BETTER FINANCE welcomes the Commission’s proposals to amend the Regulation on a Pan-European Personal Pension (PEPP) product. As longtime supporters of the PEPP, we are pleased to see that the Commission remains committed to ensuring that a simple, cost-efficient personal pension product (PPP) is made available to EU citizens to complement the existing offer of PPPs in each Member State.
Level playing field
The failure of the PEPP to take off has more to do with the unlevel playing field it must compete on than with its design or regulatory requirements. As a report from the Occupational Pensions Stakeholder Group (OPSG) of the European Insurance and Occupational Pensions Authority (EIOPA) evidenced the failure of most Member States to provide for a tax treatment (incentives, subsidies) and possibility to transfer savings across different types of PPPs, including the PEPP.1
We therefore welcome the Commission’s proposal for Article 3, which would require Member States to grant the PEPP the same tax treatment they grant to equivalent PPPs. Of course, the implementation of that requirement will require a general assessment of existing PPPs within each country and whether their differences to the PEPP justify a different tax treatment.
We welcome the requirement that any financial advice provided on the Basic PEPP must be provided on an independent basis. This is, in our view, essential for the prospective customer to receive a recommendation that is truly based on the respective merits of PEPP and other PPPs on offer and are directed towards the product that is best suited for their needs.
Simpler, clearer design and better information
We welcome the proposed amendments to the design of the PEPP, which offers the benefit of both more flexibility and more simplicity. The former is provided by the greater possibility for providers to offer tailored PEPPs with a variety of investment strategies and risk-mitigation techniques. The latter is provided by the clearer differentiation between the Basic PEPP and all other PEPPs: with the Basic PEPP limited to investments in listed securities according to a life cycle strategy, it becomes much easier for prospective investors to sort out between PEPP offers.
Investors would be aided in this task by the proposed extension of the information to be displayed on EIOPA’s central register of PEPPs: beyond the existing information, having performance and cost data, in particular will facilitate comparisons of PEPP offers.
Value for Money
We remain concerned if the intended Value-for-Money approach will ensure that the PEPP remains a cost-efficient product the benefits of which substantially outweigh the costs. The proposals for the PEPP in that regard rely on the still to-be-finalised and very much to-be-tested Value for Money framework that the Retail Investment Strategy will insert into the Insurance Distribution Directive.