The European Union (EU)’s pensions regulator is consulting on the development of pension tracking services and pension dashboards.
The European Insurance and Occupational Pensions Authority (EIOPA) has kicked off the two consultations after a request from the European Commission, made in December 2020, for technical advice on best practice.
Public pension systems are facing the dual challenge of remaining financially sustainable and being able to provide citizens with an adequate income in retirement, the Commission said in its request to the Frankfurt-based authority.
The broader policy backdrop is the EU’s Capital Markets Union (CMU) project. Action nine – ‘Supporting people in their retirement’ – of a CMU action plan presented in September 2020, commits the Commission to developing best practice that will help its 27 member states and citizens in the field of pensions.
The Commission is specifically looking to develop best practice for national tracking systems that facilitate access to individualised pension information. In parallel it is seeking to ‘fill a gap’ in the monitoring of pension adequacy in member states by ‘establishing pension dashboards that cover indicators about future pension entitlements at the aggregate level of the member state and for all sources of retirement income.’
Pension tracking consultation
EIOPA launched the simultaneous consultations on 13 July, with the slightly longer paper on pension tracking services stretching to 117 pages.
In this paper EIOPA presents the development of best practices for the setting up of national online tools that would provide citizens with an overview of their retirement income based on their entitlements from pension schemes in which they participate.
The authority is consulting on recommendations in areas including digital ID, uniformity of projections methodology and data transmission standards; as well as governance and implementation strategy, for example legislative requirements.
The consultation paper draws on existing EU legislation such as the institutions for occupational retirement provision (IORP) II directive; regulation on a pan-European personal pension product (PEPP); general data protection regulation (GDPR); and the Commission’s recent proposal on a Digital Operational Resilience Act (DORA). It is also informed by input from a ‘practitioners network’, as well as responses from the national competent authorities.
‘Striking the balance between the largest possible amount of accuracy (for example to avoid legal liability for incorrectly projected amounts) and understandable information (in order to promote effectiveness of disclosure) is essential for a pension tracking system,’ states the consultation’s executive summary.
EIOPA’s consultation paper on dashboards, which runs to 93 pages, describes an online tool designed to provide a comparable view of the ‘adequacy and sustainability’ of national pension systems.
The authority proposes that adequacy and sustainability indicators proposed by the Commission in a recent report – ‘The 2021 Ageing Report: Economic and Budgetary Projections for the EU Member States (2019-2070)’ – such as demographic and macroeconomic assumptions, are complemented with indicators that relate to private pension providers, including insurance undertakings and institutions for occupational retirement provision.
The consultation notes that, at present, no such adequacy and sustainability dashboards exist at a national level (according to those national competent authorities that fed into its document). A lack of political will to gather data at a national level is among the challenges in some countries, the document adds.
Responses to both consultations are requested by 8 September. EIOPA has been asked to submit its final advice, as well as impact assessments, to the Commission by 1 December.
Definitions: EU harmonisation required?
Europe is currently something of a patchwork quilt when it comes to pension information provision. Nordic states are widely seen as among the countries ahead of the pack, while others are yet to get out of the starting blocks.
There is also an acknowledged risk of inter-country confusion over terms. On page 50 of the dashboards consultation document, for instance, it states that ‘the term “dashboard” was not defined explicitly for this question and there may have been some alternative inference by respondents, as the term “dashboard” could also be understood to mean an individual pensions tracking service’.
In the UK – albeit no longer an EU member state – ‘pension dashboards’ bear significant semblance to what the EU authorities call ‘pension tracking services’. When the UK’s plan to introduce what its authorities refer to as dashboards was announced (in the 2016 Budget) the aim was to launch in 2019. The UK’s latest launch target date is ‘from 2023’.
EIOPA’s tracking services consultation also considers ways to foster the compatibility of national schemes with the Commission-backed ‘European Tracking Service [ETS] on Pensions’ initiative. ‘In order to achieve a pension tracking system at international level, similar issues as at [the] national level are to be tackled but at a much larger scale. This will increase the complexity of the process but should not alter any of the principles [contained in the consultation],’ the document states.
The ETS project incorporates authentication via the EU’s eIDAS (‘electronic identification and trust services’) framework. ‘EIOPA recommends [national] pension tracking services include eIDAS-compliant authentication digital IDs in order to allow a connection with the ETS,’ notes the consultation.
‘Long and challenging project’
‘Practitioners overwhelmingly agree that pension tracking systems [are] a long and challenging project,’ states the executive summary of the tracking systems consultation. ‘One of the most repeated mottos [among those that fed into its document] is “start small, think big”. As such EIOPA’s advice is that progressive implementation on how best to roll out and scale up the service is crucial. Building a pension tracking system takes time, several years at least. In such a timespan, ideas evolve, new insights develop, new technologies emerge.’
‘In line with the [Commission’s] call for advice and considering people’s inertia when faced with too much choice, this consultation paper focuses on the development of a single digital pension tracking system [PTS], hence disregarding the possibility for running multiple PTSs within the same member state,’ the PTS consultation’s executive summary also notes.
In the UK it is expected that there will eventually be multiple dashboards: one created by the Money & Pensions Service – an arms-length government body housing the Pensions Dashboards Programme – plus dashboards run by pension providers, banks and fintech companies.
“The work of the EU is important to encourage, guide and support governments to develop trustable services, which people should be able to access for free,” said Simone Miotto, senior policy adviser at Brussels-based PensionsEurope, which represents national associations of pension funds and similar institutions for workplace and other funded pensions. “These consultations are important also because they highlight some of the challenges encountered by policymakers. I believe the political willingness to develop these services, data protection issues and overall costs/financing issues are the most relevant.”
UK Pensions Dashboards Programme principal Chris Curry told Global Government Fintech: “From the outset, we’ve looked at the international experience when developing our thinking around dashboards – although we’re cognisant of the differences in pension systems and the challenges presented. EIOPA’s consultation provides another perspective and is another addition to the international evidence base we’ll look at.”