BACKGROUND
According to the Press Release of the European Commission on Pan-European Personal Pension Products only 27% of Europeans between 25 and 59 years old have currently enrolled themselves in a pension product. This is the context in which the Regulation (EU) 2019/1238 of 20 June 2019 on a pan-European Personal Pension Product (the “PEPP Regulation”) entered into force on 25 July 2019.
The PEPP Regulation aims to provide for the creation of a pan-European personal pension product (“PEPP”) which will have a long-term retirement nature taking into account environmental, social and governance factors and will offer EU citizens an additional opportunity to save for their retirement.
A PEPP, defined as “an individual non-occupational pension product subscribed to voluntarily by a PEPP saver in view of retirement” shall only be complementary to public pension systems. Early withdrawal of capital should be limited and might be penalised.
CONTRACTUAL FRAMEWORK
A PEPP will be provided by an eligible financial undertaking, and subscribed to by a PEPP saver, or by an independent PEPP savers association on behalf of its members, in view of retirement, and will have no or strictly limited possibilities for early redemption.
The PEPP contract between the saver and the provider shall include a large amount of information relating to costs and fees, the investment option, alternative investment options, retirement benefits and portability options.
REGISTRATION REQUIREMENTS
A PEPP may only be provided and distributed once it has been registered in the central register kept by the European Insurance and Occupational Pensions Authority. Only financial undertakings such as credit institutions, insurance undertakings, institutions for occupational retirement provisions, investment firms, investment companies or management companies authorised pursuant to Directive 2009/65/EC and AIFMs are allowed to submit an application for registration of a PEPP to their competent authorities.
Once the national competent authority has granted its authorisation, the PEPP will be registered in a central public register and the registration will be valid in all Member States, subject to the PEPP having notified the host Member State of its intention to open in the host Member State a sub-account.
BENEFITS OF THE NEW PEPP RULES FOR PEPP PROVIDERS
PEPP providers will be able to distribute PEPPs that they have created and, in certain cases, PEPPs that they have not created within the territory of a host Member State under the freedom to provide services or the freedom of establishment.
PORTABILITY
PEPP savers shall have the right to use a portability service which gives them the right to continue contributing into their existing PEPP account, when changing their residence to another Member State. Within three years from the date of application of the Regulation, each PEPP provider shall offer national sub-accounts for at least two Member States upon request addressed to the PEPP provider.
CONSUMER PROTECTION
The PEPP Regulation foresees strong consumer protection. PEPP savers have to be provided with a key information document (the “KID”) before the conclusion of the PEPP contract . The PEPP KID should replace and adapt the key information document for packaged retail and insurance-based investment products under Regulation (EU) 1286/2014 of 26 November 2014 on key information documents for packaged retail and insurance-based investment products (PRIIPs) which, as a consequence, would not have to be provided for PEPPs.
General advice and personalised pension benefit projections for the recommended product shall also be provided to the PEPP saver, allowing it to make a clear and appropriate judgement of the product before entering into a contract with a service provider.
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