Pan-European Personal Pension Products (PEPP)

Pan-European Personal Pension Products (PEPP)

The aim of this article is not to provide you with the most up-to-date information on the subject but to give you a general insight in the subject and its importance for the sector.

On 29 June 2017, the European Commission published a proposal for a Regulation on a Pan-European Personal Pension Product (“PEPP”), dealing with the authorisation, manufacturing, distribution and supervision of PEPP. The PEPP is intended to be an optional, 2nd regime instrument, complementary to the existing state-based, occupational and national personal pensions. The PEPP proposal was launched together with a Recommendation on the tax treatment of personal pension products, including the PEPP. The proposals are part of the bigger framework of the Capital Markets Union.

Proposal for a Regulation on PEPP

The Commission proposal follows consultations and public hearings on personal pensions in general and on PEPP in particular to which BIPAR responded and which BIPAR attended, organised both by the European Commission and by EIOPA.

The Commission sees PEPP as “a new opportunity to save for retirement: simple, transparent & portable”. Some of the key features of the PEPP proposal from the Commission’s point of view are:

  • Consumers should be fully aware of the (standardised) key features of the product,
  • Consumers have a choice between a safe default investment option and alternative options with different risk-return profiles,
  • Consumers will benefit from EU-wide portability, full transparency of the costs of the PEPP and the ability to switch providers (with switching costs capped),
  • A broad range of providers should offer the PEPP and a level playing field should be ensured,
  • The PEPP could be provided online, including advice, and would not require a network of branches, allowing easier market access,
  • Passporting rules would help providers enter new national markets,
  • Standardising the key features should also reduce providers’ costs and help them pool contributions from different national markets to channel assets into EU-wide investments,
  • Most of the PEPP conditions related to decumulation are left to the Member States.

With regard to distribution in particular the proposal contains:

•A definition of PEPP distribution, of PEPP distributor and of advice,

•PEPPs might also be distributed by financial undertakings that have not created them but that have received a specific authorisation for distribution by their national competent authorities, and by insurance intermediaries registered in accordance with IDD,

•A chapter on distribution and information requirements (example: to act honestly, fairly and professionally in accordance with the best interests of the customers).

Insurance distributors and investment firms have to comply with some of the PEPP rules (e.g. on POG) but as for other rules, reference is made to the IDD IBIPs rules for insurance distributors and to some MiFID II rules for investment firms. All other distributors have to follow the articles of the PEPP Regulation.

BIPAR views

Some key points for BIPAR:

  • The importance of advice and intermediation even for a “standardised” product, since pension products are long-term products and the situation of the individual saver is always complex.
  • Ancillary intermediaries (IDD terminology) should not be allowed to distribute PEPPs.
  • Intermediaries who want to be a PEPP provider (manufacturer) and who are regulated by their national competent authority to provide pension schemes, should be able to be a PEPP provider (and not only PEPP distributor).
  • Many of the proposal’s requirements for providers and distributors that refer, for example, to PRIIPs or IORP provisions should be reviewed and should not apply to distributors in case these original provisions put duties on manufacturers only and not on distributors.

State of play

BIPAR has been sharing its views on the proposal with representatives of the European Parliament and with the Council Presidency.

The Council of the EU agreed on its common position in June 2018.

In the European Parliament, the opinion committees IMCO and EMPL adopted their opinions on the proposal in June 2018. The leading ECON committee and the Plenary will vote on the report of Rapporteur Sophie in ‘t Veld in autumn.

Commission's 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.

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