Are you all pepped up for the PEPP?

Back in 2017 the European Commission launched the proposal for a regulation on a Pan-European Personal Pension Product (in short, “PEPP”).

Last April 4th the text of this regulation was adopted by the European Parliament.

So let’s get you prepped for the PEPP!

What is a PEPP and why the need?

The PEPP is a new type of pension product that will offer consumers a new opportunity to save for retirement.  It concerns a voluntary personal pension plan complementary to existing national state-based, occupational and personal pensions.

According to the European Commission, a study has shown that only 27 % of the EU citizens aged 25 – 59 years have a voluntary personal pension plan. Currently, the personal pension market is fragmented, due to a patchwork of rules that impede the development of a market at EU level.

This EU initiative on personal pensions aims to complement the current divergent rules at EU and national level by adding a pan-European framework for individuals who wish to use an additional saving option. At the same time it aims to boost the market on personal pensions and encourage competition between providers to the benefit of consumers.

Who can provide a PEPP?

PEPPs can be offered by a broad range of financial companies such as insurance companies, banks, occupational pension funds, certain investment firms and asset managers.

Who can save in a PEPP?

PEPPs will be available to all individuals who are keen to save for retirement, whether they are (self-) employed, unemployed or in education.

For savers:

What are the advantages and opportunities?

  • 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:

  • 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.

What’s next?

The adopted draft regulation is to be published in the Official Journal of the European Union and will enter into force 20 days after its publication. Since it concerns a regulation, it will have direct effect.

Source: Council of the EU press release of 13 February 2019 :