European regulations are so-called directives: in other words, not strict rules that countries are obliged to adopt, but directives they can assess and incorporate in their national legislations. Each as they see fit, Kamerling stresses.

Nobody talks about MiFID

MiFID (Markets in Financial Instruments Directive) is such a directive. As of 1 January 2018, asset managers have to comply with those regulations, but Kamerling says she heard little about it among the smaller asset managers until May of this year.

“Apparently they didn’t see it as an issue for them. Which is odd, because the regulations had already been postponed at that point. The good thing about MiFID is the greater transparency. Which is needed. The downside is the bias towards larger asset managers. For instance, the rule that research costs must be paid separately. Smaller players will find it far more difficult to absorb those extra costs. So what will happen eventually is that we get consolidation that nobody asked for and even more large players.” And yes, prices will rise because of all the new rules. Kamerling: “Either products become more expensive or the spreads go up.”

Micro rules

Kamerling insists that there is no question of excessive regulatory pressure after the crisis. The problem is a lack of transparency and too many micro rules per country. At the same time, European products are not encouraged enough because consumers allegedly think nationally. “That’s nonsense,” says Kamerling.

“I buy from Amazon.co.uk and Dutch site Bol.com, so why shouldn’t I buy financial products from foreign providers? These products are increasingly being offered by non-financial players like Amazon. What rules are we applying there? Should the regulatory role of the ESMA (European Securities and Markets Authority) be extended if this trend continues?” Kamerling is a strong advocate of a uniform pension product, with the same rules across the whole of Europe and a single regulatory body. “I have pension pots collecting in five European countries. So I’m the ideal customer for a PEPP product.”

Only 27% of all residents in Europe between 27 and 59 years of age have a personal pension plan. A survey from CFA Institute revealed that 50% of the respondents are in favour of PEPP. “In the Netherlands, pensions are generally pretty well organised. PEPP is primarily a step forward for Eastern European countries, where saving for your own pension is in its infancy.” Kamerling believes PEPP can become the UCITS of pensions. “And if PEPP happens, investors may also become more aware of the importance of saving or investing for later and may acquire other products in that area, too.” So PEPP could have a positive impact on the entire sector.

Three to five years

PEPP is likely to happen, but it might be a while yet, says Christian Lemaire, Global Head of Retirement Solutions at Amundi. He will one of the debaters about pensions and IORP II en PEPP on the WorldPensionSummit 2017.

“It is a proposal from the European Commission and it still requires agreement from 27 countries. That would be followed by a vote in the European Parliament and PEPP would then have to be incorporated in local markets and regulations. We are looking easily three, or even five years down the line, before PEPP is actually in operation.” Amundi has decided not to wait. The French asset manager is now active in eight European countries with an IORP II (European Pension fund directive) product.

It is a pan-European, multi-employer pension product, based in Luxembourg. Amundi can set up a pension product for an individual client, takes care of the investments, the administrative side and communicates with pension participants in seven languages. At this point, the main takers for the Amundi product are large companies. Lemaire says the shift from the collective defined benefit pension system to a system of defined contribution pension plans is also boosting demand for Europe-wide, tailor-made pension products.

Amundi and other players in the sector, such as State Street, are also benefiting from the disappearance of small pension funds. Their number has declined from 1,060 in 1997 to 268 in 2017, according to figures from the Dutch Central Bank (DNB). And 45 of those have indicated they plan to cease trading in the near future. Increasing regulatory pressure mean it is often no longer profitable for small funds to invest individually.

More regulations also mean higher costs and it is increasingly difficult for smaller funds to raise those costs, says Lemaire. For that matter, Lemaire talks about a cross-border approach rather than harmonisation of European pension plans. “Without a European tax policy, there will never be a single European market. Tax regulations are always local and that is not going to change.” Kamerling takes a more positive view. “In the case of PEPP, for the first time in the history of Europe the Commission is recommending tax cuts for participants.”

Future scenario

The European pension fund of the future will at the very least be a cross-border fund, Lemaire and Kamerling agree. Pension fund investors are increasingly asking for alternative investments, Lemaire notes. “They are moving away from the simple portfolio trend. They are increasingly participating in dynamic asset allocation and asking for investments outside the stock exchange, like private equity and infra.”

Kamerling believes the ideal pension plan of the future will be structured in line with the Dutch or Swedish model. “In those countries, a pension plan is built on multiple pillars. If we could get closer to that standard in Europe, that would be enormous progress.” So PEPP could be a good beginning and even set a trend, but Europe is nowhere near the finish line yet.

What is the Pan-European Personal Pension Product (PEPP)?

Under the proposal from the European Commission, residents of the European Union will in future be able to save up via a personal pension plan on a voluntary basis. They will be able place their savings with a bank or insurer offering such a PEPP product, and take it with them to any other European country. So, they can continue to save up for their retirement no matter where in Europe they work, without creating a pension gap or creating multiple small pensions in different countries. The Commission considers PEPP complementary to existing pension plans and does not intend for PEPP to replace those completely. The European Union will act a regulator, making sure that the products on offer all comply with the same terms and conditions and regulations.

The WorldPensionSummit is the platform for and by pension professionals and provides a truly global learning and networking experience. The 2017 program will focus on longterm investing, emphasizing on the investment questions of vital pension cross-roads.