Framework for an EU personal pension product (Pan European Personal Pension - PEPP)

In “Economic and Monetary Affairs - ECON”

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For a brief overview of the key points of the adopted text and its significance for the citizen, please see the corresponding summary note.

Ageing populations have put pressure on pension systems and led to reforms to make them more sustainable, hence pay-as-you-go public pensions are typically expected to become less generous in future. Against this background the European Commission’s (EC's) 2012 pensions White Paper called for more opportunities for citizens to be able to save in safe and good value complementary funded pensions. The European Parliament’s 2013 resolution Adequate, safe and sustainable pensions: 'Welcomes the call in the White Paper for developing both funded, complementary occupational pensions ... and, if possible, individual schemes'.

Given this as part of the Capital Markets Union (CMU) Action Plan, on 27/7/16 the EC launched a consultation on a policy framework to establish European personal pensions. It noted that, apart from supporting retirement incomes, investments in personal pensions also strengthen the single market for capital by making more funds available to finance the economy.  Views were sought on 'possible EU action in order to offer personal pensions to individuals, which are simple, affordable, transparent and provide better returns.' The consultation built on earlier work on personal pensions undertaken by the EC and the European Insurance and Occupational Pensions Authority (EIOPA).

The consultation included a public event on 24 October and closed on 31 October 2016 having attracted 586 responses from individuals, consumer organisations and stakeholders. The subsequent proposal for a regulation on a pan-European personal pension product (PEPP) was made on 29 June 2017 together with a Commission recommendation on the tax treatment of personal pension products. An impact assessment and feasibility study accompanied the proposal.

The proposal seeks to establish a framework for a pan-European personal pension product (PEPP) to (1) increase investment in the EU and contribute to completing the CMU; (2) enhance features of personal pension products; and (3) enhance the cross-border provision and portability of personal pension products. It sets out the requirements for a PEPP, which include that they are a voluntary contract between the saver and PEPP provider with an explicit retirement objective providing capital accumulation until retirement with only limited early access; authorised by EIOPA; and portable across Member State borders. Other rules include: the provision of standard information both before and during the contract term; a maximum of five investment options including a default option protecting at least the capital invested and provision to switch for free every five years; and a provision to switch providers every five years at a capped cost. Pay out (decumulation) rules are largely left to Member States. Recognising that existing personal pensions often attract beneficial tax relief and that this can be key to their widespread take-up, the Commission's recommendation, issued alongside the proposal, encourages Member States to grant the same tax relief to the PEPP.

The European Parliament's Economic and Monetary Affairs Committee (ECON) lead (Rapporteur: Sophia in 't Veld, ALDE, Netherlands). The rapporteur presented a working document on 11 January and the draft report on 26 February. The draft report contained 175 amendments including: a right to buy cross border; removing the 3 year limit for PEPP compartments to be offered in all MS; allowing switching of providers at retirement (rather than once every 5 years) with costs capped at 0.5% rather than 1.5% of the PEPP balance; and that capital protection shall allow the PEPP saver to recoup the capital invested, including fees, costs and inflation.  A further 739 amendments were tabled and they were discussed in ECON Committee on 28 May 2018. IMCO's draft opinion (Rapporteur: Birgit Collin-Langen, EPP, Germany) contained 143 amendments and attracted a further 499. It was voted on 19/6/18 (28 for, 5 against, 2 abstentions). EMPL's draft opinion (Rapporteur: Heinz K. Becker EPP, Austria) contained 24 amendments and 487 further ones were tabled. It was voted on 28/6/18 (35 for, 4 against, 2 abstentions). ECON voted on the draft report on 3/9/18 (29 for, 10 against, 17 abstentions) and mandate to negotiate (47 for, 8 against, 1 abstention) and no objections were raised at the September plenary to the opening of inter-institutional negotiations. The Committee report was tabled for plenary, 1st reading/single reading, date to be decided. Meanwhile, the Council agreed a negotiating mandate on 19/6/18. Trilogues started on 11 October and provisional agreement has now been reached. Re-consultation with the ECON Committee on the text provisionally agreed in trilogues is currently expected to take place at the meeting on 25 – 26 February and, if approved, it will then be referred to plenary for confirmation.

The Parliament also decided to respond to the EC's recommendation on the tax treatment of PEPPs with an own initiative report developed by the same ECON rapporteur. The draft own initiative report was published on 23 February and called on the Council to put forward proposals to incentivise PEPP savers, such as: giving the same tax relief to the PEPP as is given to national products (even where the PEPP did not fully meet the rules for this); a specific PEPP tax relief harmonised at EU level in a multilateral tax agreement between Member States; or granting a specific (fixed amount or percentage) subsidy to PEPP savers. EPRS produced a European Added Value Assessment to accompany this legislative initiative. The draft report attracted 18 amendments in committee and was voted on on 3/9/18 (30 for, 18 against, 1 abstention). On 4 April, the Parliament Plenary adopted the text in first reading. The act has been adopted by Council after Parliament's 1st reading on 14 June 2019. The signature of the agreement by the EP and the Council Presidents took place on 20 June 2019. The final act was published in the Official Journal on 25 July 2019. The Regulation entered into force on 14 August 2019.


Further reading:

Author: Monika Kiss,  Members' Research Service,


As of 20/11/2019.