Pensions in 3D: Dashboards, disclosures and data

Speech by Petra Hielkema  at the IPE conference

Delivered virtually, 2 December 2021

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Introduction

Thanks for inviting me to talk to you today. Of course I wish that I could have been there with you in person.

A couple of weeks ago, I might have said that regarding Coronavirus there was a light at the end of the tunnel, but now I will just say I hope to see you in person next year.

It’s fitting that I am talking to you today during European Retirement Week, since pensions are high on the political agenda and, of course, our own agenda at EIOPA.

Today, I would like to talk to you about three aspects of our work: Dashboards, disclosures and data. Pensions in 3D, you could say.

All three are vital to fostering sustainable pensions and ensuring that people can retire with the lifestyle that they were expecting.

Dashboards

Let me start with dashboards.

When we talk about pensions, we nearly always also talk about pension gaps, and of course what needs to be done to close gaps.

And while it is clear that pension gaps affect every country in Europe, what we need to consider that that types and sizes of gaps are different in each country. 

And to close gaps, policy makers need to understand the nature of their own gaps.

We believe that pension dashboards will help. 

By increasing transparency on adequacy and sustainability of pension savings, dashboards will mean that policy makers at national and EU level will be better placed to make informed decisions. 

Over the course of this year, EIOPA has been developing recommendations for the development of pension dashboard and yesterday we submitted our advice to the European Commission.

In our advice, we are proposing a visual dashboard that includes a complete set of indicators – drawn from the European Commission’s reports on ageing and complemented with information related to occupational and personal pensions.

This is the macro level – helping policymakers to identify and assess gaps.

But we also need to consider the micro level – how we can help individuals to better plan for their retirement.

And this brings me to a second piece of advice that we submitted to the Commission, this time for pension tracking systems. 

The aim of tracking systems is to provide citizens with an overview of the income that they can expect to receive in retirement. In pooling together information from all retirement saving sources into one place, people can have a better view on whether the income that they expect to receive will sufficient and on this basis people can adapt.

Our advice provides a set of principles and good practices to help those Member States to develop their own pension tracking system. It covers the role and scope of systems, the type of information to provide, as well as how to present it, and data and technical requirements.

If that sounds like a lot, you are right – it is a lot. 

And we know that building an effective tracking system is not something that can be done overnight. 

In fact, though our extensive consultation period, one of the phrases that we heard most was ‘Start small, think big’ and this sentiment too is reflected in our advice.

And so, in our advice we are including a roadmap that outlines four key development stages from preparation through to proof of concept, testing and launch.

The success of tracking systems depends on two things: the fullness of the information that is provided and the ability to engage people.

For the first point, it’s important that information is complete and up-to-date. When people check the tracking system, if they are going to be able to take decisions, then they need to be able to see the big picture – and have accurate information on their pensions from all three pillars. The information must be both comprehensive and impartial.

For the second point, it’s not enough that the information is available, it must also be understandable. 

Our proposal therefore contains recommendations on how to layer and signpost information with a digital-first approach.  

And this is where pension tracking systems play such a key role in raising awareness about pensions saving. Something that is particularly important as we also see during this European Retirement Week.

Finally, we are also encouraging Member States to connect national systems to the European Tracking System so that people who work or have worked in different countries across Europe can access an overview of all their pension entitlements.

So, dashboards and tracking systems are one way to address pension gaps at macro and at individual level.

And while we cannot rely on tracking systems alone to increase the interest of people in their pension savings, they can be an effective tool in helping people to make informed decisions.

Disclosures

Now to my second ‘D’ – disclosures.

When we talk about engaging people in their pensions, we cannot ignore the current interest in sustainability and sustainable finance. It is quite possibly higher than it has ever been before.

The starting point here should be a common understanding of what is meant by green or sustainable. The EU taxonomy is therefore essential as it provides common definitions for those economic activities that can be considered environmentally sustainable.

Disclosures are the second step. 

