This document represents the stylised version of BETTER FINANCE's response to the EIOPA Public Consultation on implementing measures (level 2) for the pan-European Personal Pension (PEPP) Regulation. The actual response template can be found here.
General approach and review
BETTER FINANCE welcomes the holistic approach adopted by EIOPA and agrees with the working premise (trends, challenges, principles) to develop a truly efficient and performing PEPP.
The PEPP KID and BS should avoid information overload, be clear, accurate, reliable and comparable. BETTER FINANCE agrees with EIOPA’s proposal to think “digital first” and design the information documents to take advantage of interactive tools, layering and online distribution.
Past performance & Pension projections
Past performance, presented in comparison with an objective benchmark, must be presented on long-term horizons, i.e. at least 20 years (already 10 year minimum required) for the UCITS money market funds). Pension projections must be made under the form of illustrative scenarios, in order to reduce the confusing and misleading effect on consumers of erroneous quantified future scenarios.
The PEPP Regulation is clear and explicit in requiring an “all-inclusive” basic PEPP annual fee cap. The cost of distribution and the cost of the capital guarantee must be included in the annual 1% fee cap for the basic PEPP (meaning closer to 30 or 40% accumulated fee cap for the providers over the life of the PEPP contribution), and there must be no doubt about this legislative choice. Two fair solutions are provided for the cost of the guarantee and distribution under question 4.
Techniques EIOPA should consider establishing simple, short and intelligible rules for the risk-mitigation techniques and clear benchmarks on how can PEPP providers ensure that the latter are in line and reasonably expectable to reach the PEPP investment objectives.
A meaningful summary cost indicator should reflect the effect of charges on the monthly or annual pension income for the saver (in the case of a pay-out phase in the form of life-long annuities). Therefore, we propose to use the Reduction-in-Wealth (RiW) or Charges Ratio (CR) to disclose the total costs of a PEPP.
Basic PEPP The basic PEPP must be standardised in order to embed a conservative investment approach (risk-reward profile) to protect the vast majority of savers that cannot or do not wish to make a particular financial decision.
Online distribution of PEPP might prove more suitable and, certainly, cheaper than traditional channels. We fully support EIOPA’s approach to tap the potential of automated investment platforms to enable the PEPP to “take off”.
EIOPA should also include data from distributors or advisers on how many times the basic PEPP has been advised to the total number of clients for a certain PEPP and the same information but aggregated at product manufacturer level. EIOPA should develop a publicly accessible interactive database for PEPPs.