EU member states have agreed their stance on the proposal for a pan-European personal pension product (PEPP) after reaching a compromise on the question of whether pension funds should be allowed to provide the product.

This means the EU Council – which is made up of member state leaders – is ready to start negotiations with the European Parliament on the PEPP when the latter has finalised its position.

The scope of potential PEPP providers was the most controversial issue during negotiations, the Council said.

A number of member states were against all Institutions for Occupational Retirement Provision (IORPs) being allowed to provide PEPPs, as suggested in the European Commission’s initial PEPP proposal. A number of delegations were also be opposed to excluding all IORPs from the scope of the PEPP regulation. 

The compromise meant only certain IORPs would be allowed to provide a PEPP. Specifically, the council said pension funds could offer PEPPs if, pursuant to national law, they were authorised and supervised to provide personal pension products and ringfenced all PEPP-related assets and liabilities.

The Council’s compromise proposal also put forward that IORPs offering a PEPP would only be allowed to cover biometric risks, such as disability, in cooperation with insurers.

“Additional safeguards have also been introduced as regards the powers of host member states,” the Council’s proposal said.

“The presidency believes that this compromise proposal is well balanced and takes into account the different organisational structures of IORPs and their supervision in the different member states.”

The Council’s compromise proposal was supported by a majority of member state delegations. The Netherlands has a “parliamentary scrutiny reservation”, but this would not stop the Council from starting negotiations with the European Parliament.

In the Netherlands, the government and the pension fund representative group (Pensioenfederatie) have warned against allowing all second-pillar pension providers to offer a PEPP. Finance minister Wopke Hoekstra has supported a ban on the implementation of PEPP for mandatory industry-wide schemes.

Industry associations for insurers and low-cost defined contribution providers in the Netherlands have argued that providers not carrying risks related to life expectancy, work disability and death should be allowed access to the PEPP market.

The parliament’s economic and monetary affairs committee, which is leading the PEPP proposal for the parliament, is due to vote on its stance next month. The full parliament will vote on it in September.

The Commission released its proposal for a regulation on a PEPP in June last year, aiming to create the framework for a standardised personal pension product available across the EU. The regime is intended to complement existing state-based, occupational and national personal pension systems.

Vladislav Goranov, minister for finance of Bulgaria, said: “The pan-European pension product will bolster our capital markets union plan, as it will help channel savings towards long-term investments.

“It will promote competition amongst pension providers, enabling them to sell pension products outside their national markets and giving savers more choice over how and where to place their savings.”

Topics