European pension

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European pension
Surname Pan-European private pension product
abbreviation PEPP
English Pan-European Personal Pension Product
Short title European pension
Art Regulation (EU)
scope European Union
Supervisory authority European supervisory authority for insurance and occupational pensions
regulation Regulation 2019/1238
Set date July 25, 2019
Come into effect August 14, 2020
Url for regulation

The European pension ( English Pan-European Personal Pension Product ; PEPP) is a private retirement plans . With the European pension, a single European market for pension products is being created for the first time . The European pension can be used by everyone resident in the European Union to provide for old age.

The European Union is committed to fighting poverty in old age. Currently, only 27% of Europeans between the ages of 25 and 59 have a private pension. With the European pension, the EU is reacting to demographic change, the emergence of new, modern forms of work and the possibilities of digitization. The PEPP aims to provide savers with more choice and more competitive products while ensuring strong consumer protection. In addition, a developed market for private pensions in the EU will channel more savings into long-term investments and thus contribute significantly to the development of the Capital Markets Union (CMU). According to a study by Ernst & Young for the European Commission , assets under management in private old-age provision in the EU28 will rise from EUR 0.7 trillion in 2017 to EUR 1.4 trillion without PEPP and to EUR 2.1 trillion with PEPP per year 2030.

In addition to the company and state pensions available today, the PEPP offers people additional incentives to save for their pension. PEPPs will be available to all residents of an EU member state, regardless of whether they are employed, unemployed, self-employed or studying. The European pension will be particularly attractive for internationally mobile people as well as for the self-employed who do not take part in state or company pension schemes.

Basics

The PEPP is regulated by Regulation 2019/1238. The PEPP is complementary to the existing state, company and private pension systems at national level. Following adoption by the European Parliament and official adoption by the European Council , the PEPP Regulation was published in July 2019 and will come into force in August 2020. The first PEPPs are expected to hit the market at the end of 2021.

PEPPs can be offered by all providers that meet the criteria of the PEPP regulation, including insurance companies, banks, asset managers, investment firms and company pension funds (Institutions for Occupational Retirement Provision Directive 2016). A PEPP can also be sold by investment firms licensed to provide investment advice or by any insurance intermediary. In order to sell a PEPP, it is not absolutely necessary that the sales department is also the product provider at the same time. It can be expected that traditional players such as insurance companies and asset managers will be among the first to offer a PEPP. But the PEPP could also be an opportunity for so-called FinTechs or InsurTechs to enter the market with solutions and to compete with traditional providers such as insurance companies. The European Supervisory Authority for Insurance and Occupational Pensions (EIOPA) will keep a central register with all PEPP products; this register will be publicly accessible in electronic form.

Core elements of the European pension

The core elements of the PEPP are:

  • Digital distribution and use : The PEPP will be a modern product that can be sold and bought online, which makes it particularly attractive for young Europeans. The PEPP regulation expressly allows fully or semi-automatic advice, which can help lower barriers to entry, ensure cross-border flexibility and lower sales costs.
  • Complete Transparency : Fees and costs will be fully transparent, via a simple Key Information Document (KID) provided prior to purchase, as well as standardized annual information throughout the life of the product.
  • Mandatory Advice : Consumers will also benefit from the mandatory advice (with an aptitude test for all PEPP savers) so that they can make an informed decision before purchasing a product. They will also benefit from personal pre-retirement counseling to help them choose the most suitable form of payout for their needs.
  • Cross-border portability : Providers can offer PEPP on a pan-European level so that savers can continue to save on the same product when they move within the EU. If the transfer is not possible, consumers can switch providers free of charge or continue to deposit into the PEPP in their previous country of residence. However, PEPPs can only be offered within the EU.
  • Simple and Affordable Standard Option: All PEPP providers must offer a simple and affordable standard option called "Basic PEPP". For the basic PEPP, the costs and fees are limited to 1% of the saved capital per year (cost cap). The basic PEPP also offers capital protection to ensure that savers get the paid-in capital back (without taking costs and inflation into account).
  • Right to change : PEPP savers can change provider or choose another investment option after at least five years from the conclusion of the contract and, if they change later, after five years from the last change. The PEPP provider can allow PEPP savers to change investment options and providers more frequently.
  • Flexible payout : PEPP providers can offer PEPP savers one or more payout options (annuity payments, lump-sum options, regular payouts, or a combination of these). When opening an account, savers can choose the form of payouts. If available, savers can change the form of withdrawals. Member States can provide for different types of payments.
  • Sustainable investments : Providers are encouraged, but not forced, to take so-called ESG criteria (environmental, social, governance) into account in their investment decisions (see ethical investment ). Given the expected market size and the long-term nature of pension products, the PEPP could make an important contribution to the sustainability agenda in the financial sector.

