European Policy Analysis Volume 2, Number 1, Spring 2016 | Page 50

Second Tier, Second Thoughts

comments on Question 8, which deals with
the transferability of capital accumulated
in PPPs, since taxation turns out to be its
main obstacle (also cf. Guardiancich 2015:
80—with a rather pessimistic outlook on
the feasibility of a true common market).
A broad majority of stakeholders is
generally in favor of such transferability,
while only four (EIOPA 2014a, com.
198, 207, 212, 218) raise objections on
principle, pointing to disadvantages for
customers arising from high transfer costs
and/or potential risks to the financial
stability of the insurers involved.16 It is
noteworthy that three of the four opposing
voices represent the insurance industry
at the national or European level, while
the fourth has its base in occupational
pensions in Germany which often takes
the form of insurance.
Among
those
stakeholders
who generally favor transferability, but
conceive strong obstacles to it, nearly
all mention the differing tax treatment
in member states.17 Here, EIOPA at first
glance seems to have been convinced by
them, for, in its preliminary report, the
young agency changes course: “In the case
of transferability, different tax regimes
applied to pensions in different MS may
lead to double-taxation or nontaxation of
transferred capital […] Overcoming these
obstacles seems to require harmonization
of tax treatment of pensions across
member states” (EIOPA 2014b). A

sentence later, however, EIOPA admits
that this “may be in practice difficult to
achieve” (EIOPA 2014b). So once more, we
are being directed toward the 2nd tier and
the hope that its standardized products
might fly below the radar of national tax
regimes. Regarding these products, a
clear-sighted stakeholder, the Association
of the Luxemburg Fund Industry, asks for
them to be “tax-neutral” (EIOPA 2014a,
com. 201). Maybe biased by prejudice, we
were inclined to read this as “tax-exempt”
and thus as a variation of the demand of
their Portugu ese colleagues cited above,
yet the Austrian Insurers’ Association
(EIOPA 2014a, com. 203) provides an
alternative reading. They propose that the
accumulation phase of a pan-European
PPP be undisturbed by taxation, that is,
taxation restricted to the payout phase.

In its preliminary report, EIOPA
discusses two specific variants of proposed
2nd tier products, both stemming from
inside the financial services industry. The
latter one, the European Pensions Plan
(EPP), exhibits this feature of deferred
taxation (EIOPA 2014b), while its main
competitor, the Officially Certified
European Retirement Plan (OCERP)
would completely fall under the existing
national tax rules (EIOPA 2014b).
Somewhat surprisingly, when comparing
the two proposals, EIOPA judges that both
“do no [sic!] deal with taxation” (EIOPA
2014b).

16

Comments 208 and 209, whilst not expressly opposed to transferability, specify valuation problems
pertaining to the accumulated capital, especially for insurance products.
17
In an effort to create additional earnings, EFAMA (EIOPA 2014a, gen. com. 206) also points out that
providers’ back-offices could solve taxational problems relating to transfers of accumulated capital for
their customers. It does not mention the fees this would entail, though.

50