For Official Use DAF/AS/PEN/WD(2015)8
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For Official Use DAF/AS/PEN/WD(2015)8 Organisation de Coopération et de Développement Économiques Organisation for Economic Co-operation and Development 27-Oct-2015 ___________________________________________________________________________________________ _____________ English - Or. English DIRECTORATE FOR FINANCIAL AND ENTERPRISE AFFAIRS INSURANCE AND PRIVATE PENSIONS COMMITTEE For Official Use Official For DAF/AS/PEN/WD(2015)8 Working Party on Private Pensions SUMMARY RECORD 34th Session 22-23 June 2015 This document contains the Summary Record of the WPPP meeting held on 22-23 June 2015. For further information please contact Mr. Pablo Antolin [Tel: +33 145 24 90 86; Email: [email protected]] or Ms Bridget McGeehan [Tel: +33 145 24 64 20; Email: [email protected]]. English JT03385228 Complete document available on OLIS in its original format - This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of Or. English international frontiers and boundaries and to the name of any territory, city or area. DAF/AS/PEN/WD(2015)8 WORKING PARTY ON PRIVATE PENSIONS 34th Session, 22-23 June 2015 SUMMARY RECORD Closed session of the WPPP 1. Accession review of Colombia The Working Party: took note of a presentation by the delegation of Colombia on their private pension system and their self-assessment according to the OECD Recommendation on Occupational Pension Regulation. sought clarification regarding the adequacy of the retirement saving schemes in providing sufficient lifetime retirement income, in light of the low coverage rates, low level of total contributions and benefit withdrawals through lump-sum payments. Other issues discussed included: (1) the need for complementarity between funded private and PAYG public pensions arrangements; (2) financial education, as individuals need to make important decisions regarding retirement choices; and (3) the low number of market actors (pension funds) and high administrative costs. agreed to carry out the next review in December 2015 following a technical mission and a detailed review against the Core Principles to be prepared by the OECD Secretariat. was invited to provide comments through the written procedure by 10 August. 2. Core Principles of Private Pension Regulation The Working Party: took note of the main changes made by the Secretariat to the Core Principles since the meeting in December 2014 (DAF/AS/PEN/WD(2012)3/REV6) which reflected the comments made by delegations at that meeting and by written procedure. It acknowledged the inclusion of the additional commentary and an introductory text to each Core Principle. took note of the Secretariat document DAF/AS/PEN/WD(2012)3/REV6/ADD1 which provided the comments received and their treatment. agreed to have a final check in 2 weeks times on a new version to be circulated by the OECD Secretariat in early July incorporating the changes discussed and agreed during the meetings. agreed to circulate the Core Principles for public consultation after the final check and for 90 days, including an introduction to the Principles, implementation guidelines, with introductory texts, and the glossary. 2 DAF/AS/PEN/WD(2015)8 agreed to discuss at the next meetings of the WPPP scheduled for 30 November – 1 December a document compiling all the comments received during the public consultation and including an overall initial assessment, unless a full new revised document of the Core Principles can be prepared in time for the WPPP. Open session of the WPPP 1. Adoption of the Agenda The Working Party: adopted the agenda DAF/AS/PEN/A(2015)1/REV1 adopted the summary record of the last meeting DAF/AS/PEN/WD(2015)2 with the amendment that the Working Party agreed to reflect in the Core Principles of Private Pension Regulation the flexibility to apply them only to occupational plans. 2. Project on Financial Incentives and Retirement Savings The Working Party: took note of a presentation by the Secretariat on the document DAF/AS/PEN/WD(2015)3 providing a description of the tax treatment of funded pension plans in OECD and EU countries. The discussion started with presentations by Delegates from Spain and Chile, who described the tax treatment of private pensions and other financial incentives to promote private pensions in place in their respective countries. acknowledged the usefulness of this work as this kind of information, made comparable for more than 40 countries, is not available anywhere else. took note of the World Bank’s proposal to cooperate on matching contributions. asked the Secretariat to clarify the rational for considering employer matching contributions in a paper on tax incentives and to check further the tax treatment of different pay-out options. agreed to provide written comments and validate the country profiles compiled in the annex (DAF/AS/PEN/WD(2015)3/ADD1) by the 10th of August. supported the publication, including in the OECD webpage, of the summary document and its annex with country profiles once all the information has been validated. 3. Risk management of annuity products The Working Party: took note of a presentation by the Secretariat on the document DAF/AS/PEN/WD(2015)4. This document examines the risks faced by annuity providers as a result of different types of annuity products, and looks at how the annuity provider can manage the risks that each product presents through both product design and ongoing risk management strategies. 3 DAF/AS/PEN/WD(2015)8 agreed on the classification of products and suggested eventual areas to expand this research, covering supervisory and governance aspects relating to annuities in addition to the quantitative aspects of risk management. agree that the next steps of this project will be to produce a policy document, including a section on issues relating to consumer protection. was invited to provide comments through the written procedure by 10 August. 4. Draft G20 report on regulation of insurance company and pension fund investment The Working Party: took note of the Secretariat presentation of a draft report for the G20 Finance Ministers and Central Bank Governors meeting in September on the regulation of insurance company and pension fund investment, DAF/AS/PEN/WD(2015)5. The draft report draws on responses provided by delegates to the questionnaire on regulation affecting insurer investment for the insurance side, and on the OECD annual pension investment regulation survey for the pension side. The draft report provides a conceptual framework and looks at three types of regulation which target the investments of insurance companies and pension funds – quantitative limits, risk-based requirements and qualitative behavioural requirements – and discusses some of the impacts these may have on investment strategies. was invited to provide comments through the written procedure by 6 July so that a document could be ready for the G20 meetings in September. 5. Conflicts of interest in retirement financial advice – Background report The Working Party: took note of the Secretariat document DAF/AS/PEN/WD(2015)6 describing some of the main conflicts of interest and approaches implemented by some countries to address them. heard from four participants in the roundtable on the sources and types of conflicts of interest, evidence of the potential impact these conflicts have on retirement savings, any regulatory initiatives which have been taken to address the problem and finally the impact and effectiveness of these interventions thanked the speakers Joseph Piacentini (Office Director and Chief Economist, Employee Benefits Security Administration (EBSA), United States Department of Labor), David Geale (Director of Policy, United Kingdom Financial Conduct Authority (FCA)), Theodor Kockelkoren (Board member, Netherlands Authority for the Financial Markets (AFM)), and Carlos Ramírez (President, Comision National del Sistema de Ahorro para el Retiro (CONSAR)) for their participation and insightful presentations and comments. took note that the speakers highlighted compensation structures as the main source of conflicts of interest; that explicit commissions for selling certain products seemed to be the most obvious source of the problem, although volume targets and soft incentives such as concert tickets could also present an issue. Some evidence was presented that such conflicts reduce the potential investment returns individuals can earn from their retirement savings, as lower cost products are not suggested to the individual. 4 DAF/AS/PEN/WD(2015)8 took note that three main policy interventions have been used in various combinations to address these issues: disclosure requirements, requirements for qualifications for financial advisors and explicit controls on compensation structures for financial advisors such as banning commission payments. was invited to provide comments on the Secretariat paper DAF/AS/PEN/WD(2015)6 through the written procedure by 10 August. 6. Financial education and retirement planning The Working Party: took note of the document on financial education and retirement planning (DAF/AS/PEN/WD(2014)16/REV1) and welcomed the joint work with the financial education team on retirement savings and the role that financial education tools can play. expressed interest in measuring the impact of financial education on retirement planning. suggested adjustments or updates in a few paragraphs of the document. was invited to provide written comments by 30 of