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EUROPEAN UNION

Pensions in the EU: What you need to know if you’re moving country

Have you ever wondered what to do with your private pension plan when moving to another European country?

Pensions in the EU: What you need to know if you're moving country
Flags of the EU member states flutter in the air near a statue of the Euro logo outside the European Commission building in Brussels, on May 28, 2020. (Photo by Kenzo TRIBOUILLARD / AFP)

This question will probably have caused some headaches. Fortunately a new private pension product meant to make things easier should soon become available under a new EU regulation that came into effect this week. 

The new pan-European personal pension product (PEPP) will allow savers to take their private pension with them if they move within the European Union.

EU rules so far allowed the aggregation of state pensions and the possibility to carry across borders occupational pensions, which are paid by employers. But the market of private pensions remained fragmented.

The new product is expected to benefit especially young people, who tend to move more frequently across borders, and the self-employed, who might not be covered by other pension schemes. 

According to a survey conducted in 16 countries by Insurance Europe, the organisation representing insurers in Brussels, 38 percent of Europeans do not save for retirement, with a proportion as high as 60 percent in Finland, 57 percent in Spain, 56 percent in France and 55 percent in Italy. 

The groups least likely to have a pension plan are women (42% versus 34% of men), unemployed people (67%), self-employed and part-time workers in the private sector (38%), divorced and singles (44% and 43% respectively), and 18-35 year olds (40%).

“As a complement to public pensions, PEPP caters for the needs of today’s younger generation and allows people to better plan and make provisions for the future,” EU Commissioner for Financial Services Mairead McGuinness said on March 22nd, when new EU rules came into effect. 

The scheme will also allow savers to sign up to a personal pension plan offered by a provider based in another EU country.

Who can sign up?

Under the EU regulation, anyone can sign up to a pan-European personal pension, regardless of their nationality or employment status. 

The scheme is open to people who are employed part-time or full-time, self-employed, in any form of “modern employment”, unemployed or in education. 

The condition is that they are resident in a country of the European Union, Norway, Iceland or Liechtenstein (the European Economic Area). The PEPP will not be available outside these countries, for instance in Switzerland. 

How does it work?

PEPP providers can offer a maximum of six investment options, including a basic one that is low-risk and safeguards the amount invested. The basic PEPP is the default option. Its fees are capped at 1 percent of the accumulated capital per year.

People who move to another EU country can continue to contribute to the same PEPP. Whenever a consumer changes the country of residence, the provider will open a new sub-account for that country. If the provider cannot offer such option, savers have the right to switch provider free of charge.  

As pension products are taxed differently in each state, the applicable taxation will be that of the country of residence and possible tax incentives will only apply to the relevant sub-account. 

Savers who move residence outside the EU cannot continue saving on their PEPP, but they can resume contributions if they return. They would also need to ask advice about the consequences of the move on the way their savings are taxed. 

Pensions can then be paid out in a different location from where the product was purchased. 

Where to start?

Pan-European personal pension products can be offered by authorised banks, insurance companies, pension funds and wealth management firms. 

They are regulated products that can be sold to consumers only after being approved by supervisory authorities. 

As the legislation came into effect this week, only now eligible providers can submit the application for the authorisation of their products. National authorities have then three months to make a decision. So it will still take some time before PEPPs become available on the market. 

When this will happen, the products and their features will be listed in the public register of the European Insurance and Occupational Pensions Authority (EIOPA). 

For more information:

https://www.eiopa.europa.eu/browse/regulation-and-policy/pan-european-personal-pension-product-pepp/consumer-oriented-faqs-pan_en 

https://www.eiopa.europa.eu/browse/regulation-and-policy/pan-european-personal-pension-product-pepp_en 

This article is published in cooperation with Europe Street News, a news outlet about citizens’ rights in the EU and the UK. 

