EFAMA fully supports the European Commission’s proposed Regulation for the creation of a pan-European Personal Pension Product (PEPP) that is complementary to and supportive of existing Member State and occupational pensions. EFAMA has been a long-standing supporter of this legislative initiative for a number of reasons including:
- The demographic need to encourage citizens in many EU Member States to save more for their retirement and increasingly investing more in capital markets-based and long-term instruments. This will support investment in the real economy and contribute to the success of the Capital Markets Union (CMU) initiative.
- The high degree of fragmentation between national markets, which prevents cross-border distribution of personal pensions and results in limited competition between different categories of providers, higher prices and no portability of personal pensions across Member States.
We support the broad regulatory framework proposed by the Commission to develop the PEPP market. In particular, we strongly support the Commission’s aim of creating a simple, standardised personal pension product that can be passported throughout the EU. This will generate economies of scale and, in turn, benefit consumers through lower costs.
EFAMA welcomes the Commission’s recommendation to Member States to give PEPPs the most favourable tax treatment available to their national personal pension products.
We note, however, that the PEPP Regulation will likely only produce all of its expected positive effects if there is sufficient flexibility to enable different types of providers to offer a PEPP and encourage the development of different types of default investment strategies, including life-cycle strategies. These life-cycle strategies offer long-term investment market exposure and risk diversification throughout the accumulation phase, whilst reducing the impact of market risk as the beneficiary approaches retirement. Not only is such a strategy consistent with the overall objectives of the CMU agenda, it is already considered as well-suited for default option by the authorities in many countries throughout the world. It should be up to the PEPP providers to decide whether they want to offer life-cycle investment strategies or strategies with minimum return guarantees as a default option.
William Nott, EFAMA President, commented: “The PEPP will bring much needed scale, choice and competition to the EU personal pensions market. I am also confident that the portability of the PEPP will make pension savings more attractive to younger people with increasingly mobile careers and lifestyles. By channelling more capital towards long-term investments and putting European savings to better use, the PEPP can become the figurehead of the CMU project. EFAMA looks forward to continuing to engage and offer support to policymakers, to contribute to a successful PEPP”.
Peter De Proft, EFAMA Director General, confirmed: “The Commission’s proposal represents an important milestone towards the creation of a truly single market for personal pensions. The PEPP framework can succeed in breaking down barriers between national markets if it allows a broad range of providers the possibility to offer innovative and cost-effective pension products on a pan-European scale. If this is achieved, I have no doubt that asset managers will have a significant role to play in the success of the PEPP”.