The EU’s Economic and Monetary Affairs committee has approved a draft rulebook for the planned pan-European personal pension product (PEPP), including consumer protection and sustainable investment requirements.

Although the European Parliament still has to vote on the rules, this would be a formality, according to Sophie in ‘t Veld, Dutch MEP for the Liberal Democrats in Europe and the lead on the PEPP – known as the “rapporteur”.

The PEPP is the envisaged third-pillar product designed to be offered under the same rules across the European Union.

Speaking to IPE’s Dutch sister publication Pensioen Pro, In ‘t Veld said that the European Parliament had tried to tighten the product’s specifications, improve consumer protections, and set clearer rules for information provision.

“This is contrary to member states, who chiefly think from the perspective of their local institutions,” she said.

She indicated that in the Parliament’s final draft of the regulation, consumers would be allowed to lodge complaints at their local supervisor, based on a clear and detailed procedure.

A basic PEPP model has been fleshed out, comprising requirements for safer investments and additional conditions for the decumulation phase.

The regulation also included rules for sustainable investment, stipulating that PEPPs ought to invest in line with the targets of the Paris Agreement as well as the UN’s Sustainable Development Goals.

EU member states in the European Council agreed their approach to PEPP regulation in June. The Council and Parliament will soon begin discussing how to combine the two for the final rules.

Consumer protection

Sophia in 't Veld, MEP

Sophia in ’t Veld, MEP

Credit: Sebastiaan ter Burg

In ‘t Veld emphasised that consumer protection was an important aspect of the rules, as was the role of European supervisor EIOPA for offering access to the PEPP market.

“The member states wanted their local regulators play this role, rather than EIOPA as the European Commission had suggested,” In ‘t Veld said. “However, we do both. The local watchdog will carry out the initial validation of an application, before EIOPA can pass judgement with respect to the content.”

She argued that EIOPA’s involvement was necessary to ensure the quality of all PEPPs.

“We know that there are differences between a local supervisors,” she explained.

The fiscal treatment of the PEPP remained a difficult issue, the rapporteur said, as this was still under the control of individual member states.

Parliament gave member states two options in its PEPP rules: either give the PEPP the same rights as local products, or develop a special European-wide fiscal regime for PEPPs.

However, Europe lacked the means of forcing member states to support such a move. In ‘t Veld said: “If providers want this, they must lobby their local governments.”

The European Commission has previously estimated that the EU market for personal pensions could hit €2.1trn in assets by 2030 if the PEPP was successful.