18 November 2014

Topical developments on pensions: an EIOPA perspective

Gabriel Bernardino, EIOPA’s Chairman, delivered a speech at the 9th European Pension Funds Congress, in Frankfurt am Main.

“To ensure that citizens will have a chance to maintain appropriate standards of living in their retirement it is self-evident that we need a comprehensive package of reforms. Changes to ensure the future sustainability of public pay-as-you-go pension systems need to be accompanied by reforms incentivising the creation of funded complementary private schemes be it 2nd pillar occupational pensions or 3rd pillar personal pensions. I believe that an important strategy to achieve this goal is to provide a robust and proportionate EU regulatory framework capable of regaining the trust and confidence of EU citizens in private complementary pension savings. This regulatory framework needs to deliver on three fundamental objectives: enhanced sustainability, strong governance and full transparency. These are the fundamental building blocks of EIOPA’s pensions’ vision.

Enhanced sustainability, because the first step to ensure protection of members and beneficiaries is to make sure that any pension scheme disposes of sufficient assets to fulfil its liabilities within a realistic valuation scenario. The QIS that we performed last year showed that pension funds in many member states have vulnerabilities. Local measurements sometimes provide a more optimistic view on pension funds solvency than applying a more realistic measurement. In these cases, the reliance on future payments by the sponsoring employers is very large. We need to recognise this and assess if this dependency is sustainable in the long run.

Strong governance, because pensions deserve to be governed by fit and proper persons, with the appropriate skills, experience and integrity; because conflicts of interest need to be identified and managed in order to make sure that Board Members act in the sole interest of members and beneficiaries; because strong risk management capabilities and robust internal controls are fundamental to deliver to pensioners the promises made or the expectations created.

Full transparency, because if we want to regain trust of citizens we cannot hide anymore behind “jargon”; in the digital era we cannot justify difficulties of providing information; we need to provide full disclosure of all costs, be it investment or transaction costs; we need to give members and beneficiaries a full picture of the returns that they get on their pension products.”

Full speech

© EIOPA