The Pan-European Pension Product Regulation – Europe’s Solution to the ‘Pensions Gap’

Abstract

In July 2012, the European Commission asked the European Insurance and Occupational Pensions Authority (‘EIOPA’), in the broader context of efforts to develop private funded pensions, to advise on a legal framework for a Single Market for PPPs. Following a Discussion Paper, a Preliminary Report, a draft advice and a Final Report published by EIOPA, Regulation (EU) 2019/1238 (‘PEPPR’) was adopted on 20 June 2019. The PEPPR establishes a 2nd regime (also known as the 29th regime) that serves as an alternative uniform European system to different national regimes allowing private parties (providers and PPP holders) to choose whether the European or a national regime governs their legal relationship. The PEPPR, that introduced a European (product) passport for Pan-European Pension Products (‘PEPPs’), is in line with the advice in the 2011 White Paper on Pensions that addresses enhancement of the development of private retirement savings in realizing efficiency gains through diversification, innovation and scales of economies on the side of pension providers. Apart from that, the introduction of the European product passport for PPPs might help to overcome the ‘financing gap’ for small and medium-sized enterprises (‘SMEs’). Developing complementary personal retirement savings is seen as a regulatory tool to develop third-pillar pension systems in EEA Member States where occupational pensions are not well-developed. The PEPPR seeks to create a regulatory framework for personal pensions that could play a role in securing pensions, reducing the burden on public pension schemes and increasing pension income. It serves as an answer to overcome the pressure being put by the low interest rates on funded schemes. Furthermore, the PEPPR has as an additional objective to diminish the obstacles to labour mobility and adapt to the general shift from defined benefit (‘DB’) to defined contribution (‘DC’) schemes. The PEPPR, thus, plays a major role in overcoming the ‘pensions gap’. This contribution discusses PEPPs as a ‘wrapper product’. Furthermore, this contribution explains the common regulatory framework for PEPPs in harmonizing regulation applying to PEPP providers/distributors, depositaries/custodians, the position of PEPP customers, the standardization of PEPP ‘product regulation’ and sales regulation. It concludes by explaining that the PEPPR establishes a ‘wrapper product’ investment triangle that is, depending upon the PEPP contract employed, based upon the underlying investment triangle under Directive 2011/61/EU (‘AIFMD’), Directive 2009/65/EC (‘UCITSD’) or the (optional) investment triangle under Directive (EU) 2016/2341 (‘IORPD II’).