EFAMA reiterates its support for a Pan-European Personal Pension product

18 May 2017

In a short briefing document published, the European Fund and Asset Management Association outlined its vision for how the young generation of European citizens will benefit from the PEPP – and reaffirmed its support for the project.

The European Commission is expected to launch a legislative proposal on a framework for a Pan-European Personal Pension product (PEPP) at the end of June.  EFAMA has been supportive of this project since its inception.

EFAMA’s briefing shows that households held €7.6 Trillion in bank accounts at end 2016. This figure represents 41% of households’ financial wealth.  This is clearly a huge amount of savings held in short-term, liquid assets, with very limited return potential. At a time when the average replacement rate from public pensions in EU28 is expected to fall to 36% by 2060, EU citizens should be encouraged to start saving more and earlier, and to re-allocate part of their savings towards more market-based instruments.

The current fragmentation of national markets in the personal pension sphere means there is less choice and competition than it should.  A well-regulated, EU-labelled PEPP would ultimately give people access to low-cost personal pensions and give them the chance to get better returns for their savings.

EFAMA views the PEPP as the solution to make personal pensions more attractive and contribute to the success of Europe’s Capital Markets Union.

For a PEPP to succeed in achieving exactly this, EFAMA makes three recommendations: 

• The PEPP should be a highly standardised product that can be sold across Member States with an EU product passport. This will generate economies of scale and reduce costs.  In particular, investment rules and disclosure requirements should be standardised at EU level.
• The PEPP framework should give Member States the freedom to introduce country specific rules in a limited number of areas which are central to the organisation of their pension systems, such as the beneficial tax treatment granted to pension products, the determination of the retirement age and the features of eligible pay-out options.
• Finally, the framework should give an adequate degree of flexibility for potential PEPP providers.  In this respect, it should be up to the providers to decide whether they want to offer life-cycle investment strategies or strategies with minimum return guarantees as a default option.

Press release

Briefing on the PEPP

© EFAMA - European Fund and Asset Management Association