It is for this reason that BETTER FINANCE welcomes the proposal released by the European Commission in mid-2017 for the creation of a pan-European Personal Pension Product (PEPP) that will go a long way towards alleviating this worrying situation, provided the PEPP ensures pension adequacy through decent long-term returns and a default investment option that is really safe and really simple.
BETTER FINANCE has been actively involved in the incubation process of the draft document of the PEPP through answers to public consultations from the European Commission and from the European Supervisory Authorities. As part of the on-going work of the European Parliament (ECON, IMCO and EMPL committees), Guillaume Prache, Managing Director of BETTER FINANCE, was invited to address the IMCO Public Hearing organized by the EPP group on 31 January 2018.
BETTER FINANCE, along with policy makers from the European Parliament and other stakeholders, proposed crucial amendments to the EC’s PEPP proposal to ensure it addresses the extreme fragmentation of the pensions markets within the EU and establishes a simple, standardised and cost effective product that provides good “value for money” for all European savers and pensioners.
A PEPP must therefore provide pension adequacy through decent long-term returns and at the very least protect the purchasing power of EU citizens’ life time savings. To achieve this, the PEPP proposal took amendments into account to accommodate for:
- A default investment option that is really safe and really simple (and really default): savers can subscribe to the cost-effective BASIC PEPP default option without advice. With view on protecting the purchasing power of savings, the “capital protection” for the BASIC PEPP will apply to the capital before fees are deducted, and before inflation.
- An alternative investment option that allows direct low-cost investment into simple long term financial instruments (equities, ETFs…);
- The inclusion of a Key Information Document (KID) that will reinforce investor protection rules and include historical performance disclosure covering the last 20 years or all the years that the scheme has been operating for in case the scheme existed for less than 20 years.
The final amendments are to be submitted to the EP’s ECON Committee by 23 April.