The pan-European Personal Pension Product (PEPP) is a voluntary, individual, non-occupational personal pension product that offers savers a new pan-European means of saving for retirement. The first PEPPs can be established from 22 March 2022, but will this product prove popular for providers?
Before the introduction of the PEPP, there was no legal framework governing personal pensions at an EU level. It was recognised that the lack of an internal market for pensions caused difficulties with pension portability for mobile workers in the EU. As remote working becomes a more accepted practice, it is arguable this will drive an increase in workers based abroad, possibly accentuating the requirement for pension portability. (See related articles by our employment and tax team on some issues that can arise in a "long-distance" employment relationship, available here and here).
In March 2021, the European Insurance and Occupational Pensions Authority (EIOPA) issued a survey on PEPP to understand the potential take-up. In June, EIOPA issued Guidelines on PEPP supervisory reporting (Guidelines). The Guidelines set out what competent authorities should ensure is contained in the annual quantitative supervisory reporting on the PEPP business. European Pensions reported that the executive director of EIOPA has confirmed that it expects 13 PEPP providers will launch products in March 2022. The Interdepartmental Pensions Reform & Taxation Group (Group) noted in their 2020 Report (Pensions Reform Report) that PEPP providers may wish to operate in Ireland to market and sell PEPPs on a cross-border basis. The Group suggested this may introduce greater competition if European providers choose to market PEPPs to Irish savers. We consider the core features of PEPP in more detail below and how it compares to the Personal Retirement Savings Account (PRSA) product in the Irish market.
A. CORE FEATURES OF PEPP
Regulation (EU) 2019/1238 on a pan-European Personal Pension Product (Regulation) sets out uniform rules across the EU for the registration, provision, distribution, and supervision of a portable PEPP. The Regulation establishes the legal foundation for a PEPP market by standardising the core product features, such as mobility, transparency, and investment options.
1. Providers
There are six types of financial undertaking that can apply to become either a "PEPP provider" to be authorised to manufacture and distribute a PEPP, or a "PEPP distributor" to distribute PEPPs not manufactured by it and provide investment advice;
- Investment firms;
- Insurance undertakings engaged in direct life insurance;
- Credit institutions;
- Investment companies or management companies;
- EU alternative investment fund managers; and
- Institutions for occupational retirement provision.
2. Registration
Registration of a PEPP is valid in all member states. An application for registration as a PEPP is made to the provider's competent authority. The applicant will include the standard terms of the PEPP, and a list of the member states within which it intends to market the PEPP. EIOPA will maintain a central public register of PEPPs.
3. Mobility
The Regulation provides PEPP savers with certain rights, including the right to use a portability service and a switching service. The portability service entitles the saver to continue to contribute to the PEPP if they change residence to another member state and the switching service allows a PEPP saver switch between PEPP providers (after at least five years in that contract) at a maximum cost of 0.5% of the assets to be transferred.
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