The Council of the EU under the Cyprus Presidency on Wednesday reached a common position on the review of the pan-European personal pension product (PEPP), aiming to make it more attractive, accessible and simple for savers by lifting requirements that have so far hampered its uptake, while maintaining a high level of consumer protection.
PEPP is a voluntary pan-European personal pension product, established in 2019, which can complement existing public and occupational pension systems, as well as national private pension schemes. Strengthening the PEPP is a key priority of both the savings and investments union (SIU) agenda and the EU’s “One Europe, One Market” roadmap.
Finance Minister, Makis Keravnos, said that when harnessed correctly, “pan-EU pension schemes have the potential to expand retirement investment opportunities, while channeling capital to the broader, productive economy. That’s why this proposal is a fundamental part of the savings and investments union’s broader objectives.”
According to the Commission’s original proposal to revise the PEPP regulation, the Council’s position removes the current obligation for pension providers and distributors to provide mandatory investment advice for basic PEPPs. In such cases, advice will be provided only at the client’s request – a change considered crucial to making basic PEPPs execution-only products, reducing costs and delivering a modern-age pensions product.
To ensure consumer protection, the Council’s position stipulates that providers will continue to provide mandatory advice for tailored PEPPs, which are more sophisticated and adapted to each investor’s needs. On fees, the Council maintains the Commission’s proposal to remove the 1% cap on the provision of PEPPs, which currently limits their commercial viability for providers.
In its position, the Council retained the Commission’s proposed provisions on investment limits for basic PEPPs, providing additional flexibility by allowing up to 5% of a PEPP’s portfolio to be channelled into assets other than straightforward, non-complex assets, including alternative assets. The Council also retained the Commission’s objective of facilitating employer contributions within the PEPP framework.
According to a press release, the Council’s negotiating position seeks to maintain the appropriate scope of the regulation, avoid compliance costs where possible, and ensure sufficient time to develop new supervisory tools. To that end, proposed provisions on the tax treatment of PEPPs, on enhanced EU-level supervisory powers, and on the introduction of a value-for-money framework for PEPPs were removed. At the same time, to ensure consumer protection, an enhanced product oversight governance regime was introduced.
The negotiating position approved on Wednesday constitutes the Council’s mandate to begin trilogue talks with the European Parliament on the changes to the PEPP regulation, once Parliament has also adopted its own position on the review.