ICQ Log - Pensions:

 PAN EUROPEAN PERSONAL PENSION (PEPP) UPDATE

Last Updated: December 2020

Background

The PEPP Regulation (the Regulation), was published on 25 July 2019, with entry into force on the 14 August 2019. The Regulation will enter into application 12 months after the delegated acts required by the Regulation are published in the Official Journal, this has not yet occurred. The Regulation enables the establishment of the PEPP which is designed to be transparent, consumer friendly and portable, and is intended to complement existing pension schemes and products. Key aspects of the Regulation are as follows:

  1. Distribution: A wide range of financial institutions will be able to offer the PEPP e.g. Insurers, asset managers, banks, etc. PEPP providers will be able to sell PEPPs online and distribute them across the EU with one single product registration.
  2. Portability: The PEPP enables consumers to continue contributing to the PEPP even where they change residence to another EU member state.
  3. Provider switching: Consumers can switch PEPP providers every five years.
  4. Transparency on costs and fees: the regulation seeks to achieve this through a standardised Key Information Document (KID), a Benefit Statement and having a cost cap on costs and fees.

Recent Developments In August 2020, the European Insurance and Occupational Pensions Authority (EIOPA) delivered to the European Commission (EC) draft Regulatory Technical Standards (RTs), draft Implementing Technical Standards (ITS) and advice on Delegated Acts relating to the design and delivery of the PEPP.

The draft RTs outline in more detail the level and type of information that should be provided in the PEPP KID and Benefit Statement. In addition, they also specify requirements regarding costs and fees included in the cost cap and risk-mitigation techniques.

The RTs seek to ensure the information provided to consumers via the PEPP KID and Benefit Statement is clear and easily understood. To that end, the RTs specify criteria for the presentation, layout and content of both documents as well as outlining requirements for the provision of these documents in a digital format. Finally, to further ensure standardisation of the information contained within the PEPP KID and Benefit Statement, templates for both documents are provided in the annexes to the RTs.

In relation to the cost cap, the RTs specify that in principle all costs and fees must be included in the cost cap. The RTs also outline criteria for the design of risk-mitigation techniques. The draft ITs establish the format of supervisory reporting for the submission of regulatory information to competent authorities. The ITs also outline requirements for the exchange of information between competent authorities of home and host Member States and also between competent authorities and EIOPA.

The annexes to the ITs include quantitative templates that must be used by PEPP providers for their annual submissions. The templates cover the reporting of inter alia basic information on the PEPP and PEPP saver information. In addition, the ITs also contain instructions in relation to the population of the templates.

EIOPA also provided Technical Advice to the EC on delegated acts with regard to the criteria and factors to be applied in relation to EIOPA’s product intervention powers. The Regulation allows EIOPA to monitor the market for PEPPs and subject to certain conditions, temporarily prohibit or restrict the marketing, distribution or sale of certain PEPPs. EIOPA’s conclusion was that the factors and criteria set out in the Regulation (which are to be applied in determining when there is a significant PEPP saver protection concern) are not exhaustive, and the inclusion of other relevant and related factors should be considered e.g. factors and criteria related to the PEPP saver, the PEPP provider and PEPP distributor.

In summary, while the PEPP Framework is progressing, there is still some way to go before we see the launch of PEPPs in the marketplace.

Lawyer Photo

Author: John Higgins

Vice President Compliance at Credit Suisse

 

Lawyer Photo

Author: Rachel Woolley

 

Global Director of Financial Crime at Fenergo

ICQ Winter Edition 2020

This article was taken from the ACOI's ICQ Winter Edition 2020