Today the European Commission released its proposal for a new pan-European Pension Product (PEPP).
Josina Kamerling, Head of Regulatory Outreach EMEA, CFA Institute, comments:
“CFA Institute welcomes the release of an EU personal pension package, which includes a regulatory proposal for a new pan-European Pension Product (PEPP) and the granting of preferential tax treatment for the product which should be comparable to the tax relief granted to national pension products. The lack of appropriate tax incentives, such as for the deductibility of contributions and/or for capital gains, have been a significant barrier to entry for pension providers and investors, therefore we welcome this recommendation on preferential tax treatment.
“The EU personal pensions package provides a pan-European product that will provide consumers with added choice in addition to existing national regimes. Eligible providers include banks, insurance companies, occupational pensions providers and asset managers.
“EIOPA, the insurance and occupational pension authority in the EU, will authorise providers who are able to sell on a pan-European basis. This will ensure regulatory consistency, but EIOPA also needs to play a role in driving supervisory convergence among member states. This will ensure portability, a feature which CFA Institute highlighted in An Ideal Retirement System (2015) as one of ten key issues facing the pensions industry, alongside taxation support, flexibility and appropriate regulation.
“In our response to the public consultation on a potential EU personal pension framework (2016), we suggested that the issues limiting the development of personal pensions across borders are differing tax and regulatory requirements, lack of portability of pensions, and a lack of standardization of pension products (and their associated cost structures). Low levels of financial literacy compound the problem.”
In its 2015 member survey on the EU Capital Markets Union, CFA Institute asked its EU-based members whether the introduction of a standardised European pension product would be necessary to strengthen the single market in pension providers. A majority of CFA Institute member respondents in Europe (59%) agreed that standardised European pension product is necessary to strengthen the single market in pension provision.
CFA Institute also welcomes the use of a Key Information Document (KID) to accompany the sale of these products to aid transparency and comparability for investors. Importantly, the PEPP KID will provide past performance information covering the past five years, or all the years the scheme has operating if less than five years. This is a significant development that will aid investment decision-making, and a notable improvement on the PRIIPS KID, which crucially lacks such information.