Latvian Commissioner for the Euro and Social Dialogue Valdis Dombrovskis is a vice-president of the European Commission.
Dombrovskis spoke with EURACTIV.com’s Jorge Valero.
Why is a pan-European personal pensions product needed?
It is a proposal to complement the existing state and occupational pensions, and also the existing personal pensions plans. The aim is to bridge a pension gap that is emerging due to the ageing of the population. In 2060, we expect only two people in working age for every pensioner, compared to the ratio of four to one today. It is a tool for product providers and businesses to offer a quality personal pensions product based on single EU standards. It has to be a single product for savers, with up to five investment strategies with different risk stance. Today there are more complex products. It will include caps for the cost of switching between providers, and requirements on transparency on the fees and performance of the investment.
The idea is that these features will be harmonised at EU level. The providers will need only one authorisation to offer this product across the EU. Unlike many national plans, it will be also portable, with no need to change your pension plan if you move from one EU country to another one. Given that it is a pan-European product, you can achieve economies of scale, and correspondingly it makes it an affordable and attractive option for savers.
What would the tax treatment treat be?
This proposal will be a regulation. But we will also put forward a recommendation for the tax treatment of this product. In many countries, what makes personal pensions products attractive are the tax incentives the state provides. What we will recommend is to provide the same tax incentives the member states are offering to the national pensions products, to ensure that users also have tax benefits when they invest in it.
We hope that the proposal helps us to achieve our double aim of providing an investment product, so people can save for their pensions, and put those savings to a productive use by providing an additional source of financing for the real economy.
Wouldn’t this system facilitate tax arbitrage?