European Parliament Pensions Forum Brussels, 6 December 2005

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European Parliament Pensions ForumBrussels, 6
December 2005

• Violeta Ciurel, Ph.D.
• General Manager Global Retirement Services ING
  and Chairwoman of the EFR Pension Steering Group

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Pleased to be here

• EFR Pensions Steering Group already working
  together since 2001
• Most of the 20 EFR Members, CEOs and/or Chairmen
  from following companies, actively involved in
  the development of a Pan-European Pension market
• The objective is to promote a single market for
  pensions
• To achieve this objective the Pensions Steering
  Group has researched the current situation,
  explored new proposals and published them in
  different publications.
• The EFR wants to trigger and contribute to the
  debate of the creation of a Pan-European market

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(Pan-European) Pensions as Priority

• Seeking sustainable retirement income solutions
  has become a priority on European agenda
• Growth in private financing of externally funded
  pensions is vital to finding such solutions
• Financial services industry is well-equipped to
  cater to pension requirements of companies and
  individuals
• Including growing number of internationally
  mobile workers
• National barriers hamper structured European
  pension approach

• Different regulations and proposals from European
  institutions aim to develop Pan-European pension
  market
• Take away barriers for mobile workers who move
  between Member States
• Take away barriers for companies that operate
  across EU
• IORP Directive is catalyst for change
• Consistent implementation will stimulate further
  development and encourage convergence of national
  pension markets

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Additional steps are necessary to create
Pan-European Pensions

• Different publications from the EFR Pensions
  Steering Group aim to trigger the debate in the
  creation of a Pan-European Pension market

Pan-European Pension Plans, deepening the
concept -work in progress-
Pan-European Pension Plans, an alternative route
Towards Pan-European Pension Plans
One Europe, One Pension - Affording the future
Typical Life Cases
Creating a common structure for Pan-European
Pensions
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Deepening the concept

• Executive Summary (see synopsis on next page)
• The need for higher saving for retirement
• Why Pan-European Pension Plans
• EPP Structure in general
• Generic aspects of the EPP structure
• Operational aspects and supervision
• Consumer protection
• Taxation
• Specific common standards for the product to
  qualify as an EPP
• General clauses
• Contributions
• Investment choices
• Collective investment
• Portability
• Pay out
• Ancillary benefits
• Time to execute step by step

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Report synopsis

• With this working document the EFR trusts that
  the debate can become even more focussed and a
  way forward can be agreed by all stakeholders. We
  fully understand that more work remains to be
  done.
• Within the next few decades, an increase of about
  50 in yearly retirement savings is required to
  fill the pension gap in Europe
• The single market in the provision of pension
  could help in responding to the challenges.
• The EFR anticipates the long term solutions and
  proposes part of the solution could be
  Pan-European Pension Plans (EPP) which should be
  easy to understand for customers and available
  throughout the EU
• The private sector can make a positive
  contribution to increase the level of retirement
  savings and thus towards closing the European
  pension gap
• Privately managed funds have to be compatible
  with the requirements of labour market
  flexibility and mobility
• EPP fits the required strategy (see the EPP key
  features on next slides)
• Aligned with the Lisbon agenda
• The EPP requires a single set of EU-wide
  prudential rules that may be laid down in an
  EU-directive or in EU-regulation
• The translation of those parts of the scheme
  rules applying to a particular Member State will
  be denominated as Compartments. In the ideal
  situation there will only be one Compartment
  (see graph on next slide)

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EPP Scheme
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EPPs key features (1)

• The EPPs will be highly (not fully) standardised
  plans which can be provided
• all over the EU with basic characteristics.
• Individual participants shall be the owner/holder
  of the EPP. The employer as well as the employee
  may contribute to the plan.
• There should be no uniform fee level across the
  EU. This would allow competition between
  providers.
• The holder of the EPP should get tax incentives
  according to the EET-model contributions to the
  EPPs should as far as possible - be
  tax-deductible, the investment gains during the
  pay-in phase will be tax-exempt and any pay out
  will be taxed.
• During the accumulation phase the flexible -
  contributions will be directed into an individual
  retirement contract.

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EPPs key features (2)

• The participant can choose between different
  product types with different
• risk / return profiles. If the participant bears
  the investment risk he will have different
  investment choices. The provider has to offer the
  option where the value of the retirement plan is
  not less than the contribution paid, minus
  expenses. An appropriate balance between freedom
  to choose and protection is important.
• In the pay-out phase the income stream will be
  life-long, but in accordance with the Member
  States, money withdrawal as a lump sum up to a
  certain limit is possible. The pay-out will be
  flexible.
• The participant would be able to cover additional
  risk, like disability or survivor pension
  specific riders will be available as an option.
• A minimum requirement on the level of information
  applies to ensure consistency in all Member
  States. The participants should have access (via
  Internet) to their own account and should be able
  to view the value of their plan.

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EPPs key features (3)

• Vested rights will be portable within and between
  Member States. During the
• accumulation phase the change of a provider on
  fair terms will be possible. If the participant
  decides to change provider(s) of the specific EPP
  product, the (international) transfer value
  should not be subject to taxes.
• Regarding consumer protection a code of conduct
  could require the industry to provide an EU-wide
  standard summary of the key features and terms of
  the EPP. The summary should be simple and clear
  and include all necessary explanations of the
  terms of the contract together with information
  about risks involved. It should be written in a
  language that average consumers can understand,
  but should not fall into the trap of information
  overkill. In the event that the plan conditions
  or consumer protection rules are breached, there
  has to be an easily accessible mechanism to
  deliver fast and effective redress to consumers.
• The providers of EPP will strive to ensure that
  the consumer can rely on various sources of
  advice.

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It is time to execute

• Current differences between tax, labour law and
  investment regulations in the Member States are
  such that it is unavoidable to work with
  compartments.
• Nevertheless, by regulating as many as possible
  the key issues of the EPP at EU level, we can
  start and work our way through towards the ideal
  situation.
• What does EFR propose to implement the EPP
  structure?
• Priority and commitment of stakeholders to the
  EPP
• Agreement at EU-level on the requirements to
  qualify as EPP (e.g. via consultation rounds at
  national and EU-level)
• Work out the specific parts of the structure and
  key requirements in detail
• Issue EU-legislation to establish EPPs
• Determine what portion of contribution and assets
  belong to a specific compartment at Member State
  level