European Commission: Proposal on a pan-European pension product
The European Commission has presented today a proposal of regulation on a pan-European personal pension product. PEPP will be a voluntary scheme for saving for retirement. It will be offered by a broad range of financial companies across the EU and will be available to savers as a complement to public and occupational pension systems, alongside existing national private pension schemes.
Please see below an analysis by Caterina Vidal who is a Director of Cattaneo Zanetto & Co
Today's proposal will provide pension providers with the tools to offer a simple and innovative pan-European personal pension product (PEPP). This new type of voluntary personal pension is designed to give savers more choice when they are putting money aside for old age and provide them with more competitive products.
PEPPs will have the same standard features wherever they are sold in the EU and can be offered by a broad range of providers, such as insurance companies, banks, occupational pension funds, investment firms and asset managers. They will complement existing state-based, occupational and national personal pensions, but not replace or harmonise national personal pension regimes.Currently, the European market for personal pensions is fragmented and uneven. The offers are concentrated in a few Member States, while in some others they are nearly non-existent. This variation in supply is linked to a patchwork of rules at EU and national levels, which impede development of a large and competitive EU-level market for personal pensions. The PEPP will allow consumers to voluntarily complement their savings for retirement:
• PEPP savers will have more choice from a wide range of PEPP providers.
• 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 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.