Think tank pitches pan-European pension pots
A Brussels think tank has called for the creation of a pan-European long-term savings product that is portable across different countries, eyeing funds modeled around the UCITS framework that could address fragmentation in the region.
The concept follows a year of work by a partnership between The Center for European Policy Studies and European Capital Markets Institute on the creation of a single long-term savings market in Europe.
The group’s proposals are conceptual and would require the blessing of European lawmakers, but they envision a market in which people who work in several countries for different companies could bring their pensions pot with them as they move.
The products they envision would be portable to different jurisdictions across Europe in a similar way to Undertakings for Collective Investment in Transferable Securities (UCITS) mutual funds. Part of the think tank's proposal is the creation of funds that would be larger than European mutual funds that are available today.
Karel Lannoo, chief executive of CEPS, said through a translator at a Paris press conference: “We need a simple product; one that is mobile that can be brought to different countries.”
He called on European lawmakers to “harmonise” the market and stressed the need for scale in the products the group envisioned.
The report's authors say the products, aimed at retail investors, would have less liquidity than mutual funds, locking up their cash for a longer period of time. This would give the funds the ability to invest in less liquid assets such as infrastructure, the researchers said.
Jean-Baptiste de Franssu, the former president of European Fund and Asset Management Association and a non-executive director at Carmignac Gestion, which sponsored the report, said: “We need to put in place a single standard throughout Europe.”
He added that European policymakers had spent too much time on the financial transactions tax, a “complete distraction” and not enough time on the issue of long-term savings.
De Franssu said through a translator: “[Politicians] would have been much better advised to spend their energy and time on this topic.”
Still, a host of challenges stand between the think tank’s vision and its actual implementation. There could be little incentive for financial institutions to create the new products and little appetite among policymakers to approve the framework that would allow for their creation.
At a product level, asset managers would have to consider the risk appetite of clients, the liquidity of the funds themselves and whether the long-term savings funds offered payments in a lump sum or through annuities
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