A] Prelude
For more information on pension systems, risk and coverage, feel free to visit our dedicated webpages:
- https://expatpensionholland.nl/europe-expat-pensions
- https://expatpensionholland.nl/global-pillars-systems
- https://expatpensionholland.nl/global-investments-risks-0
- https://expatpensionholland.nl/global-social-security-coverage
For even more information about this topic feel free to visit the following external sites:
- https://pensionseurope.eu/policy-priorities/eu-pension-policy/
- https://cyprus-presidency.consilium.europa.eu/en/news/council-agrees-position-on-increasing-the-appeal-of-the-pan-eu-personal-pension-product-pepp/
B] The Issue
The EU Council has reached its negotiating position on a review of the Pan-EU Personal Pension Plan (PEPP). The review seeks to make the PEPP a more attractive, accessible and simple option for savers.
C] The Details
I. More flexibility
It will remove some existing requirements and design features that have hampered PEPP’s take-up, while continuing to ensure a high level of consumer protection.
PEPP is an EU-wide voluntary personal pension product, established in 2019, that can complement existing public and occupational pension systems, as well as national private pension schemes. Strengthening the PEPP is a key deliverable of both the savings and investments union (SIU) agenda and the EU’s One Europe, One Market roadmap.
II. Less mandatory advice
As in the Commission’s original proposal to update 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 should be provided only upon the clients’ request. This is crucial to making basic PEPPs an execution-only products which can be distributed online – driving down costs and delivering a modern-age pensions product.
To ensure adequate consumer protection, however, the Council’s position stipulates that providers should still provide mandatory advice for tailored PEPPs, which are more sophisticated and tailor-made to an investor’s individual needs.
III. No fee cap: More much needed providers
When it comes to fees, the Council maintains the Commission’s proposal to remove the 1% cap for the provision of PEPPs, which currently limits their commercial viability for providers.
In its position, the Council kept the Commission’s proposed provisions on investment limits regarding basic PEPPs, affording additional flexibility by allowing up to 5% of a PEPP’s portfolio to be channelled towards assets other than straightforward, non-complex assets, including alternative assets. The Council has also preserved the Commission’s objective of facilitating employer contributions within the PEPP framework.
IV. In Essence
The Council’s position strives to maintain the regulation’s appropriate scope, avoid compliance costs where possible and ensure sufficient time to develop novel supervisory tools.
In this vein, the proposed provisions on PEPPs’ tax treatment, on increased EU-level supervision powers and on the introduction of a value-for-money framework for PEPPs have been removed. At the same time, to ensure consumer protection a strengthened product oversight governance regime has been introduced.
D] Finally: Our Take
Our take as EPH on the PEPP is that we are very positive but from a client/consumer/reality perspective it is obvious that as long as there are no inclusions of substantial tax benefits, the PEPP has no real chance to succeed.
EU: Please accept this and ACT on it!
(Source: consiliumeuropa/EPH)