In June, the European Commission proposed a new voluntary pension aimed at helping individuals who move around the continent to save for retirement.

If passed, employers, banks and insurance companies will be able to offer the portable pan-European pension to European citizens. The European Insurance and Occupational Pensions Authority will regulate the pension.

“All in all, we agree with the commission that a larger European market for personal pensions will support the supply of funds and will help link savings with investment opportunities and, therefore, from our general perspective we very much welcome the proposal,” says Simone Miotto, senior policy advisor at PensionsEurope, which represents national associations of pension funds and some providers of individual pension products in Europe.

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While retirees in Europe generally receive most of their retirement income from a national social security program and a workplace pension, Miotto says voluntary personal pensions are necessary in countries, such as those in eastern Europe, that don’t offer wide access to workplace pensions or provide attractive personal pension products.

The proposed pension plan aims to be clear and simple for employees who don’t have much financial knowledge, says Miotto. He notes that while the pan-European personal pensions will let people make investment choices, they’ll also include a default investment option. Individuals will receive clear information before they sign up for the pension and, most importantly, they can continue making contributions even if they move to another part of the continent.

PensionsEurope is still reviewing the commission’s proposal, and Miotto notes the association sees some potential complications, including a lack of clarity about the pension’s tax treatment.

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While the European Commission recommends granting the same tax treatment to the product as similar existing national schemes, Miotto says member states haven’t confirmed they’ll follow that recommendation. Tax regimes vary across Europe, and Miotto notes pension providers will face challenges translating the different rules for their country.

As well, one of the pension’s main selling points is its portability. The pension will include a number of national components. Individuals living in France would make contributions to one component, for example, and then would transfer their accumulated savings to a different one if they moved to Belgium.

The regulation stipulates that pan-European personal pension providers from all members states will establish their national components within three years, says Miotto, noting the timeline poses some complications for plan providers that have yet to understand how the process will actually work.

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“So we understand that the commission didn’t have the possibility to tackle the issue, but still different taxes will represent a burden for the attractiveness and the simplicity of the product and then we are also still starting trying to understand the details of how the management of the different compartments and the transfer of accumulated rights will work concretely,” he says.

As well, there’s also the question of whether Britain will offer pan-European personal pensions as it moves forward with planning its exit from the European Union. In theory, Miotto notes, Britain will remain part of the deal if the proposal becomes a reality before the country’s official exit.

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Copyright © 2019 Transcontinental Media G.P. Originally published on benefitscanada.com

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