Efama, the European fund and asset manager association, has reacted to the European Commission’s delegated act on the pan-European personal pension product (PEPP) to express its dissatisfaction with the decision on the cost of advice.
The delegated act was announced on 18 December and specifies the requirements for information documents, costs and fees, and risk mitigation techniques for the PEPP.
Reiterating concerns previously expressed by asset management industry representatives, Efama today said there was “a real risk” that including the initial cost of advice in the 1% fee cap for the Basic PEPP would prevent potential providers from developing an economically viable business model for the PEPP, thereby jeopardising its take-up.
Delivering the type of advice required under the PEPP regulation entailed costs that would not be recouped if they were came under a 1% fee cap that also covered costs such as manufacturing and distributing the product, Efama said.
In its opinion, the PEPP regulation allows the exclusion of the one-off initial advice from the fee cap so there is an alternative to the approach taken in the delegated act. It said that a benefit of postponing the potential inclusion of advice in the fee cap was that this would ”allow time for the nascent technology-enabled advice market to develop low-cost, high-quality, personalised advice offerings suitable for the PEPP”.
Tanguy van de Werve, director general of Efama, said: “If the PEPP remains a fine idea without a future, the real losers will be the citizens of Europe, in particular those with inadequate future retirement incomes, who will not be able to reap the initially intended benefits of the PEPP in terms of product choice, quality of advice and value for money.
“It is now for the Council and the European Parliament to decide whether such a policy outcome is desirable and in line with the objective of the Regulation.”