The European Commission should avoid making changes to domestic pension regulation when introducing new cross-border legislation because the market still favours a national approach, warns the ABI.
Speaking at a EU pensions seminar yesterday, Association of British Insurers deputy director Stephen Sklaroff suggested 90% of pensions business is likely to be conducted within a country's borders for many years yet to come.
This should encourage EU officials to avoid adding the changes aimed at the cross-border market to the regulatory burden of domestic business, he added.
Sklaroff, who is also a member of the EU Commission's advisory group on Insurance and Pensions, says both occupational and personal pensions are almost all provided on a national basis.
This is because most consumers generally prefer to deal with "familiar and reputable" brands, Sklaroff explains.
Moreover, "they want to deal with providers who 'speak their language', in every sense of the phrase," he adds.
Another reason why he believes a majority of pension business will remain a domestic issue is that cross-border pensions will be more expensive compared with the cost of buying one from a national provider.
The web of several countries different national regulation, tax and social security rules, and local employment law when opting for an occupational pension will all prop up the cost for people wishing to make long-term cross-border savings, he deems.
With this in mind, the group hopes the Commission will introduce a low-cost regime for cross-border pensions. This would be attractive for those companies and customers with a "genuine" need to do cross-border business, it believes.
The Commission is open for comments on this to the end of September this year. A final plan is then scheduled to come into effect in spring 2005.IFAonline
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