Council agrees position on increasing the appeal of the pan-EU personal pension product (PEPP)
The Council reached today its negotiating position on a review of the pan-EU personal pension product (PEPP). The review seeks to make the PEPP a more attractive, accessible and simple option for savers. It will remove some existing requirements and design features that have hampered PEPP’s take-up, while continuing to ensure a high level of consumer protection.
PEPP is an EU-wide voluntary personal pension product, established in 2019, that can complement existing public and occupational pension systems, as well as national private pension schemes. Strengthening the PEPP is a key deliverable of both the savings and investments union (SIU) agenda and the EU’s One Europe, One Market roadmap.
Key features of the Council’s position
As in the Commission’s original proposal to update the PEPP regulation, the Council’s position removes the current obligation for pension providers and distributors to provide mandatory investment advice for basic PEPPs. In such cases, advice should be provided only upon the clients’ request. This is crucial to making basic PEPPs an execution-only products which can be distributed online – driving down costs and delivering a modern-age pensions product.
To ensure adequate consumer protection, however, the Council’s position stipulates that providers should still provide mandatory advice for tailored PEPPs, which are more sophisticated and tailor-made to an investor’s individual needs.
When it comes to fees, the Council maintains the Commission’s proposal to remove the 1% cap for the provision of PEPPs, which currently limits their commercial viability for providers.
In its position, the Council kept the Commission’s proposed provisions on investment limits regarding basic PEPPs, affording additional flexibility by allowing up to 5% of a PEPP’s portfolio to be channelled towards assets other than straightforward, non-complex assets, including alternative assets. The Council has also preserved the Commission’s objective of facilitating employer contributions within the PEPP framework.
The Council’s position strives to maintain the regulation’s appropriate scope, avoid compliance costs where possible and ensure sufficient time to develop novel supervisory tools. In this vein, the proposed provisions on PEPPs’ tax treatment, on increased EU-level supervision powers and on the introduction of a value-for-money framework for PEPPs have been removed. At the same time, to ensure consumer protection a strengthened product oversight governance regime has been introduced.
Next steps
The negotiating position approved today is the Council’s mandate to start talks with the European Parliament on the changes to the PEPP regulation. Negotiation trilogues can begin once the Parliament has agreed its respective position on the review.
Background
Personal pensions (also known as “private pensions”) are long‑term savings products that individuals contribute to on a voluntary basis, complementing state and occupational workplace pensions. They help build a stronger, more diversified pension and have a role to play in giving pension savers the opportunity to benefit from long‑term capital market developments, while maintaining the desired risk-return exposure.
The pan‑European personal pension product (PEPP) is a voluntary personal pension scheme that can complement existing public and occupational pension systems, as well as national private pension schemes and employers would not be prevented from contributing to a PEPP. A PEPP may also receive employer contributions where this has been agreed.
