photo by Micheile Henderson on Unsplash
In a joint press release together with Better Finance and the CFA Institute, we warn against the possible negative impact of the COVID-19 crisis on pension savings and incomes, namely as a result of policies likely to be implemented by governments and central banks to address the upcoming post-pandemic economic crisis.
This unprecedented crisis will require policy makers and other stakeholders in the pension services field to design exceptional protective measures to ensure a decent pension income for EU citizens, for now and for the near future.
The European Federation of Investors and Financial Services Users, BETTER FINANCE, had already advocated for several actions to tackle the overall poor long-term real returns of pension savings in the EU – including via the EU’s Capital Markets Union initiative – namely:
- Make sure that all financial users have access to all markets, including capital markets.
- Enable employee share ownership programs in the next 24 months including tax reductions
- End biased advice in “retail” distribution and strongly curb “inducements”.
- Enhance financial literacy, not for individual investors to determine the best products for them, but to make sure they can choose the adequate level of advice for them.
- Fight “greenwashing” in the design and promotion of ESG (‘sustainable’) investment products.
- Stop penalising long-term equity investments versus sovereign bonds in prudential rules
- The European supervisory authorities (ESAs) to enforce EU Law by ensuring EU individual investors have full access to low fee investment products
- Restore standardised disclosure of past performance and costs for all retail investment products.
- Ensure that the future PEPP, the proposed Pan-European Personal Pension product, is really simple, safe and efficient.
- ESAs to improve and continue reporting on costs and past performance of retail investment products.
- ESAs to build a publicly available database where pension products can be compared.
Still on the topic of pension savings, we co-signed on 23 April, a letter addressed by Better Finance to the Chair of the ECON Committee of the European Parliament, in which we express our concern about the ongoing discussions on the Packaged Retail and Insurance-based Investment Products (PRIIPS) within the European Parliament. More specifically about the possible very negative impact of rejecting the draft Regulatory Technical Standards (level 2) on the PRIIPS.
BETTER FINANCE has always strongly supported the aim of the PRIIPs Regulation, as being the first, and so far the “only, ‘horizontal’ EU set of investor protection rules that encompasses both non-insurance based and insurance based ‘retail’ investment products”. However, Better Finance warns that the current design of the level 2 rules and their implementation fail to meet their goals, which is to facilitate the understanding of the products and make it possible for consumers to compare similar products.
The proposed EU investor protection rules rely on different future scenarios that are based on past performance. Such projections “drawing from the hypothetical distribution of past returns” are unreliable and misleading and would be highly detrimental to the EU pension savers.