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Monday 21 January 2019


Spring Conference

Tax harmonisation 'highly unlikely' for PEPP implementation

Written by Theo Andrew

New proposals for a Pan-European Pension Product (PEPP) show that tax harmonisation across member states is "highly unlikely”, but a specific tax treatment for the scheme could be implemented.

In a working document submitted by the European Parliament's Committee on Economic and Monetary Affairs yesterday, 9 January 2017, it reiterated plans for a cross-border pension product, but highlighted key issues on taxation and availability of certain providers across some member states.

However, the document said that tax incentives on in-payments are a pre-condition for PEPP to succeed, going as far as saying it is “the main driver for consumer choice”.

Despite this, the Committee said that it is “highly unlikely” to achieve unanimity for any kind of tax harmonisation among the EU, but suggested that the member states could agree on specific “29th regime”, which could allow a specific tax treatment for PEPP.

The proposal said: “It is highly unlikely to achieve unanimity for any kind of tax harmonisation among the member states. But alternative avenues can be explored. A group of member states could agree to advance on the basis of a voluntary multilateral approach. Harmonisation or approximation can be achieved in various ways.

“If PEPP has certain agreed features, it could receive the same beneficial treatment as national products, or alternatively member states could agree on a specific "29th regime" approach, allowing for a specific tax treatment for PEPP.”

In addition, the cross-border nature of PEPP could also prove a sticking point for smaller, regional providers of the product, which might struggle to get up to speed with the regulation changes.

On the issue, the Committee said: “A possible solution would lie in partnerships between providers in different member states. However, if a provider chooses not to offer compartments in all EU member states, they must inform users clearly and pro-actively of the availability of compartments in member states before a contract is signed.

“EIOPA can play an important role in boosting portability of PEPPs by facilitating the creation of new compartments with information kits on national requirements, and by assisting providers in finding partners through a register of available partners.”

The Committee admitted that PEPP is extremely complex and politically sensitive, but added that concerns around “insufficient adequacy and sustainability of pension systems” are growing, as well as new market actors, such as fintechs, which are offering financial products from outside the European market.

The European Commission first outlined its plans for the PEPP in June 2017, which was widely welcomed by the European pensions industry.

The product is one of the key measures of the mid-term review of the Capital Market Union, a project to create a single market for capital in the EU. It is hoped such a product would boost the number of people enrolled in a pension across Europe and add to investment in the economy.

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