Two years after the new law came into force, the much-hyped pan-European pension product only has one provider in four Member States.
Five years after the EU finalized its new pan-European pension product, the PEPP, its uptake is disappointing. There is only one supplier: Finax. Juraj Hrbatý, CEO of Finax, says that his PEPP It has about 11 million euros in assets under management and that currently It is only available to savers from four Member States.
“After a year of serious operation, we had about 5,000 customers,” Hrbatý explains to 'Euronews'. “It's less than we expected.” The community block moves one billion eurosso the figure is minimal.
At the time of its launch, PEPP was announced with great fanfare. Just before the last European elections in 2019, former Commission Vice-President Jyrki Katainen said that the PEPP would “give all citizens the opportunity to save for their retirement”, opening a “pan-European market“.
Lawmakers such as Brian Hayes (Ireland/European People's Party) noted the need for a diverse range of providers, such as asset managers and insurers.
A subsequent survey, carried out in February 2022 by the European pensions authority Eiopa, just a month before the regulation came into force, suggested that 21 entities, mainly insurers and asset managers, were considering the possibility of having a retirement plan approved by the EU.
But those aspirations do not yet appear to have materialized. Potential suppliers may be deterred by the long list of legal requirements of the EU: offer advice to savers and guarantee returns, all while keeping fees below 1% of capital.
To some extent, these may be the inevitable teething problems that arise when a new law comes into force. A pension plan lasts decades and the market can take time to adapt.
But it comes at a time when Brussels wants to attract small investors to the capital markets. Ministers are already talking about a European savings product which could be the little brother of PEPP, which we hope will be more successful.
A road full of potholes
The Finax experience shows how bumpy it can be when political aspirations collide with bureaucratic reality. Hrbatý says he “fell in love” with the PEPP concept, with an equity focus and pan-European reach that fit well with the group of young workers planning to forge a cross-border career.
But getting a license from the national regulator is “quite complicated”; does not hesitate to explain the numerous obstacles -financial, logistical, linguistic- those he has faced to take him to other countries.
In Poland, where half of Finax's PEPP clients are located, the corresponding law did not come into force until September; in Belgium it doesn't exist at all. There are no tax incentives to use the product in Germany, Sweden or Austria, Meanwhile in Slovakiaits country of origin, is worth about 34 euros, he says.
Regulatory bodies do not always have the statistical models necessary to verify compliance with EU regulations, and in some cases they do not even agree on what they mean.
Divergences in the EU
Even the architects of the law admit that its results are disappointing. “The end result is imperfect… of course, we expected something more” than a single PEPP provider, said Jorik van Zanden, who as a staff member at Sophie in 't Veld (Netherlands/Renew Europe) was key involved in drafting the law.
Van Zanden, a PhD student at Utrecht University, said the EU's foray into pension legislation was “already a step in the right direction“, and that he was aware of other suppliers that are still considering launching PEPP in countries with a more developed market.
But it is understandable why the plan to unify EU pensions is an uphill struggle. Member States differ greatly in sector structures, consumer expectations and tax advantages. Private retirement savings range from 1% of GDP in some countries to more than 200% in others.
In more advanced markets, such as Netherlandsthere is less demand for community alternatives, while others expect to rely on state benefits.
Meanwhile, few governments are interested in reforming tax structures to meet the whims of Brussels. “To my knowledge, there is no country that has changed its own tax treatment to apply it to PEPP products,” Nicolas Jeanmart, head of insurance at the Insurance Europe pressure group, told 'Euronews'. “I wouldn't expect any PEPP to be offered by an insurance company in the near future,” the expert added, pointing to regulatory limitations that rule out any viable business model.
“There are a series of issues that would have to be overcome for the situation to radically change.” Some hope for redemption could come from a legislative review that the commission is due to undertake soon, five years after the law takes effect.
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But for others, it is the sector that It needs a fix, not legislation.“The problem is not with the PEPP,” Sébastien Commain, head of research and policy at Better Finance, explains to 'Euronews', citing the financial incentives that intermediary advisors who recommend less suitable products can receive: “The PEPP is a competitive product in an unfair market.
And Commain, whose lobby group represents users of financial services, sees good prospects for new market entrants such as Finax. The EU pension scheme is “a very good wrapper for the type of investment you can do with a robo-advisor or neobroker”, being simple, cheap and transparent, he said.
“I imagine this type of offering will develop in the coming years,” as online fund supermarkets expand to encompass retirement savings, he said.
