13 Feb
pensions and retirement PEPPs

Pensions: European Council confirms today (13 February) agreement on pan-European pension product (PEPPs)

EU institutions agreed today (13 February) new rules that will make it easier for people to put money aside for their retirement.

EU ambassadors today endorsed the agreement reached between the presidency and the European Parliament on 13 December on the proposed ‘pan-European pension product’ (PEPP), a new class of personal pension scheme.

The draft regulation is aimed at providing greater choice for people who wish to save for their retirement, and at the same time boosting the market for personal pensions. According to the Commission, only 27% of Europeans between 25 and 59 years of age have subscribed to a pension product.

Population ageing in Europe creates new challenges. One of them is how to make sure that people put enough money aside to live well after they retire. Pan-European pension products will create a new opportunity to put aside long-term savings using capital markets and thus relieving the pressure on public funding. PEPPs will also have the huge advantage of pooling all savings, wherever in Europe they have been made, in one single personal pension plan.

In Europe, the personal pension market is currently fragmented, due to a patchwork of rules that impede the development of a market at EU level. In some member states, the market is virtually inexistent.

For products based on capital market instruments, choice is often limited. This leads to higher costs for savers and a shortage of liquidity on markets.

The newly created PEPPs will be give people a new EU-wide saving option that will complement state-based, occupational and national personal pension schemes.


PEPPs would present the following advantages for savers:

– more choice. Savers would choose from a broad range of PEPP providers in a more competitive environment. They would be able to choose between a default safe investment option and options with different risk-return profiles;

– consumer protection. The regulation will ensure that savers are aware of a PEPP’s key features;

– switching providers. Savers would have the right to switch providers, both domestically and across borders, after a minimum of five years from the conclusion of the contract or from the most recent switch. (They could do so more frequently if the PEPP provider so allows.) The fee for doing so would be capped;

– portability. Savers would be able to continue contributing to their PEPP if they move to another member state.

For pension plan providers, the regulation will bring the following opportunities:

– economies of scale. Providers will be able to develop PEPPs in different member states and pool assets more effectively;

– broader reach. Electronic distribution channels will enable providers to reach consumers throughout the EU;

– cross-border distribution. An EU ‘passport’ will enable providers to sell PEPPs in different member states.

Additionally, when a product reaches maturity, providers and savers will have different options for pay-outs.

By: Estela Martín

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