Vice-President Valdis Dombrovskis


Speech at the Pensions Europe 2017 conference

"Security in an uncertain world: the role of pension schemes in 2017 and beyond"


Brussels, 6 June 2017





Ladies and Gentlemen,


It's a pleasure to be here to conclude the Pensions Europe Conference 2017.


I would like to talk about our work to connect savers with investors, through our Capital Markets Union, which we are reviewing and accelerating today.



EU households have one of the highest savings rates worldwide: they save at least one out of every ten euros they earn.


But hardly any of these savings are being put to long-term productive use.


This is a wasted opportunity: savings held in bank deposits currently earn very low levels of interest, depriving savers of crucial revenue and our economy of much-needed investment.




Although our economy is recovering steadily now, the lack of long-term investment in business and infrastructure remains a drag on growth.


European start-ups and SMEs often struggle to get the funding they need to invest, innovate and grow.






The solution is to unlock Europe's savings and put them to work.


That is why the European Commission launched an action plan for a Capital Markets Union in 2015.


It aims to create the right conditions for more funding to flow from Europe's savers to Europe's businesses - in all stages of their development.





We have made good progress so far, by delivering around two thirds of the 33 actions announced in the original action plan. 


  • For start-ups and innovators, we have worked to strengthen venture capital markets with the recent agreement in principle on revised rules, and with our pan-European venture capital fund of funds.


  • Just last week, the EU reached a political agreement to restart securitisation markets. These markets could unlock up to €150 billion of lending to households and fast-growing companies.


  • And for consumers, we tabled this spring our Action Plan to provide greater choice and better access to retail financial services across the EU.  It will complement our work on the Single Euro Payments Area, by addressing the high costs of making certain payments within the EU. 


…and these are just a few recent examples.

Now we are confronted with new developments:

  • In particular, Brexit makes completing the Capital Markets Union more challenging, yet more important. As Europe's largest financial centre leaves the EU, the rest of the EU economy needs advanced capital markets more than ever to complement bank lending with other sources of funding.


  • The CMU must also propose ways to harness the transformative power of financial technology and to shift private capital towards green investment.


Our consultation on the CMU mid-term review showed strong support for the objective of a stronger capital markets system.

There is also a growing sense of urgency for developing a Capital Markets Union.


That is why we are now launching phase two of this flagship project.


Today's Mid-term review puts forward a revised action plan that builds on the achievements and significantly raises our ambitions for integrating EU capital markets by 2019.


Let me give you a few examples:



First, we will explore how to further ease conditions for SMEs seeking funding on public markets.


Building on the input received from stakeholders and results of the Call for Evidence, we will look at ways to alleviate regulatory requirements for listed SMEs, such as reporting for supervisory purposes.


This could involve targeted amendments to EU legislation - such as the Market Abuse Regulation or MiFID II - by the second quarter of 2018.




Second, we will assess the case for an EU licensing and pass-porting framework for fintech activities by the end of this year.


We want our innovative companies to scale up in a single European market, stay in Europe, and compete globally.


For this, we need to foster innovation while preserving a level-playing field.




Third, we are determined to lead global work on supporting green finance, such as the growing green bonds market.


This will require a deeper re-engineering of our financial system.


Our High-Level Expert Group is currently preparing advice on how to integrate sustainability considerations into our financial regulation, and we will follow up on this in the first quarter of 2018.



Fourth, we want to promote consistent supervision across the EU and beyond.


By autumn this year , we will act on the findings in our public consultation to strengthen the European Securities and Markets Authority's powers in targeted areas, including by a possibility to grant direct supervision where needed.


In addition, we will move forward with outstanding legislative proposals under the original Action Plan, such as an EU-framework for covered bonds planned for the first quarter of 2018.





But probably of most interest to this audience is our upcoming proposal on personal pensions.


Before I get to this, allow me a few words on why we are looking at this now.




Situation of pension provision in Europe


Europe is facing an unprecedented demographic challenge.  


Over the next 50 years, the share of the population in retirement-age versus those in working-age is forecast to double (going from 4 to 1 to 2 to 1). Meaning two people in working age to one pensioner.


This so-called pensions gap will increase pressure on public finances.





Of course, not all of the answers can lie with pensions themselves.


Part of the solution is to align retirement ages with life expectations– and reforms have been introduced in a number of European countries in this regard.


But it’s clear that to address this challenge, occupational and personal pension schemes are needed to complement state-based pensions.


This is why the Commission is committed to creating the right environment for pension funds to prosper.




On occupational pensions, Member States are now in the process of transposing the revised Directive on institutions for occupational retirement provision.

The new rules will strengthen governance, transparency of information, cross-border activities and transfers, and foster long-term investment.



Recently, we also proposed targeted adjustments to our regulatory framework for trade in derivatives, known as EMIR.


As part of these adjustments, we provided three years to develop technical solutions for pension funds to take part in central clearing, while protecting the revenue of future pensioners.


While central clearing for pension funds remains our clear goal, this temporary exemption will help them avoid estimated costs of up to €1.6 billion.

This brings me to personal pensions:



Currently, the European market for personal pensions is fragmented and uneven.


The offers are concentrated in a few Member States, while in some others they are nearly non-existent.


This variation in supply is linked to a patchwork of rules at EU and national levels, which impede development of a large and competitive EU-level market for personal pensions.



By the end of this month, the Commission will propose legislation for a Pan-European Personal Pension Product, or PEPP.


This PEPP regime would create a framework for pension providers to offer personal pension products on a pan-European scale.


It would lay the foundations for a safer, more cost-efficient and transparent market in affordable and voluntary personal pension savings.




For savers, PEPP would bring the following advantages:


  • It would complement existing pension products and schemes by providing more options to save for retirement.


  • It would be open to different types of providers.


  • It would harmonise a set of core features for the product, taking inspiration from existing personal pension products.


  • It would allow easy switching from one provider to another.


  • And for those who move across borders, such as mobile workers, or students studying for a degree in another EU country, it would allow for keeping your personal pension plan in another Member State without switching providers.


In other words, PEPP would offer additional incentives for people to save for their pension, alongside the occupational and state-based pensions available today.  

With PEPP in place, the European market for personal pension products would grow significantly faster.


Our proposal will need to address certain challenges in taxation, where criteria for tax incentives vary widely between Member States.


We want to secure consumer mobility across borders while ensuring eligibility for tax incentives for the proposed product.



We received almost 600 contributions in our public consultation on personal pensions. Many respondents said the current supply of personal pension products in the EU was insufficient. 


Currently, only 27% of Europeans between 25 and 59 years old have enrolled themselves in a pension product.


PEPP would contribute to unlocking this huge potential and boosting investment in our economy.




The PEPP proposal is one of the most important measures for the CMU mid-term review.


It will:


  • complement pension funds currently on the market,


  • offer a safer and more transparent option for personal pensions,


  • and provide the economies of scale needed to reduce costs for savers and improve the flow of capital to long-term investments around Europe.



    We count also on your support to bring it to fruition.