Pan-European Pension

The Pan-European Pension Product (PEPP) or like Pan-European Personal Pension Product is a proposed pension which will be available to residents of the European Union. The PEPP is designed to give the 240 million savers in the EU a better choice in the fragmented and uneven European market, where options are nearly non-existent in some member states.^[1] PEPPs are regulated by the Regulation 2019/1238.^[2] This regulation lays the legal foundation for a single European market for personal pensions. The PEPP will be complementary to existing state, occupational and private pension systems on national level. After endorsement by the European Parliament and official adoption by the European Council the PEPP regulation was published in July 2019 and will enter into application in August 2020. The first PEPPs are expected to be offered in late 2021.^[3]

Valdis Dombrovskis, a vice-president of the European Commission responsible for financial services, said "It has enormous potential as it will offer savers across the EU more choice when putting money aside for retirement," and "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."^[4]

Jyrki Katainen, Vice-President responsible for Jobs, Growth, Investment and Competitiveness, added: "The agreement achieved by the European Parliament and the Council on PEPP is a major milestone on the road to addressing pension gaps and demographic challenges and a major achievement in completing Capital Markets Union. It will benefit consumers and providers with a strong framework for personal pensions through a new product with strong consumer protection and enhanced cross-border competition."^[5]

Gabriel Bernardino, Chairman of the European Insurance and Occupational Pensions Authority (EIOPA), said: "The current macro-economic environment with persistent low and negative yields requires the rethinking of long-term retirement savings solutions. The implementation of the PEPP Regulation is an opportunity to build an appropriate regulatory basis for the design and monitoring of innovative and cost‑effective products that could enable European savers to reap the benefits of sustainable growth."^[6]

The European Union is committed to fighting old-age poverty. Currently, only 27% of Europeans between 25 and 59 years old have enrolled themselves in a pension product.^[7] With the PEPP the EU is responding to changing demographics due to the aging of the population, the modern forms of labour, and embracing the opportunities of digitalisation. This PEPP is designed to give savers more choice and provide them with more competitive products, while enjoying strong consumer protection. Moreover, a more developed market for personal pensions in the EU will channel more savings into long-term investments and thus contribute significantly to develop a Capital Markets Union (CMU). According to a study by Ernst & Young to the European commission personal pension assets under management in the EU28 are expected to grow from EUR 0.7 trillion in 2017 to EUR 1.4 trillion without PEPP and EUR 2.1 trillion with PEPP by 2030.^[8]

The PEPP offers additional incentives for people to save for their pension, alongside the occupational and state-based pensions available today. PEPPs will be available to all residents in one EU member state no matter if they are employed, unemployed, self-employed or studying. PEPPs could be particularly attractive to both mobile citizens and self-employed individuals who are not participating in state-based or occupational pension provisions.

A PEPP can be offered by all providers that fulfil certain criteria provided by the PEPP regulation, including insurance companies, banks, asset managers, certain investment firms and certain occupational pension funds (Institutions for Occupational Retirement Provision Directive 2016). A PEPP can be sold by investment firms authorised to provide investment advice, or any insurance intermediaries. To sell a PEPP, it is not mandatory for providers to be the designers of the product. It can be expected that traditional players such as insurance companies and asset managers will be among the first players to offer a PEPP. But PEPP could also be an opportunity for new FinTech players to enter the market with innovative solutions competing with more traditional providers such as insurance companies. The European Insurance and Occupational Pensions Authority (EIOPA) will maintain a central register in which it will register all PEPPs, this register will be made publicly available in electronic format.