European Capital Markets and Future Pension Adequacy: The Potential of the Pan-European Personal Pension Product

Proceedings of The 4th International Conference on New Trends in Management, Business and Economics

Year: 2023

DOI:

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European Capital Markets and Future Pension Adequacy: The Potential of the Pan-European Personal Pension Product

Elroi Hadad, Jivka Nikolova, Stanislav Dimitrov

ABSTRACT: 

The establishment of a capital markets union encompasses a package of legislative proposals, including the introduction of the first standardized pension product at the EU level – the pan-European Personal Pension Product (PEPP). In this paper, we examine the potential for the development of the PEPP in the EU from a macroeconomic perspective. We focus on three EU member states – Belgium, Germany, and Spain, which have advanced economies with well-developed financial markets and multi-pillar pension systems, and the role of private pension funds is growing.
The country analysis shows that PEPP can fit into the multi-pillar pension systems and add to the diversification of the sources of retirement income. We infer that favorable tax treatment is a necessary condition for people to save in personal pension products, including the PEPP. Therefore, the market success of the PEPP will strongly depend on the state policy regarding financial and, in particular, tax incentives to promote its development.

keywords: pension adequacy, capital market, European union, multi-pillar system, tax incentives