When the European Commission consulted on its renewed sustainable finance strategy, only 15% of respondents knew if their insurance or pension assets were invested in sustainable finance assets. Of those that did not know, most asked for more – and more transparent – information about the environmental and social impact of their investments.

Disclosures should help even though we know that consumers often do not necessarily read the disclosures they receive, for example pre-contractual information. Again this is a call for clear and engaging information. It also underlines that the role of advisors will be crucial to help consumers choosing a pension product with green criteria. 

New rules under the Sustainable Finance Disclosure Regulation, or SFDR, should also help investors in making informed decisions or identify inaccurate disclosures.

While the SFDR calls for a statement showing the principal adverse impacts that investment decisions have on sustainability most  occupational pension funds in the EU are not required to report on those.

This is because they are below the SFDR threshold of 500 employees. Nonetheless, we should encourage pension funds to make the effort to disclose on the principal adverse impacts under the SFDR regime. This will also help to enhance indeed accountability of pension funds, as they will be able to show to the public how they engage with investee companies and whether the adverse impact of their investments reduces over time. 

Data

Now the third ‘D’ that I would like to talk about is data.

Good data is vital for so many reasons.

Good data will help us establish not only where gaps are, but also the underlying drivers that create the gaps.

It helps to inform not only policymakers but also policyholder and results in evidence-based decision making.

Finally, good data means that we can measure results and adapt where needed.

As I mentioned at the beginning, pension landscapes differ per country. Still there is space for common approaches and for a European approach. This is also true for data, where EIOPA plays a key role: from collection to sharing.

And we are continuing to improve the quality of our data collection and last month, for the first time, published annual occupational pension statistics. This information complements our quarterly statistics publication with additional information.

The annual statistics are derived from annual submissions to the pensions data reporting framework and provide a comprehensive picture of the European occupational pensions sector. 

In the areas that I have mentioned here today: dashboards, tracking systems and disclosures – data will play a key role in their success and this is why we at EIOPA place so much importance on the topic.

Looking ahead

Before I close, I would like to mention a couple of other things on our pensions agenda.

If I stick with the letter ‘D’ – I would like to add something about demand, and specifically how we can meet the demand for simpler products.

We have seen through our work, not only on pensions, but also our more broad work on value for money that there is a clear need for simpler long-term savings products.

Next year, the first pan European personal pension products will enter the market. These products are designed with today’s workforce in mind – people who change jobs frequently, who might move countries often for work, who might be self-employed or freelance.

The PEPP is fit for all these consumers. The product is simple, transparent and portable and the basic PEPP comes with a cost cap. Also the key information documents and pension benefit statement have been designed with consumer engagement in mind.

We see the potential for PEPP to create more competition. Suppliers can benefit from a broad market with the same rules, while consumers can have access to a wider range of products.

And we hope that the learnings from PEPP will pave the way for more simpler products to help consumers save for their retirement.

A second point on our agenda for next year is the review of the IORP II Directive, where we will look carefully at the impact of the implementation of the IORP II Directive on cross-border activity.  We expect to receive a call for the advice on the review of the IORP II Directive early next year and this will be part of that work as well as the role of sustainable finance in pensions and pension solvency.

With that I have one final point to mention and that is that next year we will conduct the IORP stress test.

We recently set out a methodological framework for stress testing IORPs that should help to make the exercise more efficient while allowing the tailoring of the approach depending on the specific objectives of the exercise.

We consulted widely on the development of the framework and will use elements in our forthcoming exercise. We will also continue with the practice of disclosing the participating IORPs as we believe that this transparent approach builds further trust in the exercise and the sector. 

In conclusion

Let me conclude where I started with the need to foster sustainable pensions and thereby closing pension gaps. There will be many steps to take, but the work that we are doing on for example dashboards and disclosures, will help.

And in our role as a European supervisor and by bringing together our members to share best practice and data is where EIOPA can add real value.

Because as I also said, while gaps and challenges are different across Europe, there is also scope for common approaches. As such EIOPA will continue to make sure that there is a constructive dialogue on pensions, thereby help to close the gaps.

Thank you very much.