PEPP: how the Pan-European Pension Product works
Demographic change means that younger generations increasingly need to build additional private pension savings to maintain their standard of living in old age. This applies to all citizens of the European Union. The idea of creating a pan-European private pension product therefore emerged as early as 2013. Nine years later, the Pan-European Personal Pension Product — known as PEPP — was launched.
What is PEPP?
The Pan-European Personal Pension Product is a standardised, voluntary private pension scheme governed by the same basic rules in all EU Member States. It is designed to allow people to take their pension savings with them when moving from one EU country to another. This matters because national pension systems across the EU vary widely — especially when it comes to taxation. PEPP has been available since 22 March 2022 and can be offered by a range of providers, such as banks and insurers.
How widely is PEPP offered today?
So far, PEPP is barely offered at all. Since its launch more than three years ago, only two providers across Europe have brought PEPP to the market, offering it in a total of eight EU countries. All available PEPP products are listed by the European insurance supervisor EIOPA.
Why is PEPP scarcely offered?
The PEPP Regulation imposes very high administrative hurdles, which is why the product has seen almost no uptake. For example, under the 2022 rules, providers must maintain at least two national sub-accounts—meaning they have to offer their PEPP in at least two EU countries. In addition, there is a rigid cost cap of 1% of annual contributions.
What happens next?
In November, the European Commission presented a pension package aimed at strengthening retirement provision across Europe. The centrepiece is a revision of the PEPP Regulation. The Commission plans to abolish both the strict cost cap and the requirement for national sub-accounts in the basic PEPP option. From the GDV’s perspective, this is a positive development.
Can PEPP become a success?
Yes, a revised PEPP can become a viable component of private retirement provision. To achieve this, PEPP must be easy to integrate into national pension systems. The GDV will advocate for this in the ongoing revision process. From the GDV’s point of view, people’s need for security should also take centre stage: lifelong pensions and guarantees remain important. A well-designed PEPP can also help the EU meet its financing goals. Insurers in Germany, France, Italy and Spain alone manage around eight trillion euros in assets, most of which are invested in Europe. The insurance sector therefore plays a key role in financing the European economy. For the new PEPP to contribute as well, it must be supported by the strong capital base of insurers.