| Sustainable Value for Money | | |
| With sustainable finance set to dominate the agenda of the new European Commission, BETTER FINANCE once again stresses that, besides addressing crucial environmental, social and governance issues, the concept of sustainable finance should translate into investment products that are exemplary in complying with EU investor protection and conduct of business rules. An investment can be as ‘green’ or ‘sustainable’ as you like, individual investors as long-term and pension savers will not entrust their lifetime savings to such products if they do not address their primary need for sustainable long-term value creation. To have a real impact on ESG issues, sustainable finance, its taxonomy, its benchmarks and its ecolabels must incorporate the most basic of requirements for sustainable finance such as fair, transparent, clear and non-misleading investor information. The trust of EU citizens as savers and investors is at stake. Whereas it is crucial for public policies that address negative externalities to be put in place, “green” investment products should not be developed at the expense of individual long-term and pension savers. If sustainable finance is to achieve what it set out to do, it should first of all ensure long-term and sustainable value creation and pension adequacy for EU Citizens as savers and investors. BETTER FINANCE and the CFA Institute, with the support of Accountancy Europe and Nasdaq, will host a joint International Conference on “Sustainable Value for Money” in Brussels on Wednesday the 20th of November 2019. The conference will address the challenges of sustainable finance and count with the participation of senior representatives of the European Parliament, the European Commission, BETTER FINANCE and CFAI Member Organisations and other key stakeholders who represent the interests of their members in this field. “Sustainable Value for Money” Conference Programme | |
| Pensions Inadequacy highlighted in the 2019 BETTER FINANCE Pensions Report | | |
| For the seventh year in a row, BETTER FINANCE embarked on the herculean task of gathering all the data on private pensions in 17 EU Member States and published its annual report on the real net returns of long-term and retirement savings in Europe. Despite the fact that the European Supervisory Authorities (ESAs) have a legal duty to collect, analyse and report data on “consumer trends” in their respective fields, the “Pension Savings – The Real Return” Report remains the sole and unique study looking at the performance and costs of long-term and savings products in the European Union. If it were not for this report by BETTER FINANCE, EU citizens and public supervisors would remain completely in the dark with regards to the real net performance and costs of those products that form the backbone of the European pensions system. Whereas the report is even wider in scope this year, covering 17 pension systems and 87% of the EU population, the results unfortunately continue to point to the same worrying conclusion: For years now, public authorities have insisted on the fact that that citizens need to take their responsibility and start saving more and for longer to achieve income adequacy at retirement. So far, our research indicates this advice may be misplaced: in far too many instances, saving more would only make you lose more. Crucially, it ignores a key reason as to why too many long-term and pension savings are failing to provide for an adequate replacement income: insufficient and sometimes even negative long-term real (after inflation) returns. Whereas asset allocation and unsuitable investment styles may share a part of the blame, fees and commissions are the main reason behind low returns on pension products, destroying the real (after inflation) value of pension savings over the long-term. Inflation, though conveniently ignored, also plays an important role in destroying the value of your savings. With such poor prospects ahead and European savers looking at a future with inadequate replacement incomes for their retirements, it is no wonder that investments and pensions continue to rank as one of the worst consumer markets in the entire European Union according to the European Commission’s Consumer Scoreboards. With an ageing population, the EU can ill afford to continue down this road and needs to look into solutions to diffuse this ticking time bomb that is European pensions. More information: “Pension Savings – The Real Return”, 2019 Edition Press Release: “Pensions Inadequacy: the High Fees often charged by European Pension Providers prevent many EU Citizens from enjoying a Decent Retirement” | |
| BETTER FINANCE intensifies its Campaign for Collective Redress: The Council should stop their Boycott of Consumer Rights and give EU Citizens access to Collective Redress | | |
| As consumers we have all been ripped off at some point in our lives by a dishonest company or service provider. We have all been a victim of a scam, small or large, and lost money due to the mis-selling of, or misinformation about, one product or another. Most of the time the amount of damage or harm done is limited, albeit upsetting and painful. And most of the time it stops there. It stops there because we don’t necessarily have the time, resources or knowledge to initiate legal proceedings against our wrongdoers. When our rights as a consumer have been breached and we suffered detriment due to illegal or unfair practices, we often find ourselves alone without any recourse or redress. But it doesn’t have to be this way. For 24 years now, an EU-level proposal - the Collective Redress Directive - that would allow consumer organisations to take up important legal fights on your behalf and obtain compensation for you, has been on the table in some shape or form. If this Directive were to be adopted, European consumers would no longer face this uphill struggle alone, since Collective Redress would allow consumer organisations to group all those affected by a certain illegal practice together to defend their rights and obtain due compensation for the detriment suffered. Yet, all this time the governments and politicians you voted for at home, and the representatives you sent to Brussels in your name, seem hellbent at denying EU Citizens their consumer right to redress. It would seem that national governments, more often than not, put the needs of businesses before those of consumers, forcing the European Commission and Parliament to give in to national governments and industry lobbyists and water down consumer protection standards. Nothing has changed to this day: the EC published their proposal for a Directive in March 2018. The European Parliament then voted for amendments to the Directive, severely limiting its scope and impact, removing EU Citizens as Savers and Investors from its scope. Now it’s the Council’s turn to do the same. If the European Parliament already inflicted serious damage to the Directive, everything seems to suggest that the Council is set to deliver the knock-out blow. Don’t let private interests from your countries get in the way of your rights as citizens and consumers! BETTER FINANCE for one, is doing its part in trying to obtain an EU-wide consumer collective redress scheme for you. More information: Find out more about BETTER FINANCE’s campaign here. | |
