Brussels is preparing a fresh initiative under the Savings & Investment Union: the Savings & Investment Account (SIA). Another acronym in the grand lexicon of EU finance, but one to note. It will consist of a (non-binding) recommendation to Member States to create accounts or products that allow people to save and invest in an easy, safe way, while offering tax advantages.

A year has passed since the great trinity of Draghi, Letta & Noyer reminded us that Europeans save much but need to do it better. Despite high saving rates, capital lies idle, returns are meagre and households remain strangers to the benefits of the capital markets that could serve both themselves and finance Europe’s most expensive objectives.

Europe’s finance must be unlocked and put to better use – the fight against climate change or the Affordable Housing Plan to name a few. Since 2015’s First Capital Markets Action Plan, Brussels has stepped towards this goal. Co-legislators are still haggling over the Retail Investment Strategy (RIS), while pensions and financial literacy reforms linger in national capitals. These reforms are politically difficult & will take a long time.

The SIA thus presents itself as an opportunity for quicker progress, standing complementarily with the RIS, supplementary pensions reform, and the recently published Financial Literacy Strategy. The Recommendation, expected in September, will beckon Member States to establish savings & investment accounts or products inspired by existing successful models such as the Swedish investeringssparkonto (ISK), the UK Individual Savings Accounts (ISAs) or the French Plan d’epargne en actions (PEA). Having closed its Call for Evidence on July 8, DG FISMA’s eurocrats have spent a busy summer drafting a blueprint proposal.

This European blueprint will carry no binding effect, yet it shall offer guidance on design and tax treatment, urging national governments to adapt best practices to their own jurisdictions. Brussels will then closely monitor the uptake of these accounts or products, reporting regularly on their uptake.

Recommendations for a successful SIA

The success of the SIA will depend on whether the Commission selects wisely from the currently existing national accounts or products: tax incentives that truly encourage savers, rules that channel capital into worthy assets, and holding periods that reward long-term investments.

Insurance Ireland, the representative body of Europe’s fourth-largest insurance market -an industry that provides stable, long-term funding- brings some experience on what the SIA Recommendation must include for success:

1. Keep it simple. The Swedish ISK thrives because of its simplicity: easy to open, easy to use, and scarcely a reason to refuse. A hallmark of Sweden’s ISK is that tax reporting is handled by providers and shared with the tax agency, with any tax due automatically included in tax returns. Leveraging life insurance wrappers -where tax matters are handled automatically- maximises convenience.

It should be simpler for providers to offer these accounts too, as the sorry tale of the PEPP reminds us. Then, the Commission should leverage in existing distribution channels. The insurance sector’s extensive networks, with intermediaries close to EU consumers, offer unique capacity to reach diverse profiles and promote broad uptake. Insurance distributors combine local markets knowledge with long-standing experience in guiding savers, making them well placed to channel household savings into productive investments.

2. Ensure the SIA is digitally friendly. The digital component plays a significant role, especially for younger generations. In addition, there should be an emphasis on engaging with consumers through their chosen distribution channel, whether this is through digital channels or from a human adviser.

2. Include a broad scope of products & investments. The SIA blueprint should recommend access to a broad range of investment products tailored to all consumer needs. Insurance products are particularly suited to long horizons, offering higher potential returns and enabling investment in less liquid assets such as infrastructure, private equity, and venture capital.

The simplest implementation would use the existing life insurance wrappers, allowing investment in a range of funds without geographical bias. While EU-focused fund options could offer alongside global ones, uptake would depend on marketing and attractiveness rather than design.

4. Make easy & affordable portability. Switching providers within a national market is essential for a competitive SIA market, making easy and affordable portability a key long-term requirement. As with the UK ISA, portability between providers would be allowed where servers can transfer all or part of their funds in their ISA from one provider to another at any time.

The ambition of including a pan-European approach in the SIA is noble, yet must remain a long-term vision. Cross-border licenses, differing tax regimes, multilingual disclosures, and IT infrastructures complicate matters. Let SIA take ground first. Europe’s federal unity in savings & investment will come, perhaps, only in a distant SIU 2.0 or 3.0.

Conclusion

Insurance Ireland believes that the Commission should set a holistic, inclusive SIA blueprint, granting Member States and providers sufficient flexibility to include take profit of existing products, channels, tax regimes, and preferences -ensuring the Savings & Investment Union’s objectives are met based on the most successful experiences.