Need for improvement in specific pension information.

Dr. S-W – 01/2021

On the 14th of January, the European Commission (EC) asked EIOPA, the European supervisory authority for insurances and pension funds, to make a specific contribution to increasing the transparency of possible pension gaps, this request can be found here.

Specifically, there are two concerns for which advice is being sought:

  • increasing the transparency at specific levels through national pension information systems
  • to better understand second and third pillar systems and their contribution at macro-level to pension adequacy - under the heading of "Pension dashboard".

Thematically, we are dealing with two quite different approaches here. Specific pension information provided at national level is to be studied for "best practices". This pension information should not only indicate the level of the expected actuarial reserve, but also the amount of the expected current pension, broken down into individual products. Alternative forms of dissolving the actuarial reserve might also have to be presented, especially in the case of defined contribution systems, which are more comparable to investment products. With regard to funded systems, there is also the problem of forecasting expected future investment income. A study should also be made into which way information about the expected taxation could be integrated into the pension information, irrespective of the specific implementation method used for the old-age provisions.

„European Tracking Service for Pensions“

In the future, the national pension information systems are to be further developed into a pan-European system, i.e. a "European Tracking Service for Pensions". A delicate task in this context will be agreeing on a certain degree of standardisation of assumptions and projection methods in order to make information more comparable. EIOPA is required to consult with the partners in the ETS project. The main aim here is to identify obstacles to identifying entitled persons and to the cross-border exchanging of information.

From the point of view of the operators of the ETS project, the wording of the "Call for advice" is seen as confirmation of the establishing of “ETS/Find your pension” and the Commission’s support is welcomed. This "service" will not just consist of a data infrastructure, but also of a portal that is supposed to "guide" the users on their way to their pension entitlements. This will result in a lot of material covering best practice exchanges on many topics. In this respect, the work of EIOPA as well as that of the network present opportunities that the ETS project can use for its work and to which it will gladly contribute itself.

„Pension Dash Board“

On one hand the creation of a "Pension dashboard" is intended to allow long-term projections of future pension income across all pillars. The main aspects here are the cover ratio and the level. Such an instrument already exists for the first pillar, especially with a view to the development of age-related public expenditure. The results are published every few years in an "Ageing report" (sustainability) and a "Pension adequacy report” and the next editions of the two reports are due in April/May 2021. Whilst the projections for the first pillar cover the next 50 years (sustainability) or 40 years (adequacy) in most cases, most member states have not yet implemented corresponding projections for non-public systems. On the other hand, EIOPA already has a wide range of data about occupational pension systems. EIPOA will be developing ideas about how existing information gaps could be closed. More work still needs to be done in developing appropriate data sources for private third pillar systems.

The role of fiscal incentives or, more broadly, the taxation of the relevant systems and products, both during the accumulation and retirement phases, is of interest in the macroeconomic analysis of funded pension schemes. The mandate given to EIOPA takes this one step further: The relationship between minimum income systems and old-age pension systems and their impact on public finances will also be studied. It should already have become clear that the EC’s concern is by no means just about "technical assistance". 

The time frame for the "delivery" of the technical advice by EIOPA is the 1st December 2021. The EC will also consult experts nominated by the member states with regard to specific pension information systems.