On 22 March 2022, the 'PEPP', or the pan-European personal pension product, was launched

23 March 20223 min read

Since 22 March 2022, Europe has made a pan-European pension savings product possible, also known as PEPP. Institutions that want to market a PEPP will need to obtain approval for this, what we call "getting a European passport". This makes it easier for an institution to offer a pension savings product across borders, or for a citizen to purchase a pension product from a provider in another country. Once a PEPP is registered in its home country, it can indeed also be offered in other member states. And of course investors take the product with them when they move from one European country to another.

Why were PEPPs developed? Encouraging international mobility has always been a goal for the European Commission. A pension product that can be underwritten and carried across member states fits perfectly within this framework. But according to the European Commission, only 27% of Europeans between 25 and 59 years old have a pension product. So pension saving needs to be encouraged. In addition, Europeans currently buy a savings solution developed for and by the member state in which they live and work. That product therefore has the typical fiscal and technical features of that local member state. So there is room for some uniformity in the market for supplementary pensions. The European Commission also wants to encourage further digitalisation, so simple online subscription for the PEPP will be facilitated. Furthermore, the European Commission wants to encourage long term saving and discourage saving through a savings account. ESG criteria will also get a fixed place within the PEPP. Finally, and not unimportantly, a PEPP will have a fully transparent cost structure, and will be transferable from PEPP to PEPP under certain conditions. This is meant to encourage competition. Those are already seven reasons why the PEPP deserves a place.

EIOPA (European Authority for insurance and occupational pensions, or the European FSMA) says that 21 institutions are already considering offering a PEPP. In certain cases, an institution could for example also adapt an existing product and then have it registered as a PEPP.

In our country there is for now no fiscal framework yet for the PEPP, but it is expected that this framework will take shape within the 3rd pillar. The PEPP is indeed a personal, non-occupational savings solution, which is also linked to a fiscal incentive, provided that the savings effort is maintained until retirement age. In time, however, the intention is that third parties will also be able to make payments into the PEPP. Typically this could be an employer who pays premiums for the PEPP of an employee. This should lead to more customization, and offer the possibility of taking the product along when the employee changes employer, even if that new employer is based in another member state.

In our Belgian, very strongly developed market for supplementary pensions, we are curious how the PEPP will position itself. When will our legislative framework be adapted? Will supplementary guarantees play a role in this? Will the investment possibilities not be too severely curtailed compared to a normal Branch 21 or Branch 23 policy? Will a PEPP offer added value for the average client compared to the already very extensive toolkit of the 2nd, 3rd and 4th pillar? Will we for example be able to buy PEPP variants of existing products, or will this become a completely separate range? If employers can pay into a PEPP, will the PEPP (and the question arises in the first instance for the third pillar as a whole) then also get its place within reporting in MyPension? Will employers have an interest in sponsoring the PEPP of an employee, and under what conditions will that happen? Will an advisor be able to play a role in this? What extra international possibilities will arise?

For now, subscribing to a PEPP is still music of the future. We expect the first products to come onto the market within the next year. Life Experts will keep you informed in any case.

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