EU puts a PEPP in the step of digital delivery of pensions

The clock is ticking down towards the European Parliament elections in May. This means that the deadline for the adoption of the Pan-European Pension Product framework is looming, as it is intended that this should be completed before the end of the current parliament. Indeed, this is probably a necessity, as a new Parliament will inevitably mean a delay whilst new committees are setup and new priorities for the parliament are decided. Thus, if it doesn’t get adopted prior to the breakup of this parliament, then it is likely to be at best significantly delayed, at worst deprioritised and pushed to the back of the list.

This would be disastrous for a plan that was originally introduced in a Commission white paper in 2012. Seven years is long enough to wait, even for an organisation as notoriously slow to move as the EU.

And yet the need for it is growing strongly. The increasing use of the freedom of movement means that there are significant numbers of the EU workforce moving from country to country. In 2018, almost 4% of Europeans of working age (20-64) were living in another EU country. At the same time, the ageing of the working population across Europe means that the need for workers to save for their own retirement is more urgent than ever.

The Pan-European Pension Plan is the ideal way to ensure that these workers can utilise this same plan as they move between the member states, thereby making it more practical for mobile workers to save for their pension throughout their working lives.

The idea of a pension product that is mobile and that can be transferred across national borders with restrictions on the charges and on the costs of transfer, even cross-border, is an exciting one that could have a dynamic effect on the level of pension savings throughout Europe. It does mean that pension providers will have to adapt to meet this demand.

The primary market for the PEPPs will be mobile workers who will be seeking the ability to interact with their pension providers on a more digital basis than those who are based in the one country for longer periods of time. For one thing, mobile workers are far more likely to change address than those who remain in their native country. And mobile workers are far more likely to switch jobs than non-mobile employees, necessitating changes in their pension arrangements.

As a result, the ability to access information and to carry out changes digitally is vital for those workers. Life and pension providers looking to service this market will need to be at the forefront of digital delivery of products and services.

The European Parliament is in a hurry to get this proposal accepted early in 2019. The European Capital Markets Institute reckons that this “should encounter a huge demand”. Life and pension providers need to ensure that they are not behind the curve when it comes to being able to fulfil this demand. The ability to deliver pension products and services digitally should be a primary goal for 2019.