Pan European pensions on sale in Ireland by 2019

It’s been a long time in coming but the PEPP will offer portability and better choice to Irish pension savers

Buy your pension in Germany? Well you might be able to by 2019 under a new European proposal.

Buy your pension in Germany? Well you might be able to by 2019 under a new European proposal.

 

It’s been a long time in coming, but a pan-European pension, which would allow Irish pension savers seek out a portable – and potentially cheaper – pensionproduct elsewhere in the European Union, is likely to be available for sale in Ireland by 2019.

According to Brian Hayes MEP, who has just been selected as lead negotiator for the European People’s Party (EPP) on the European Commission’s pension plan, the so-called Pan European Pension product (PEPP) “has a real opportunity to improve all our national pension systems in the EU”.

“It’s the product for the new mobile workforce”.

Proposal

In June, the Commission published a proposal which lays down the foundations to offer consumers a new pan-European option to save for retirement via the PEPP. The PEPP will be portable between member states and will have the same standard features wherever they are sold in the EU. Its fees and charges will be transparent, and it will also have the same tax treatment as existing pensions in Ireland, which means users will benefit from tax relief of 20 or 40 per cent depending on their marginal rate.

It’s expected that the scheme will have approval by the European Parliament and European Council by the end of 2018 after it goes through the legislative process, which means that companies would likely be able to sell PEPPs to consumers in 2019.

“So, it is very likely that we will see PEPPs on the Irish market sometime in 2019,” Mr Hayes said.

‘Portability’

According to Mr Hayes, “portability” is the major advantage of a PEPP, as it will be easily transferred from one Member State to another. But it should also enhance competition, both in Ireland and across the EU, with consumers able to shop around and switch into another cheaper product.

There are challenges on the way however, including the “very tight” time-frame. As Mr Hayes noted, the easiest way to progress the proposal is if tax relief is harmonised across Europe; but with national interests to the fore, this would be difficult to achieve.

However he is “hopeful” that the Commission will deliver on its goal.

“The elephant in the room is the fact that the level of private pension cover across Europe is so abysmal,” said Mr Hayes.

While the UK’s involvement in such a scheme is uncertain against a background of Brexit negotiations, “there is no reason why the British can’t sign up to this,” Mr Hayes said.

Auto-enrolment

In addition, Mr Hayes said that the PEPP may be an eligible product for the forthcoming Irish auto-enrolment project, which could see every employee automatically enrolled into a pension scheme by 2021.