AEIP publishes its position on ‘The role of paritarian institutions of social protection in the creation of the Capital Markets Union’
AEIP and paritarian institutions of social protection – including occupational pension and healthcare funds, first pillar bis pension schemes as well as provident institutions – can play a key role in the development of the Capital Markets Union (CMU). Especially in the light of the unprecedented and detrimental coronavirus pandemic, paritarian institutions should have an even more pivotal role in funding the CMU initiative.
Paritarian institutions have an important social function in supporting the EU economies and citizens. They ensure adequate benefits for old age income, healthcare and long-term care services while they work as much-needed automatic stabilizers in times of economic strain. Thanks to their joint decision-making process and management by the social partners, they promote and ensure transparency and inclusiveness, acting in the best interest of their participants and beneficiaries.
At the same time, paritarian institutions of social protection are important institutional investors and can contribute to fostering long-term investment and sustainable economic growth. They also have a substantial role in maintaining financial stability. They often act counter-cyclically by maintaining their long-term strategic asset allocation in stressed market conditions, meaning they rebalance and buy assets whose prices have diminished abruptly. Importantly, paritarian institutions allow for individuals to safely save at a very low cost and with high real returns. In that regard, they are essential for investing in capital markets and the deepening of the CMU.
In the current economic environment of persisting low interest rates and the detrimental effects of the Covid-19 pandemic, there is a growing interest among paritarian institutions of social protection to invest in the real economy. This includes investments in alternative asset classes such as infrastructure and private equity.
Given the importance of paritarian institutions of social protection for the creation of the CMU, the EU should support growth in the second pillar pension sector. Furthermore, we call for decisive policy instruments at European and national levels that would back up and enhance capital-based and collective systems of social protection managed by social partners, thus assisting to the channeling of savings towards a European CMU.
To read the AEIP position in detail, please see here.