The European Commission (EC) should ‘consider carefully’ its push to boost retail participation in capital markets through savings and investment accounts (SIAs) as they “risk undermining” occupational pensions, PensionsEurope has warned.

Although PensionsEurope welcomed the initiative to encourage greater retail participation in capital markets, it said it was “important to distinguish properly between SIAs and retirement vehicles”.

The association’s main area of concern was the impact of such an initiative on supplementary pensions.

“While SIAs can be used to foster retail participation in capital markets, they could in member states also risk undermining the existing well-functioning occupational pension systems that collectively manage long-term savings, as well as already available third pillar pension products such as individual pension plans,” it stated.

PensionsEurope added that introducing SIAs could “weaken individual funded retirement products and reduce trust in supplementary pensions”.

It urged the EC to “carefully consider” the interaction between SIAs, occupational and personal pensions to “avoid jeopardising the objective of providing good retirement outcomes for EU citizens”.

The association also cautioned that placing too much faith in competition and digital accessibility as the primary drivers of SIAs’ success could be misguided, particularly given the relatively low levels of financial literacy across some EU member states.

The association further warned that promoting alternative investments through SIAs could lead to higher costs, as these asset classes are often associated with elevated fees.

Concerns were also raised about the long-term sustainability of such initiatives in the context of Europe’s ageing population. With the EU facing a shrinking working-age demographic, the association argued that offering preferential tax treatment to short-term products could undermine efforts to ensure adequate retirement incomes.

Specifically, the proposed five-year investment horizon under the ‘Finance Europe’ label was seen as insufficient for supporting long-term retirement goals or for contributing meaningfully to EU capital markets, objectives highlighted in reports such as the Draghi report.

Finally, the requirement for a minimum percentage of investment to be directed within the EU, as outlined in the label proposal, was criticised as being at odds with the fundamental principle of diversification. Such constraints, PensionsEurope noted, could ultimately restrict returns for savers.

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