The PEPP saver can choose between six investment options. All providers must offer a "basic PEPP". The basic PEPP is a simple, affordable and secure standard option that offers a level playing field among providers and full transparency for savers. For the basic PEPP, the costs and fees are limited to 1% of the saved capital per year. This includes all administration, management and sales costs. Costs for additional services (e.g. payment in the event of death) or a capital guarantee are not included in the upper cost limit. The basic PEPP aims to receive the contributions saved after deduction of all fees upon retirement. There will be two types of basic PEPP depending on the type of capital protection. For the basic PEPP with guarantee (type 1), providers are legally obliged to ensure that the PEPP savers get at least the capital invested back. The basic PEPP with other risk reduction techniques (type 2) aims to preserve the invested capital as well as possible, but without any legal obligation to repay the capital.

The PEPP regulation does not regulate the tax treatment. It is up to the Member States to offer tax incentives or not. In order to level the playing field between the PEPP and existing national pension products, the European Commission encourages Member States to give PEPP savers the same tax treatment as similar existing national personal pension products.

Supervisory authority

PEPP providers are monitored by the national supervisory authorities. The requirements of the respective industry apply to the distribution of Euro pensions: insurance companies and intermediaries selling a PEPP will be subject to the Insurance Distribution Directive (IDD), while investment firms and other PEPP providers will be subject to the provisions of the Markets Directive for financial instruments ( MiFID II ).

The European Supervisory Authority for Insurance and Occupational Pensions (EIOPA) is mandated to ensure the consistent implementation and monitoring of the PEPP. To this end, EIOPA develops technical standards for implementation and supervision, maintains the central register of all PEPP products, monitors market developments and, under certain conditions, can even issue a temporary ban or restriction for certain PEPPs. EIOPA has to support an expert advisory board set up (Expert Practitioner Panel on PEPP). The task of the Expert Advisory Board is to advise EIOPA on the development of proposals for the implementation of the European pension. The committee consists of experts from the insurance industry, asset managers, consumer protection and science. Members of the Expert Advisory Board are:

  • Jean-Paul Andre-Dumont, Luxembourg, Forsides
  • Paul Le Bihan, France, Union Mutualist Retraite
  • Jens Rosendahl Frederiksen, Denmark, PFA
  • Edward Hiller, Luxembourg, Fidelity
  • Herman Kappelle, Netherlands, Aegon
  • Til Klein, Germany, Vantik
  • Christian Lemaire, France, Amundi
  • Kristine Lomanovska, Latvia, SEB LV
  • Andrew Marker, United Kingdom, Vanguard
  • Aidan McLoughlin, Ireland, Independent Trustee
  • Simone Miotto, Italy, PensionsEurope
  • Stefan Voicu, Romania, BetterFinance
  • Piotr Wrzesinski, Poland, PIU

Introduction and implementation

The idea of ​​a European internal market for private old-age provision is part of the European Commission's plan to strengthen the Capital Markets Union by creating a single capital market in the EU. The history of the PEPP goes back to 2013, when the European Commission commissioned the European Supervisory Authority for Insurance and Occupational Pensions (EIOPA) to work towards a European internal market for private old-age provision. This culminated in a preliminary report on a European internal market for private pension provision, which was published in 2014. In September 2015, the European Commission launched an initiative for Capital Markets Union to create a real single capital market in the EU member states. In it, the European Commission called on to find ways in which private old-age provision can support the establishment of an EU internal market with an appropriate level of consumer protection. On the basis of the results of a public consultation, EIOPA issued a recommendation in July 2016 for a standardized pan-European pension product to complement the national systems. As a result, the European Commission published a proposal for a regulation on a PEPP in 2017. The proposal includes a recommendation to the Member States on the preferential tax treatment of the PEPP. The draft was discussed and further developed by the European institutions. After being adopted by the European Parliament and officially adopted by the European Council , the PEPP Regulation was published on July 25, 2019. The PEPP regulation will officially come into force 12 months after publication on August 14, 2020.

