The European Insurance and Occupational Pensions Authority (EIOPA) has submitted a set of draft regulations to the European Commission (EC) to implement the framework for the design and delivery of the Pan-European Personal Pension Product (PEPP).

The regulatory provisions include quality criteria for PEPP to be used by providers, with the aim of ensuring that European consumers will be offered high-quality, safe, transparent and simple PEPPs.

EIOPA said that the regulations will leave “sufficient room” for innovation and competition.

Its draft regulations also include criteria for “sound and robust” investment strategies and risk mitigation techniques with the aim of delivering better long-term returns to savers and managing investment risks to match consumers’ risk appetites.

EIOPA has developed two compulsory consumer information documents, the PEPP Key Information Document (PEPP KID) and PEPP Benefit Statement.

These documents will provide savers with relevant information to help with decision-making before entering a binding contract and monitoring the savings’ performance.

They also look to provide a holistic approach for the analysis of the PEPP’s risk-reward profiles, with the PEPP KID including a ‘summary risk indicator’ that aims to identify the riskiness of various investment options and comparative information to understand the relevant risk of future benefits.

Additionally, projections of future retirement income will be included to help consumers in deciding whether the product meet their retirement objectives.

EIOPA added that online distribution will be key, and it will be “particularly crucial” that consumers can easy access, understand, and use the information presented in a digital format.

Using digital means will also help the process be more cost-efficient, EIOPA said.

To try and ensure the PEPP is cost-effective, the annual cost of the Basic PEPP will be limited to 1 per cent of the PEPP saver’s accumulated capital at the end of each year.

The Basic PEPP, which is the default investment option, has been regulated to offer a relatively high level of capital protection, according to EIOPA.

It can be further extended to a capital guarantee, the cost of which is excluded from the cost cap but must be disclosed.

EIOPA noted that the success of the PEPP will depend on supervision and cooperation between national authorities and member states, and it believes that regular supervisory reporting and intervention powers will be necessary to ensure efficient and effective monitoring of the PEPP market.

“With the delivery of EIOPA’s proposed implementing measures specifying the PEPP regulation, EIOPA has fulfilled its objective to design the PEPP as a simple, safe and reliable retirement savings option for the European citizens and to provide a powerful tool to close the pension savings gap,” commented EIOPA chairman, Gabriel Bernardino.

“PEPP is a unique opportunity to offer consumers the participation in sustainable investments and the European Capital Market Union, whilst ensuring good pension outcomes and protection against downside market risk.”

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