Petra Hielkema, Chair of the European Insurance and Occupational Pensions Authority (EIOPA) and the Joint Committee of European Supervisory Authorities (ESA), outlined the risks that inflation poses to pensions on Monday 24 October at a hearing of the European Parliament’s Committee on Economic and Monetary Affairs (ECON).
MEP Lídia Pereira (EPP, Portuguese) raised the issue. Concerned about the “demographic precipice” in Europe, she asked Mrs Hielkema what solutions were being considered. EIOPA had warned that the direct impact of the invasion of Ukraine on European insurers and institutions for occupational retirement provision (IORPs) was very limited, but that the potential effects of a second wave of Covid-19 could be more significant (see EUROPE 12978/30).
Mrs Hielkema confirmed the existence of this problem: “One in five Europeans is not saving enough for the future”, she said. Apart from the lack of money to fund pensions, inflation could also cause Europeans to stop saving, because “they are driven by short-term needs”. They may even decide to laps a life policy despite possible penalties.
“They might also not extend the non-compulsory insurance for damages and run the risk of not being covered, if the risk happens”, she added. “Even if you are saving for later, because of inflation, it might not be enough”, she lamented.
Although this is not currently the case, EIOPA is monitoring the situation, notably through data collection and discussions with pension fund market participants.
In addition to monitoring, Mrs Hielkema stressed the importance of educating and explaining to workers the risks they face if they decide to stop contributing.
In addition, EIOPA had provided guidance to Member States on how to construct a pension scoreboard. “It is necessary to know the gaps in the system”, she said.
EIOPA also advised that a pension tracking system should be put in place to allow individuals to see where they stand with their pension savings.
She also regretted the lack of equality between Member States in terms of taxation and that the Pan-European Personal Pension Product (PEPP) was not more developed. The PEPP is a voluntary personal pension scheme that offers EU citizens a new option for saving for retirement. It is complementary to existing national pension schemes. It could, for example, benefit young people who frequently change jobs and/or work cross border.
In her introductory remarks, Mrs Hielkema recalled that more than 150,000 institutions for occupational retirement provision (IORPs) are active in the European Economic Area (EEA), with almost 60 million members and beneficiaries. These IORPs manage assets of almost three trillion euros. (Original version in French by Anne Damiani)