New pension rules will unleash investment in listed sector

New European pension regulations that have come into force this week could unlock “vast investment potential in the listed real estate sector” according to EPRA, the European Public Real Estate Association.

The association pointed to EY estimates that suggest a total of €231 billion is set to flood the European equities market now that the Pan European Personal Pension (PEPP) regulation has come into force.

The PEPP regulations were set up to bridge the EU pension gap, which currently stands at €1.9 trillion.

Tobias Steinmann.

Under the new regulations, PEPP providers are encouraged to allocate a sufficient proportion of their assets to sustainable investments which will enable pension providers to invest in shares of publicly traded companies, including REITs.

EPRA said that investments in listed property companies are “a great example of long-term investments that have the potential to help Europe overcome its pension challenge and to help people achieve their retirement goals, especially in the current high inflation conditions”.

The PEPP framework allows pension providers to offer safe and profitable investments with transparent market pricing, low costs and enhanced liquidity, EPRA said.

According to a study carried out by EY for the European Commission, the new regulations could see the size of personal pension investment in the equities market double.

EU personal pension providers hold an estimated €700 billion of assets. With PEPP in place, personal pension providers will hold €2,100 billion of assets by 2030 with the right tax conditions, compared with just €1,400 billion without PEPP, EPRA said.

“We at EPRA focused closely on PEPP when it was drawn up and we’re even more pleased to see it come into force now,” EPRA public affairs director Tobias Steinmann says. “We’re particularly supportive of the choice left to the PEPP taker to invest in shares, as well encouraging sufficient investment in sustainable assets in the real economy which provide long-term economic benefits.”