Despite the in-depth integration of European countries, the EU citizens still do not have a unified market for complementary pension products. Keeping in mind the latest development stages and benefits of financial freedom, European Insurance and Occupational Pensions Authority (EIOPA) announced a Pan-European Personal Pension Product (PEPP).
What are PEPPs?
The PEPP is a security that was designed to protect pension savers, regulate the rules of providing such services as long-term investment plans, and define the list of companies allowed to provide them. In other words, the PEPP is a long-term investment plan aimed at saving funds for retirement.
What are the benefits for investors?
Key features of the product include full transparency, so-called portability, and obligations for PEPP providers to deliver the mandatory service to pension savers. This pension plan is not connected to a certain employer or even the government. Thus it would be attractive for self-employed people as an alternative to occupational and public pension systems.
PEPP will be classified by regulators as a third pillar pension product with a strong consumer protection. PEPP providers have to secure an additional risk-mitigation, explain in detail all of the investment conditions to a consumer, and offer up to six different risk-to-return ratios according to investment options. The fees of a provider will be capped at 1% of the overall accumulated capital.
How will the program be put to work?
Before buying the product, PEPP owners should sign an appropriate agreement with clearly-stated conditions and purposes of the investment. After the retirement, PEPP holders will be able to enjoy periodic payouts from the company-provider.
Besides, consumers will have an opportunity to switch providers in case of changing the country of residence, for example
PEPPs will be regulated by several European financial directives including MiFID II, AIFMD, and several others. The programme is expected to launch in late 2021 or early 2022.
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