Saving is on a strong rise in the EU – why is Finland pushing the brakes?

Over the next few years, one of the key priorities for the EU Capital Markets Union is to create better opportunities for EU citizens to accumulate wealth and improve their financial security. Image: Shutterstock / Sutthiphong Chandaeng

Finance Finland welcomes the strategic initiative that is taking the EU Capital Markets Union (CMU) to a direction that promotes longer-term savings.
The development of the CMU must be market-driven and take national contexts into account.
National regulation that blocks the flow of investments must be dismantled.
National supervision must be harmonised.
Finance Finland struggles to understand why the Finnish government is swimming against the European tide and removing the tax incentive for voluntary pension savings.

In 2023 and in the beginning of 2024, the Eurogroup worked on a strategic initiative to secure an agreement among the finance ministers of all EU member states on the key priorities for enhancing and deepening the EU Capital Markets Union (CMU) in the coming years. Finance Finland welcomes this initiative but highlights that work on the CMU must follow a market-based approach.

The purpose of the CMU is to provide businesses with a greater choice of funding, boost the functioning of the capital markets and offer investors better investment opportunities. This will increase growth and employment.

“There are still obstacles that block the free flow of investments and financial services between member states. Some of these stem from justifiable differences in national regulation or practices, others from unjustifiable differences”, says Finance Finland’s Head of Asset and Fund Management Jari Virta.

Finance Finland is strongly of the opinion that the development of the CMU must be primarily market-driven and take different national contexts into account. The functioning of healthy national markets must not be hampered. Virta also points out that financial supervision should be rationalised and administrative burden lightened.

“The development of the CMU must be primarily market-driven and take different national contexts into account. The functioning of healthy national markets must not be hampered.”

JARI VIRTA, Head of Asset and Fund Management

“The various interpretations and requirements of national supervisors are hindering cross-border investment activity. The harmonisation of national supervisory practices is a supportable and justifiable measure, but we don’t need centralised supervision, an idea which has also been put forward.”

Why is Finland putting the brakes on long-term saving?

Finance Finland is pleased that one of the key priorities for the CMU will be to increase saving. This is also stated in Italy’s former prime minister Enrico Letta’s report on the future of the EU Single Market, which calls for the creation of a Savings and Investments Union. In this respect, however, Finland is putting a spoke in the wheel of these commendable plans: in its recent spending limits session, the Finnish government decided to discontinue the tax subsidy for voluntary pension savings.

“For some reason, Finland decided to swim against the European tide and effectively discontinue a well-functioning system that promoted long-term savings”, says disappointed Virta.

The ageing population is putting a strain on public economy, highlighting the importance of personal financial preparedness. Voluntary pension saving would be an excellent way to complement statutory pension coverage and alleviate the cost pressures in the public sector. But it is difficult to get people to commit to long-term saving schemes, especially to pension saving that is tied to a certain age, without the subsidies that the government has now decided to discontinue.

Markets should provide investment instruments

Removing obstacles to cross-border investments is only sensible, but there is no need to create a pan-European investment instrument: again, a market-based approach is the key.

“We don’t need to develop products at the EU level. Investments should move freely across borders, but this movement must be based on current products and better regulation, not on new investment instruments”, says Virta.