EIOPA delivered to the European Commission a set of draft Regulatory and Implementing Technical Standards and its advice on Delegated Acts to implement the framework for the design and delivery of the Pan-European Personal Pension Product (PEPP).
EIOPA’s
proposed legal instruments follow the objective to unlock the potential
of the European personal pension market by setting the right incentives
for the creation of future PEPPs, as portable, simple and
cost-efficient products. The regulatory provisions include clear and
enforceable quality criteria for PEPP to be followed by providers and so
to ensure that European consumers will be offered high-quality, safe,
transparent and simple PEPPs. At the same time, EIOPA is leaving
sufficient room for innovation and competition to reach good pension
outcomes. Clear criteria for sound and robust investment strategies and
risk mitigation techniques will help in delivering better long-term
returns to savers and in managing investment risks to match the European
citizen’s risk appetite.
In this regard, EIOPA developed two mandatory consumer information documents: the PEPP Key Information Document (PEPP KID) and PEPP Benefit Statement.
These standardised information documents will provide consumers with
relevant information allowing for easier decision-making before entering
into a binding contract and monitoring the savings’ performance during
the life of the contract.
The PEPP consumer information documents introduce a holistic approach
for the assessment and analysis of the PEPPs’ risk-reward profiles,
with a 'summary risk indicator' in the PEPP KID that identifies the
riskiness of the different PEPP investment options – as well as
comparative information to understand the relative risk to the expected
future PEPP retirement benefits. Further, projections of future
retirement income are key for consumers to understand the
characteristics of PEPPs and to enable the consumer to consider whether
the product meets the individual retirement objectives.
Furthermore, online distribution will be one of the most important
opportunities of PEPPs to attract the consumer’s interest and to engage
with the PEPP saver for the retirement planning. It will be particularly
critical that consumers can easily access, understand and use the
information presented in a digital format. The use of digital means is
expected to bring important cost-efficiencies in the distribution
process.
Cost-efficiency is also one of the major goals for the success of the
PEPP. In case of the Basic PEPP the annual cost will be limited to 1%
of the PEPP saver’s accumulated capital at the end of each year. The
Basic PEPP – the core or default investment option – has been
specifically regulated to offer a relatively high level of capital
protection, which can be further extended to a capital guarantee. The
cost of providing that guarantee is excluded from the cost cap but must
be expressly disclosed.
Finally, the success of PEPP will depend on strong supervision and
close cooperation between national competent authorities in the
different Member States. EIOPA is of the view that regular supervisory
reporting and solid product intervention powers will be necessary to
ensure efficient and effective supervision and monitoring of the PEPP
market, both at national and European level.
In developing its proposals, EIOPA built on the expertise of the
supervisory community of both the insurance and pension sectors, as well
as of the other European Supervisory Authorities, the European Central
Bank and the Organisation for Economic Co-operation and Development. At
the same time, EIOPA conducted an active dialogue with a wide range of
stakeholders, including EIOPA’s Expert Practitioner Panel on PEPP and
its two stakeholder groups, the Insurance and Reinsurance Stakeholder
Group and the Occupational Pensions Stakeholder Group.
Gabriel Bernardino, Chairman of EIOPA, said: ‘With
the delivery of EIOPA’s proposed implementing measures specifying the
PEPP Regulation, EIOPA has fulfilled its objective to design the PEPP as
a simple, safe and reliable retirement savings option for the European
citizens and to provide a powerful tool to close the pension savings
gap. PEPP is a unique opportunity to offer consumers the participation
in sustainable investments and the European Capital Market Union, whilst
ensuring good pension outcomes and protection against downside market
risk.'
EIOPA
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