The government is considering the participation of European banks, insurance companies and investment services firms in the “piggy bank” for children, opening up the range of options for beneficiaries.
Also under consideration is the guarantee-shielding mechanism for the “core” (the initial capital) of the investment-savings account so that -in cases of market risk- the matching contributions are covered, that is, the program’s money in nominal terms.
At this point it is worth noting that the account’s funds will be invested in shares and bonds listed on stock exchanges of the European Union and the European Economic Area, as well as in UCITS and ETFs, while the basket of investment options will also include large international companies traded on European markets.
The guarantee
Although the issue of the scope and cost of the guarantee remains open, as the economic staff will begin a series of consultations with banks and competent authorities, one of the scenarios being examined provides, according to reliable information from Euro2day.gr that the provision of the guarantee will be made by the market, for a fee, by banks or other supervised entities.
The fee, according to the scenario under examination, will be priced based on the actual risk of each portfolio, with a published methodology and supervision on the basis that the better/more efficient the account’s performance, the cheaper the guarantee will be.
The amounts that will arise from returns - beyond the initial capital (that is, the amounts contributed by the family and the state) - will bear the normal market risk.
According to competent sources, “the guarantee under consideration concerns only the matching core and will be priced by the market according to risk, so as not to encourage excessive risk-taking at the taxpayer’s expense”.
Upper limit on costs (TER)
The economic staff are considering setting an upper limit on the Total Expense Ratio that accompanies investment products. The cost “ceiling” under consideration will be determined by the competent authority, both for the default fund and as a condition of participation for the remaining products in the investment “basket”.
In the context of transparency regarding the costs (TER), every bank, insurance company and investment firm is required to disclose all charges using a uniform template and common methodology, so that the options are truly comparable.
It is noted that the total expense cost consists of: management fees, operating expenses (legal, audit, administrative) and custody expenses.
How the account will be opened
In the legislative regulation that will come to Parliament for a vote in two months, the technical details for opening the account, the matching and the tax regime will be determined, as well as the necessary technical infrastructure that will be required.
The exact timetable and any pilot phase of the program will be announced with the submission of the regulation. According to the information, the account will be opened automatically, that is, without an application. And this so that the most vulnerable families are not left out of the program. An account may be opened by: parents, grandparents, relatives, friends, godparents, even employers.
The contributions
According to the same sources, monthly or quarterly contributions are being considered, with a standing order and corresponding periodic crediting of the state match. Periodic investment spreads purchases throughout the year and reduces the risk of bad timing.