Member comments

  1. The cap of 1% fees is welcome but frankly way too high. If you compare to the fees charged by Vanguard or Fidelity in the US you can see how even 1% over the savings lifetime of 30-40 years is a real gouge. This is plain vanilla arithmetic. I have a managed individual retirement account at Vanguard in the US that charges me .16%. And note that is a managed fund. The purer index funds, which simply track the whole market whether bonds or shares, are even less costly.

  2. I have been paid a complementary pension by Agirc-Arrco ( after much difficulty trying to claim it during the pandemic). I received it ( I thought ) under the terms of the Brexit Withdrawal Agreement ( financial section) which states that a person should not be worse off re their financial situation ( french complementary pension) after Brexit. Although I lived and worked in France for
    Ten years and accumulated many points in the scheme…for which I have been paid monthly…now they have blocked my
    account due to completely ambiguous wording of the INFO RETRAITE formulaire which I used for instructions in sending my certificat de Vie. I am 68 years old and worked hard years to accumulate this pension….who to speak to ? I am hoping that the French state part of my pension will be paid as usual as that account isn’t blocked. Any help appreciated.
    .

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MONEY

EXPLAINED: How does Norway’s bracket tax work?

Norway has a progressive tax on gross salary and other personal income, commonly known as the bracket tax. But what are the rates, and how much will you have to pay in the country known for its steep taxes?

EXPLAINED: How does Norway's bracket tax work?

While many are familair with the concept of income tax, bracket tax may be a confusing concept for many. 

The bracket tax in Norway is calculated based on the individual’s gross salary income and other corresponding incomes, such as sick pay, work assessment allowance, disability benefit, and pension. Essentially it is a tax on one’s income after income tax. 

The country’s bracket tax consists of five steps, ranging from 1.7 percent bracket tax for the 1st step to 17.4 percent for the 5th step.

Note that, according to the rules in force for 2022, you do not pay any bracket tax on the first ca. 190,000 kroner of your personal income.

The bracket steps for 2022 are as follows:

No bracket tax
Income between NOK 0 – 190,349: No bracket tax

Step 1
Income between NOK 190,350 – 267,899: 1.7 percent bracket tax

Step 2
Income between NOK 267,900 – 643,799: 4.0 percent bracket tax

Step 3
Income between NOK 643,800 – 969,199: 13.4 percent bracket tax (residents of Finnmark and Nord-Troms pay 11.4 percent due to a special reduction in the surtax rate for the region)

Step 4
Income between NOK 969 200 – 1 999 999: 16.4 percent bracket tax

Step 5
Income over NOK 2,000,000:  17.4 percent bracket tax

Other taxes and contributions to keep in mind

Income tax: Remember that the bracket tax is calculated on your personal income and comes on top of the income tax, which is paid at the rate of 22 percent.

Personal income is defined as your salary or other similar money which replace a salary, such as sickness benefits, work assessment allowance, disability benefits, and pension.

As the Tax Administration points out, bracket tax is calculated on gross income, so any deductions you might be entitled to won’t be deducted before bracket tax is calculated.

Wealth tax: The wealth tax in Norway is paid on the wealth one has as of December 31st each calendar year. Wealth is usually defined to include bank deposits, shares, cars, and property.

The wealth tax is paid to both the municipality you live in and the Norwegian state. It is calculated based on your net wealth – the wealth left over after deductible debt has been deducted.

You can find more information on the wealth tax brackets that apply here.

Note that if you’re a tax resident in Norway, you’ll be liable to pay tax to Norway on all your income that’s earned in Norway or abroad.

Provisions in tax treaties with other countries can limit the amount of tax that must be paid to Norway but make sure to check the rules that apply to wealth abroad here.

National Insurance: Don’t forget that you are also liable for National Insurance contributions, which finance the country’s National Insurance scheme.

These are calculated on personal income, and the rates for 2022 can be found here

You can find more information on Norway’s National Insurance scheme in general on the Norwegian Labour and Welfare Administration’s (NAV) site.

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