Finax, the first provider of a Pan-European Personal Pension Product (PEPP), has called for a range of changes to ensure the product can deliver on its potential, saying it was “worth fighting for”.
Its intervention comes as the European Commission is expected to publish a new regulatory proposal on the PEPP in the coming weeks, in keeping with its Savings and Investments Union strategy.
“As a market leader, Finax aims to streamline and accelerate this process by sharing its unique experience,” it said.
Finax is one of only two providers to have taken up the PEPP since the underlying regulation was adopted in 2019. It has launched PEPP-compliant products in Croatia, the Czech Republic, Poland and Slovakia; the other provider, LifeGoals, is active in Cyprus.
According to Juraj Hrbatý, chief executive officer of Finax, making a success of the PEPP “isn’t just about finance, it’s a social issue”.
“We’re not asking for a revolution, but a smart and efficient evolution,” he said. “Reforming PEPP is key to its further development and to combating the social and economic consequences of Europe’s demographic decline.
“Looking at its foundations, PEPP is one of the most promising financial innovations to come out of the EU.”
In an opinion paper, the provider outlines barriers to the growth of PEPP and calls for changes to increase adoption among savers and providers alike. These align at least in part with reform recommendations issued by other stakeholders, including the European Insurance and Occupational Pensions Authority (EIOPA).
For example, as others, Finax identifies the 1% fee cap as a problem, deterring potential providers. It says the PEPP can be provided within the 1% fee cap range in the long run, provided the regulation allows one-off distribution fees that would not count towards the 1% fee cap, makes PEPP a VAT-exempt product, and considers the cost of underlying instruments outside of the fee cap.
Finax is also arguing for the PEPP to be designed to “invest effectively in European capital”, saying that “private equity capital investing into Europe’s infrastructure and ELTIF 2.0 funds should be part of PEPP products, however, the stochastic modelling is not addressing this”.
Another recommendation is for employers to be allowed to contribute to PEPP, for example, by introducing the option for them to negotiate PEPP terms with providers on behalf of their employees directly within the regulation. It also said the advice requirement for a basic PEPP should be dropped.
Finax is also calling for equal rights for investment and insurance distributors as the latter cannot currently offer all PEPP formats. The provider also emphasises the need to align tax incentives with local pension products, allowing fund transfers between PEPP and other retirement savings tools, and permitting PEPP funds as collateral for mortgages.
Another recommendation is to raise or eliminate the cap (to six) on the number of product variants a provider can offer, saying this “prevents adaptation to national specifics”.
“Another proposal is introducing a ‘PEPP label’ for compliant national products,” it said.
Read the digital edition of IPE’s latest magazine
No comments yet