The European Union is closer to establishing a cross-border pension scheme that operates under one jurisdiction and ultimately gives consumers more choice.
The Pan-European Personal Pension product (PEPP) is a voluntary pension, aiming to give consumers more choice when saving for retirement.
The scheme is portable among EU member states, and consumers can contribute to their PEPP wherever they may be within the EU.
The EU recently released draft regulation proposing to add a pan-European framework for people who wish to use PEPPs as a saving option. PEPPs would complement state-based, occupational and national personal pension schemes, but not replace or harmonise them.
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Under the proposal, PEPPs would have the same standard features wherever they are sold. They would be offered by a broad range of providers, principally insurance companies, banks, occupational pension funds, investment firms and asset managers.
EU households are among the highest savers in the world, but the bulk of these savings are held in bank accounts with short maturities, the draft regulation said. More investment into capital markets can therefore help meet challenges posed by population ageing and low interest rates.
The product, the EU said, was proposed in response to the fragmented nature of the European pension system - concentrated in some countries, while nearly non-existent in others.
Accordingly, only 27% of Europeans aged between 25 and 59 have subscribed to a pension product.
"Our social and welfare systems are already coming under pressure. Part of the answer lies in occupational and personal pension schemes complementing state-based pensions," the EU said.
Bulgaria's minister for finance Vladislav Goranov 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."
Law firm Dentons said the PEPP has a number of proposed features that are familiar to schemes in the UK. These include:
- A key information document and information provision for savers including projected pension returns to retirement;
- A sensible default investment where a saver does not pick a specific set of investment options;
- Financial guarantees or clear de-risking in the default fund as a saver approaches retirement to help safeguard expected return;
- Caps on costs and charges;
- A transfers regime to allow mobility between different products; and
- A variety of options for the payout at the end.