In December 2019, EIOPA started a public consultation on the proposals for the technical implementation of the PEPP. The consultation paper sets out EIOPA's current proposal to regulate the main aspects of the PEPP. EIOPA has sought advice from experts from the insurance industry and asset management as well as from the national supervisory authorities to develop the proposals for the technical implementation of the European pension, and is conducting an intensive dialogue with all interest groups and the expert advisory board. Gabriel Bernardino , Chair of EIOPA, said: " EIOPA invites all stakeholders to contribute to this consultation to ensure that the PEPP becomes a success for the benefit of European citizens ". The main topics of the public consultation are:

  • Product information sheet
  • Annual account statement
  • Cost cap for the basic PEPP
  • Risk Mitigation Techniques (Capital Protection)
  • Exchange law & cross-border transferability
  • EIOPA's rights of intervention
  • Cooperation between the relevant national authorities and EIOPA

Until then, the Commission will work with EIOPA on the effective implementation of the PEPP. As a regulation, it applies directly in all EU member states without the need to transpose it into national law. Only if a member state wishes to grant favorable tax treatment, national law may need to be changed. The first PEPPs are expected to hit the market in late 2021 or early 2022.

Public discourse

Former European Commissioner Valdis Dombrovskis said: " The PEPP regulation has enormous potential as it will give savers across the EU more options in terms of pensions" and "it will encourage competition by allowing more vendors to sell product outside of it." their national markets. It will work like a quality label and I am confident that the PEPP will also encourage long-term investments in the capital markets. "

Jyrki Katainen , former EU Commissioner for Jobs, Growth, Investment and Competition: " The agreement reached by the European Parliament and the Council on the PEPP is an important milestone on the way to tackling the pension gaps and demographic challenges and a great achievement in its completion The Capital Markets Union, which will benefit consumers and providers with a strong private pension framework through a new product with strong consumer protection and increased cross-border competition. "

Gabriel Bernardino , Chairman of the European Insurance and Occupational Pensions Authority (EIOPA), said: " The current macroeconomic environment, with persistently low and negative returns, requires rethinking long-term pension solutions. The implementation of the PEPP Regulation is an opportunity, a create an adequate regulatory basis for the design and monitoring of innovative and cost-effective products that could enable European savers to reap the benefits of sustainable growth. "

There are concerns that this regulation deviates significantly from its original aim, as core elements of the proposal have been watered down or replaced under pressure from member states and lobby organizations and that the PEPP has thus "become more of an insurance product than a savings product".

With the European Green New Deal , the EU Commission has announced that Europe is to become the first climate-neutral continent by 2050. A key element is the European Green Deal Investment Plan, which is expected to divert at least 1 trillion euros into sustainable investments over the next ten years. As part of the regulation, PEPP providers are encouraged to invest their assets sustainably. However, there is no obligation to invest the assets sustainably. It is claimed that the European pension could be an essential building block in order to achieve the goal of 1 trillion euros in sustainable investments. The prerequisite is that sustainable investments are made mandatory for all PEPPs.

There are concerns that the PEPP may have limited impact on local bond markets. The PEPP has to compete with local pension products. Whether the PEPP receives similar tax breaks as local products depends on the respective member state. Critics argue that the tax issue is crucial for the European pension to prevail. In addition, many European countries already have a wide range of well-established private pension products, so the PEPP could become more important, especially in countries with less developed pension systems.

