The European Union must not enforce pension funds to invest in Europe’s Capital Markets Union (CMU) but instead work to attract them, PensionsEurope CEO/secretary general, Matti Leppälä, has said.

Speaking at the CBBA-Europe Annual Conference in Brussels yesterday (8 October) during a panel discussion on how EU regulation on pension funds is evolving, Leppälä said pension funds are “dependent on well-functioning deep capital markets” and more integration in capital markets is needed.

“I think this is really crucial. Pension funds are really dependent on the success of this and want to support this,” he said.

However, Leppälä questioned how this can be achieved, and stated: “How do we enable pension funds to invest more in the European economy, European startups? I hope that we will not try to force pension funds to do this because the basic fiduciary duty of pension funds is to invest the assets so that you get the best possible returns,” he explained.

“Of course, it's very true that many of the big pension funds of Europe have invested outside Europe, but the reason for that is that the economies outside Europe have often performed much better. I really do hope that we will not put in place requirements to have potential funds investing in Europe, that we enable potential funds to be attracted,” he said.

He added that the upcoming new European Commission (EC) should use its time to reduce the regulatory burden of European companies.

“These are really crucial issues. I really don't think that this is about, for example, having stronger merged supervisory constellations in Europe. I'm confident that, based on the good work that has been done, honest recognition of these problems, and the size of the problems, we have good actions and Pensions Europe is very supportive of all of this.”

Speaking on the same panel, European Insurance and Occupational Pensions Authority (EIOPA) head of policy and supervisory convergence, Patrick Hoedjes, who is relatively new to his role, said his priorities will be not to increase the policy burden but to strengthen supervision.

“We already have a lot of rules in place that are there to support and protect citizens, what we now need is our ability to act when things go wrong,” he said.

Furthermore, another panellist, EC deputy head of unit, insurance and pensions, Larisa Dragomir, said that being at the end of a mandate, the EC is in “listening mode”.

“We are at the end of the mandate, decisions are not taken right now and waiting for the new commission to be installed,” she said, but added that there will be a clear focus on investment needs surrounding the CMU.

“Pensions have always been in the CMU debate from the very beginning and that’s for a very simple economic reason – capital markets tend to be bigger in the member states where there are pensions,” she said.

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