PEPP should have ‘minimum investment periods’ – Insurance Europe
Written by Natalie Tuck
A Pan-European Personal Pension Product (PEPP) should have minimum investment periods to ensure it is truly a long-term product and allow providers the benefits of being able to invest long-term, according to Insurance Europe.
The trade body has published an insight briefing on the PEPP ahead of the product’s official proposal by the European Commission expected later this month. The idea of a cross-border pension product has been talked about for years but is only just making progress.
Insurance Europe welcomes the product as it sees it as a way of increasing the share of the population with private pensions and the allocation of funds to long-term investments. However, it has said that PEPP’s overarching goal should be to increase long-term savings, especially in member states where these are low.
Furthermore, Insurance Europe has said that the PEPP should offer policyholders an appropriate level of security, for example, protection against longevity risk. They should also be subject to appropriate regulation that takes account of their products’ long-term horizon and specific features.
“However financially literate they are, people must be given sufficient, high-quality and appropriate information to enable them to compare and choose products. Precontractual information requirements must be tailored to the specific nature of the PEPP,” the report said.
For example, it said the PRIIPs Regulation would not be the right benchmark, as the methods of calculation of the main PRIIPs indicators (the risk indicator, performance scenarios and cost indicator) are as they stand inappropriate for pension products and would mislead pension savers.
It also noted: “The roles of and interaction between statutory, occupational and personal pensions are unique to each member state, shaping national pension markets for decades. It is therefore natural that personal pension products differ substantially across the EU. PEPP providers must be able to adapt their PEPP to national markets, particularly in terms of product features (eg long-term guarantees, profit-sharing mechanisms, risk coverage, pay-out options, and surrender options).”