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The permanent representatives of member states to the EU on Wednesday approved the agreement reached between the presidency and the European Parliament on 13 December on the proposed 'pan-European pension product' (PEPP), a new class of personal pension scheme, informs a press release of the Council of EU.
The draft regulation is aimed at providing greater choice for people who wish to save for their retirement, and at the same time boosting the market for personal pensions. According to the Commission, only 27% of Europeans between 25 and 59 years of age have subscribed to a pension product.
"Population ageing in Europe creates new challenges. One of them is how to make sure that people put enough money aside to live well after they retire. Pan-European pension products will create a new opportunity to put aside long-term savings using capital markets and thus relieving the pressure on public funding. PEPPs will also have the huge advantage of pooling all savings, wherever in Europe they have been made, in one single personal pension plan," Minister of Finance Eugen Teodorovici stated.
Under the new rules, PEPPs will have the same standard features wherever they are sold. They will be offered by a broad range of providers, principally insurance companies, banks, occupational pension funds, investment firms and asset managers.
In Europe, the personal pension market is currently fragmented, due to a patchwork of rules that impede the development of a market at EU level. In some member states, the market is virtually inexistent. The newly created PEPPs will give people a new EU-wide saving option that will complement state-based, occupational and national personal pension schemes.
PEPPs would present the following advantages for savers: more choice, as savers would choose from a broad range of PEPP providers in a more competitive environment; consumer protection; switching providers, as the savers would have the right to switch providers, both domestically and across borders, after a minimum of five years from the conclusion of the contract or from the most recent switch; portability, savers would be able to continue contributing to their PEPP if they move to another member state.
For pension plan providers, the regulation will bring the following opportunities: economies of scale; broader reach and cross-border distribution. An EU 'passport' will enable providers to sell PEPPs in different member states.
The text will now undergo legal and linguistic review. The Parliament and the Council will then be called to adopt the final text.
