The European Commission (EC) has published a proposal for a regulation on a pan-European Personal Pension Product (PEPP). This follows the EC’s 2016 consultation (see our August 2016 Global News Brief) and builds on work carried out by the European Insurance and Occupational Pensions Authority (EIOPA) in recent years. The intention is that this will complement any domestic personal pension system and have a high degree of homogeneity, allowing it to be distributed across all EU member states and therefore facilitate the free movement of people (providing for portability of pension rights for individuals moving from one country to another).


Following is a summary of key points of the proposed PEPP and further detail.

The PEPP would be:

  • Offered by providers who will obtain authorization for their product from the EIOPA
  • Limited to offering up to five investment funds, including a default (that will have a “money back” guarantee)
  • Available to employees, the self-employed and the unemployed across the EU (providers have to offer national “compartments” for all 27 member states within three years of launching their product)
  • Tax incentives in line with national policies of the member states (at least, the EC encourages member states to grant beneficial tax treatment on the same basis as domestic plans)
  • Transparent — with an up-front (pre-contract) Key Information Document (KID) and annual benefit statement
  • Portable across borders
  • Able to be switched from one provider to another (at least once every five years) at a capped cost of 1.5%
  • Able to offer a variety of draw-down options
  • Available (subject to provider development) within two years of the regulation being published to the Official Journal

Banks, insurers and occupational pension funds are among a limited number of “financial undertakings” that will be able to offer a PEPP. Providers will need to obtain authorization from the EIOPA.

In order to facilitate cross-border provision and try to keep costs low, the proposed PEPP would be standardized in certain areas, including a limit on the number (five) of investment fund options. These have to include a default option, which must also guarantee to pay out at least the contributions invested.

Certain information will have to be given to prospective PEPP savers before they contract, during the accumulation phase and through the pre-retirement and draw-down phases.

Pre-contract disclosure is based on the Key Information Documents (KIDs) under the Packaged Retail and Insurance-based Investment Products (PRIIPS) Regulation, which describes in detail what (and how) information must be provided to prospective savers.

Content of an annual benefit statement, and pre-retirement and draw-down phase information follows that under the EU’s IORP (institutions for occupational retirement provision) Directive.

PEPP savers will be able to switch providers — but not more frequently than once every five years, with the transferring provider’s fees and charges being capped at 1.5% of the PEPP balance.

To facilitate the free movement of people, PEPP savers will be able to continue to contribute to their selected PEPP wherever they move in the EU — with no loss of any “advantages and incentives … connected with continuous investment in the same PEPP.” Therefore, all PEPP providers will have to design a product that, within three years of launch, will have a national compartment for each of the member states.

PEPP providers will be able to pay out retirement benefits in the form of annuities, lump sums, drawdown payments or a combination of two or more of these. The EC considers that its proposal “imposes this flexibility on Member States as a mandatory condition.” It remains to be seen whether the member states accept this imposition.

The tax treatment may be critical

Tax (and the beneficial tax treatment of pension arrangements) is a matter for individual member states to determine, hence the short accompanying recommendation from the EC encouraging all countries to grant PEPPs the same tax relief as that granted to domestic personal pension plans. It remains to be seen how accommodating member states will be. The willingness of member states to waive some or all of their requirements — and thereby relinquish their fiscal control — is likely to be important in determining the success of the PEPP and its attractiveness to providers.


The proposal will now pass to the European Parliament and the European Council for consideration as part of the trialogue process with the EC. We would expect this process to take at least two years, during which the content of the regulation could change markedly — or even be rejected in its entirety.

Employers should monitor the progress of the proposed regulation. If the PEPP envisioned by the EC comes to pass (despite the challenges noted above), employers will want to be mindful of it in the context of their retirement plan programs as well as workforce mobility within the EU.