| BETTER FINANCE now contributes a total of 28 user-side experts to the EU authorities’ expert and stakeholder groups | | |
| Brussels, 19 September 2019 - BETTER FINANCE is pleased to announce that Edoardo Carlucci, Research and Policy Officer at BETTER FINANCE - the European Federation of Investors and Financial Services Users - was appointed as member of the European Insurance and Occupational Pensions Authority’s (EIOPA) Consultative Expert Group on Digital Ethics in Insurance to represent individual savers and investors. EIOPA identified a “strong trend towards data-driven business models across the insurance value chain” and states that “there are many opportunities arising from digitalisation, both for the insurance industry as well as for consumers. However, there are also risks that need to be further addressed.” In order to support it in the development of digital responsibility principles in insurance, EIOPA set up a multidisciplinary Consultative Expert Group. BETTER FINANCE thanks and congratulates EIOPA, as well as both other European Supervisory Authorities (ESAs), for continuously improving on the consumer and retail user representation within their stakeholder groups. BETTER FINANCE now contributes a total of 28 user-side experts to the different expert and stakeholder groups of the European Commission, the ESAs - the European Banking Authority (EBA), the European Insurance and Occupational Pensions Authority’s (EIOPA) and the European Securities and Markets Authority Banking Stakeholder Group (ESMA) - and EFRAG, the European Financial Reporting Advisory Group, and is co-chairing three of them (OPSG, SMSG and FSUG). More information: Press Release | |
| BETTER FINANCE castigates Institutional Investors' Short-termism Consultation | | |
| In its response to ESMA’s survey on its collection of evidence on short-term pressure from the financial sector on corporations, BETTER FINANCE expressed concerns about the institution restricting its definition of a long-term investment to just a long timeframe. The association argued that "not only the duration of a holding is decisive to decide if something is long-term or not." Among other factors it mentioned are the macroeconomic environment, market pressures, profitability, business objectives, client demand and executive remuneration structure. BETTER FINANCE also took the opportunity to raise questions regarding the Shareholders Rights Directive II (SRD II). The organisation pointed to the absence of an EU definition of “shareholder” as being “extremely damaging” to long-term shareholder engagement. Besides, according to BETTER FINANCE, the obligations imposed on investment firms in SRD II are “not far-reaching enough to change their investment behaviour”. More information: BETTER FINANCE response to the survey on collection of evidence on undue short-term pressure from the financial sector on corporations Asset News: BETTER FINANCE castigates institutional investors' short-termism | |
| The EU can still save the PEPP: make it simple and use a relevant risks scale | | |
| The pan-European Personal Pension (PEPP) product was designed to create a simple and safe personal pension “by ensuring sufficient consumer protection”. The design of the PEPP unfortunately falls short of this objective: the simple, safe and cost-efficient default investment option (“basic PEPP”) is no longer simple, requires advice and embeds a capital guarantee scam. For basic PEPPs that offer a capital guarantee, BETTER FINANCE asked to guarantee pension savers’ contributions before deduction of fees and in real terms, or – at the very least – to display a prominent warning for pension savers that fees and inflation will severely reduce the value of this “guarantee” over time . The voted Regulation however resulted in a “capital guarantee scam”, where the accumulated lifetime savings are protected only after deducting accumulated fees, without taking into account the negative effect of inflation, and without any warning. EIOPA is to draft the delegated acts on the fee cap for the “Basic PEPP”, on “risk mitigation techniques” and on the PEPP Key Information Document (KID). Unlike what happened to the level II PRIIPs Regulation, it must keep it simple and intelligible for pension savers: lifetime savings and pension adequacy are at stake here. The annual fee cap of 1% corresponds to the existing cap for personal pensions in the UK, and to the fee assumption in the study on life cycle pension savings commissioned by the asset management industry. It is higher than the average total expense ratio for life cycle pensions in the US. Likewise, it is meant to include all annual ongoing fees: total management, distribution and those charged for “guaranteeing” or smoothing returns if any. It is the opportunity to standardize the definition and components of the total ongoing charges that shall be mandatorily disclosed in the PEPP KID. Future rules on “risk mitigation techniques” run the risks of being too complex for pension savers and of relying on inadequate risk scales. EIOPA would do well to get inspiration from the newly enacted risk mitigation rules for French personal pensions, that are not too complex an should allow for direct investments in funds, low cost ETFs and listed equities and bonds. The risk scale should be adapted to the long-term horizon of a pension product such as the PEPP, by taking into account that, over such a horizon, a diversified portfolio of listed equities is much less risky than money market funds or short-term bonds. Last but not least, the PEPP KID must not repeat the huge mistake made with the PRIIPs KID for disclosing performance. Unfortunately, future performance forecasts seem to be back again. Besides the fact that return projections are wrong, confusing and misleading, the PEPP regulation does not require the prominent warning that “such forecasts are not a reliable indicator of future performance”. We are looking at a PEPP Regulation that may very well be “stillborn”, since it already conflicts with MiFID II provisions. Long term past performance alongside a benchmark must be part of the KID! More information: Short video and petition: "Stop the Capital Guarantee Scam & Get the PEPP Pension You Deserve" | |
| Annual Report 2018 | | |
| BETTER FINANCE published its Annual Report for 2018. The report provides an overview of our main achievement in 2018 and looks forward to the priorities for EU Citizens as savers, investors and financial services users over the next 5 years. The reader is invited to find out more about the BETTER FINANCE Team, it’s Members and principal campaigns and events. More information: BETTER FINANCE Annual Report 2018 | |
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