The European Commission has set out plans to create a ‘simple and cost effective’ pan-European personal pension product (PEPP) – in effect, a cross-state voluntary personal pension scheme.
The Commission said the PEPP was designed to give savers more choice when they were putting money aside for old age, and aimed to provide them with more competitive products.
The initiative, it added, was intended to be complementary to existing pension plans – whether state-based, occupational or personal – rather than to substitute or replace them.
The pension product will be transferrable across member states and will have standardised core product features, such as transparency requirements, investment rules, switching and portability.
It will, however, remain flexible enoughthat different providers should be able to tailor products to suit their business model.
Providers offering the product will be able to offer various pay-out options, including annuities, lump sums, a combination of both or regular withdrawals.
The PEPP could be offered by a broad range of financial companies such as insurance companies, banks, occupational pension funds, certain investment firms and asset managers.
It will not be a requirement to take advice when purchasing a PEPP in the safe default investment option, however – although the seller will be obligated to ask questions about the saver’s knowledge and experience to make sure it is an appropriate investment.
Nevertheless, the Commission said it would usually expect a PEPP to be sold with “in-depth advice”.
Promote growth in the EU
The Commission said it was proposing the framework to move away from the current “fragmented and uneven” European pension market that has been created due to a “patchwork of rules at EU and national levels”. This, it added, could impede the development of a large and competitive EU-level market for personal pensions.
A better developed market in the EU was expected, the Commission said, to channel more savings into long-term investments, which would ultimately promote growth and the creation of new jobs within the Union.
The proposals will next be discussed in the European Parliament and the Council.
Newly elected European Fund and Asset Management Association (EFAMA) president William Nott (pictured)welcomed the proposals, saying: “The PEPP will bring much needed scale, choice and competition to the EU personal pensions market. I am also confident the portability of the PEPP will make pension savings more attractive to younger people with increasingly mobile careers and lifestyles.”
EFAMA director general Peter De Proft added: “The Commission’s proposal represents an important milestone towards the creation of a truly single market for personal pensions.”
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