Pan-European Personal Pension Product (PEPP)
The Regulation on a Pan-European Personal Pension Product (“PEPP”) deals with the registration, manufacturing, distribution and supervision of PEPP. It was adopted and published in the Official Journal of the EU in July 2019. It is directly applicable and started to apply on 22 March 2022. BIPAR and its member associations have been very active on this file all along the legislative process.
The PEPP is an optional, 2nd regime instrument, complementary to the existing state-based (pillar 1), occupational (pillar 2) and national personal pensions (pillar 3) and has standardised key product features.
PEPP can be distributed by insurance intermediaries offering insurance under IDD and investment firms providing advice under MiFID II. Some specific PEPP rules also apply to all kinds of distributors. All PEPP providers have to offer “Basic PEPPs”, which are “simple and affordable default investment options” that have to provide capital protection and where costs and fees shall not exceed 1 % of the accumulated capital per year (this includes (initial) advice costs).
The Regulation foresees mandatory advice (with a suitability test) and a demand and needs test for PEPP providers and distributors, for all PEPPs, including Basic PEPPs.
In July 2022, EIOPA published the PEPP Benefits Statement and Key Information Document (KID) templates.
So far, 6 PEPPs are listed in the EIOPA central database that contains information on all PEPPs in Europe.
EIOPA has published FAQs on PEPP for professionals and for consumers.
BIPAR and its members were active on this file. In particular, BIPAR did not support the cost cap for the Basic PEPP and the inclusion of advice costs in the cap. We refer to earlier Annual Reports for more detail on the content of the Regulation and BIPAR’s position on the different aspects.
Five years after the date of application (March 2027), and every five years thereafter, the Commission will have to carry out an evaluation, and after consulting EIOPA and the other ESAs where appropriate, present a report on the main findings (a report, amongst others, on the uptake of the basic PEPP and on whether advice provided to PEPP savers is adequate), accompanied, where appropriate, by a legislative proposal.
Institutions for Occupational Pension Funds Directive (IORP II)
In December 2016, the Directive on the activities and supervision of Institutions for Occupational Retirement Provision (IORP II) was adopted. It entered into force in January 2017 and Member States had until 13 January 2019 to transpose it into national law. Many Member States were late in their transposition.
Occupational pension funds or IORPs are financial institutions which manage collective retirement schemes for employers, in order to provide retirement benefits to their employees. Occupational pensions, which include an employer contribution, are known as the "second pillar" of pension systems.
The IORP II Directive aims to ensure the soundness of occupational pensions, to better inform pension scheme members and beneficiaries with a standardised “Pension Benefit Statement” at EU level, to promote cross-border activity and to help long-term investment by encouraging occupational pension funds to invest long-term in growth-, environment- and employment-enhancing economic activities. It does not concern issues of national social, labour, tax or contract law, or the adequacy of pension provision in Member States.
The European Commission has started the review procedure for this Directive and has in this respect asked technical advice from EIOPA. The advice should primarily take the form of a stock taking exercise of the implementation and effectiveness of the IORP II Directive, having regard to the short time frame during which the Directive has been applied. It should cover both the application of the current rules and the way the Directive has delivered on its objectives. While the Commission is broadly satisfied with the implementation and effectiveness of the IORP Directive to date, the advice should assess options for adapting the IORP framework to ongoing trends in the area of occupational pensions.
In March 2023, EIOPA launched a public consultation on its draft advice.
BIPAR responded to EIOPA’s consultation in May 2023. In its input, BIPAR focused amongst others on the need for a reviewed IORP Directive to take into account proportionality (also regarding the size of the IORP) and for aligned rules in IORP regarding sustainability.
EIOPA has to submit its final technical advice to the Commission by 1 October 2023. BIPAR understands that the Commission will then consider EIOPA’s advice for the review report required by Article 62 of the IORP II Directive, but that there is no defined calendar for the next steps.