Pensions
(BRUSSELS) – The EU Commission announced plans Thursday for a new class of pan-European pension products, allowing European consumers to benefit from more choice when saving for retirement.
The proposal provides pension providers with the tools to offer a simple and innovative pan-European personal pension product (PEPP) – a new type of voluntary personal pension to give savers more choice when putting money aside for their old age and to provide them with more competitive products.
PEPPs would have standard features wherever they are sold in the EU and offered by insurance companies, banks, occupational pension funds, investment firms and asset managers. They complement existing state-based, occupational and national personal pensions, and would not replace or harmonise national personal pension regimes.
The Commission is recommending EU Member States grant the same tax treatment to this product as to similar existing national products, to ensure the PEPP gets off to a flying start.
The PEPP has “enormous potential,” said EC vice-president Valdis Dombrovskis: “It will drive competition by allowing more providers to offer this product outside their national markets. It will work like a quality label and I am confident that the PEPP will also foster long-term investment in capital markets.”
Currently, only 27% of Europeans between 25- and 59-year-olds have enrolled themselves in a pension product.
The European market for personal pensions is also concentrated in a few Member States, and virtually non-existent in others. The PEPP would allow consumers to voluntarily complement their savings for retirement, while benefiting from solid consumer protection:
- Consumers will benefit from strong information requirements and distribution rules, also online. Providers will need to be authorised by the European Insurance and Occupational Pensions Authority (EIOPA) to provide the PEPP.
- PEPP will grant savers a high level of consumer protection under a simple default investment option.
- Savers will have the right to switch providers both domestically and cross-border – at a capped cost every five years.
- The PEPP will be portable between Member States, i.e. PEPP savers will be able to continue contributing to their PEPP when moving to another Member State.
The regulatory framework that the Commission is proposing today will create opportunities for a wide range of providers to be active on the personal pension market:
- Providers will be able to develop PEPPs across several Member States, to pool assets more effectively and to achieve economies of scale.
- PEPP providers will be able to reach out to consumers across the whole EU through electronic distribution channels.
- PEPP providers and savers will have different options for payments at the end of the product’s lifetime.
- PEPP providers will benefit from an EU passport to facilitate cross-border distribution.
The proposal for the PEPP Regulation is accompanied by a Commission Recommendation on the tax treatment of personal pension products, including the PEPP. The Commission encourages Member States to grant the same tax treatment to PEPPs as is currently granted to similar existing national products, even if the PEPP does not fully match the national criteria for tax relief. Member States are also invited to exchange best practices on the taxation of their current personal pension products which should foster convergence of tax regimes.
The PEPP proposal will now be discussed by the European Parliament and the Council. Once adopted, the Regulation will enter into force 20 days after its publication in the Official Journal of the European Union.
Pan-European Personal Pension Product (PEPP) – background guide
