"Significant corrections" are needed across both the Pan-European Personal Pension Product (PEPP) Regulation and the IORP II Directive, although the "ultimate challenge" will be supervision and enforcement, the Cross-Border Benefits Alliance Europe (CBBA-Europe) has said.

CBBA-Europe said that it welcomed the European Commission's upcoming revision of the PEPP Regulation and the IORP II Directive as a "major opportunity to relaunch supplementary pensions in Europe, fixing what has not worked so far".

In particular, the group argued that the PEPP needs "urgent adjustments", outlining several reforms that could help make the PEPP viable. 

This included making changes to the 1 per cent fee cap, which the CBBA argued is "unrealistic", as well as improvements in risk mitigation techniques, as it argued that a simpler life-cycle approach should replace the "rigid" requirement to secure up to 92 per cent of invested capital.

In addition to this, CBBA-Europe argued that the current tax discrimination against PEPPs in several Member States, where PPPs enjoy more favourable treatment and portability, is "unacceptable".

"The EU must take decisive action to stop such protectionist practices. Once the PEPP Regulation has entered into force, Member States cannot be allowed to undermine it," the association stated. 

Whilst CBBA-Europe said it "strongly" supported the creation of an occupational version of the PEPP, in contrast to the European Association of Paritarian Institutions (AEIP), it acknowledged that this cannot be achieved simply by allowing employer contributions within the existing framework.

"Without a dedicated legal section that explicitly defines the O-PEPP as a genuine occupational product, it will never benefit from the same tax incentives as national workplace pensions", it stated. 

CBBA-Europe's response also raised concerns around IORP II Directive, arguing that the principle of proportionality has not worked in practice, forcing small IORPs to comply with disproportionate obligations.

"More critically, cross-border activities and transfers have not increased under IORP II – they have even decreased," CBBA-Europe continued.

"Many providers withdrew from the market, losing significant investments and dismantling entire cross-border departments."

Given this, CBBA-Europe called for uniform EU-wide rules, or at least an effort to ensure that cross-border transfers are subject to the same majority thresholds as domestic transfers.

However, CBBA-Europe clarified that the "ultimate challenge" is supervision
and enforcement, arguing that, even under the current framework, the commission and European Insurance and Occupational Pensions Authority were fully aware that Member States were delaying or misapplying the rules.

Given this, the group argued that the reforms are "necessary but not sufficient". 

"Without strong and credible EU-level supervision, the new legislation risks becoming another empty shell, leaving Europe without the pension reforms it urgently needs," CBBA Europe stated. 

"CBBA-Europe underlines that this debate goes far beyond pensions. Both the Draghi Report and the Letta Report, as well as the recent SIU Communication (Savings and Investments Union), have clearly highlighted that Europe is losing ground internationally because it has failed to complete its single market for capital, services and long-term savings.

"Cross-border pensions are one of the most telling examples of this failure: despite repeated political commitments, national barriers remain strong, and Member States continue to show reluctance to truly integrate their markets. 

"CBBA-Europe believes that the time for ambiguity is over. Europe must decide whether it genuinely wants to move forward with integration – or admit that the single market will remain incomplete. The credibility and future of the Union depend on this choice."

---