EIOPA looks decades into the future: now looking at second and third pillar pensions as well
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.