Web links

Individual evidence

  1. ↑ European Commission, "Capital Markets Union: Pan-European Personal Pension Product (PEPP)" , `` European Commission '', April 4, 2019. Retrieved February 13, 2020.
  2. ↑ EY, "Study on the feasibility of a European Personal Pension Framework" , `` European Commission '', June 2017. Accessed February 12, 2020.
  3. ↑ European Union, "Regulation (EU) 2019/1238 of the European Parliament and of the Council of 20 June 2019 on a pan-European Personal Pension Product (PEPP)" , Official Journal of the European Union , 25 July 2019. Retrieved on February 16, 2020.
  4. ↑ European Commission, "Capital Markets Union: Pan-European Personal Pension Product (PEPP)" , `` European Commission '', April 4, 2019. Accessed February 14, 2020.
  5. ↑ European Commission, "Capital Markets Union: Pan-European Personal Pension Product (PEPP)" , `` European Commission '', April 4, 2019. Accessed February 11, 2020.
  6. ↑ European Commission, "Factsheet: A pan-European personal pension product" , '' European Commission '', February 13, 2019. Accessed February 11, 2020.
  7. ↑ EIOPA, "Consultation Paper on the proposed approaches and considerations for EIOPA's Technical Advice, Implementing and Regulatory Technical Standards under Regulation (EU) 2019/1238 on a Pan-European Personal Pension Product (PEPP)" , `` EIOPA '', 29 November 2019. Retrieved February 7, 2020.
  8. ↑ European Commission, "COMMISSION RECOMMENDATION on the tax treatment of personal pension products, including the pan-European Personal Pension Product" , "European Commission", June 29, 2017. Retrieved February 11, 2020.
  9. ↑ EIOPA, "EIOPA's role in PEPP: Foster consistent implementation of PEPP" , "EIOPA", 2019. Accessed February 14, 2020.
  10. ↑ European Insurance and Occupational Pensions Authority, "EIOPA establishes Expert Practitioner Panel on the Pan-European Personal Pension Product (PEPP)" , `` EIOPA '', July 05, 2019. Accessed February 10, 2020.
  11. ↑ European Insurance and Occupational Pensions Authority, "EIOPA establishes Expert Practitioner Panel on the Pan-European Personal Pension Product (PEPP)" , `` EIOPA '', July 05, 2019. Accessed February 10, 2020.
  12. ↑ EIOPA, "Towards an EU single market for personal pensions. An EIOPA Preliminary Report to COM" , "EIOPA", 2014. Accessed on February 11, 2020.
  13. ↑ EIOPA, "EIOPA's advice on the development of an EU Single Market for personal pension products (PPP)" , `` EIOPA '', 4 July 2016. Retrieved on February 11, 2020.
  14. ↑ European Commission, "Proposal for a regulation of the European Parliament and of the Council on a pan-European Personal Pension Product (PEPP)" , `` European Commission '', 29 June 2017. Accessed on 20 February 2020.
  15. ↑ European Commission, "COMMISSION RECOMMENDATION on the tax treatment of personal pension products, including the pan-European Personal Pension Product" , "European Commission", June 29, 2017. Retrieved February 11, 2020.
  16. ↑ European Union, "Regulation (EU) 2019/1238 of the European Parliament and of the Council of 20 June 2019 on a pan-European Personal Pension Product (PEPP)" , Official Journal of the European Union , 25 July 2019. Retrieved on February 20, 2020.
  17. ↑ EIOPA, "Consultation Paper on the proposed approaches and considerations for EIOPA's Technical Advice, Implementing and Regulatory Technical Standards under Regulation (EU) 2019/1238 on a Pan-European Personal Pension Product (PEPP)" , "EIOPA", 2 December 2019. Retrieved February 12, 2020.
  18. ^ Til Klein, Pan-European Personal Pension Product , Vantik . February 8, 2020. Retrieved February 16, 2020.
  19. ↑ Daniel Boffey: 'EU pension' planned for people who move between countries . June 9, 2017.
  20. ↑ European Union, "Factsteet: A pan-european personal pension product ," European Commission ", February 13, 2019. Retrieved February 13, 2020.
  21. ↑ EIOPA, "EIOPA publicly consults on its approaches for regulating key aspects of the Pan-European Personal Pension Product (PEPP)" , "EIOPA", December 2, 2019. Accessed on February 14, 2020.
  22. ↑ Karle Lanno, "PEPP: How to kill in EU proposal" , IPE Magazine , June 2019. Accessed on February 10 2020th
  23. ↑ Karle Lanno, "PEPP: How to kill in EU proposal" , IPE Magazine , June 2019. Accessed on February 10 2020th
  24. ↑ Christian Hilmes, "Insurance companies are unjustifiably privileged" , "DAS Investment", July 30, 2019. Accessed February 14, 2020.
  25. ↑ Anke Rezmer, "Expert Advisory Board works on European private old-age provision" , "Handelsblatt", July 30, 2019. Retrieved on February 12, 2020.
  26. ^ Til Klein, Pan-European Personal Pension Product , Vantik . February 8, 2020. Retrieved February 16, 2020.
  27. ↑ Bas van Zanden, "RaboResearch - Economic Research: Q&A on the new Pan-European Pension Product" , "Rabobank", June 13, 2019. Accessed February 10, 2020.
  28. ↑ Karel Lannoo, "The PEPP could become the new UCITS" , `` CEPS '', September 28, 2018. Accessed February 14, 2020.