Personal pensions

‚ÄčThe economic and demographical situation in the European Union makes it problematic for any Member State to deliver adequate, safe and sustainable pensions to its citizens. In this context the EU acknowledges the need to put in practice appropriate strategies and policies for the benefit of EU citizens.

During 2013, EIOPA upon the request from the European Commission started its work on prudential regulation and consumer protection measures that are necessary to create an EU single market for personal pensions. This work resulted in the publication of the Preliminary Report "Towards an EU single market for personal pensions" submitted to the Commission in 2014.

In 2016, EIOPA submitted to the European Commission its Advice on the development of an EU Single Market for personal pension products (PPP) recommending the development of a standardised Pan-European Personal Pension Product (PEPP) regulated by a 2nd regime for personal pensions. EIOPA proposed the PEPP as being the best option to promote the Single Market and to strengthen the regulatory framework for the benefit of protection of consumers.

About the Pan-European Personal Pension Product

PEPP will be a safe, transparent and cost-effective long-term retirement savings product that will offer pensions savers new savings opportunities for future retirement income within a European personal pension framework. It is a powerful tool to encourage personal pension savings for individuals and to enable important long-term investments. The design of this personal pension product framework, in particular through its standardised elements, can reap economies of scale and help to increase transparency and consumers' understanding. In addition, it will provide a level playing field for providers, encourage competition, increase trust among consumers and cater for the European labour market. The PEPP will not replace existing national personal schemes, but will be a complimentary regime alongside national regimes.


EIOPA's role in the development of the concept of PEPP

In 2016, EIOPA provided its advice to the European Commission recommending the creation of an attractive PEPP in the form of a complimentary regime alongside national regimes.

On 29 June 2017, the European Commission published a proposed regulation on a pan-European personal pension product (PEPP). The proposal is accompanied by a recommendation to the Member States on the tax treatment of personal pension products including the PEPP. The legislative proposal will now be discussed and assessed by the co-legislators, the European Parliament and Council.

EIOPA will have a key role in enabling consistent implementation and EU-wide consistent authorisation requirements to ensure high-quality PEPPs throughout Europe.


EIOPA's future role in the authorisation of PEPP

PEPP is designed to become a truly European, safe, transparent and cost-effective long-term retirement savings product that will offer pensions savers an entirely new personal pensions framework for saving for adequate future retirement income. Due to this European nature, and the conceptually inherent requirements on standardisation and portability, EIOPA, as a European supervisory authority can ensure consistently high standards throughout Europe. EIOPA believes a central authorisation hub and a key contact point for accessing information on PEPPs is crucial for the PEPP's success.

According to the European Commission's proposal, EIOPA would take on the responsibility in ensuring fully consistent quality criteria for the authorisation, licensing and therewith pass-porting of PEPP.

EIOPA's mandate to promote supervisory convergence throughout Europe, close cooperation with and amongst national supervisory authorities is of paramount importance for the proper functioning of the European internal market. EIOPA is of the view that a stronger coordination and collaboration in view of the development of supervisory plans and approaches for PEPPs is needed to support the initiative of a truly pan-European product.


Main tools to foster consistent implementation of PEPP and convergent supervisory practices

For EIOPA setting consistently high-quality standards for the authorisation of PEPPs is key to the success of PEPP in terms of consumer's acceptance and promoting trust in PEPPs. Further, standardised, comparable and relevant information about available PEPPs need to be easily accessible to consumers to help them make well-informed and conscious decisions about their plans to save for retirement.

The information about PEPPs needs to be relevant. Therefore further development of pension-related disclosures for the pre-contractual and the regular benefit statements is needed. EIOPA welcomes the initiative by the European Commission to explore the best way to proceed to collect, analyse and report on cost and performance indicators of the main long-term investments personal and pension products. Outcomes of this initiative will enhance the proposed disclosure requirements for PEPP.

Similarly, the supervisors will need to receive relevant information about PEPP providers and products to enable consistency and transparency. Therefore, the development of standards around reporting to the supervisors will be equally important.


Areas requiring further regulation of PEPP to ensure PEPPs are sustainable, attractive and future-proof standards

In light of the current economic environment and the challenges for markets with long-term obligations, the role of risk-mitigation techniques, protecting the saved capital and at the same time fostering the right incentives to eventually arrive at better outcomes at retirement, cannot be underestimated. The design of the default investment option will to a significant extent determine the success of PEPP.

Furthermore the much needed conceptual link between the accumulation phase of the PEPP, (the savings phase), and the decumulation phase (phase when retirement income is received) is important. For EIOPA the most relevant outcome that counts is the right result of receiving adequate retirement income for the consumer.