PEPP has potential to ‘positively disrupt’ pensions market – Better Finance

The Pan-European Personal Pension Product (PEPP) has the potential to “positively disrupt” the European pensions market, according to Better Finance president Axel Kleinlein.

The comments were made in his foreword to Better Finance’s eighth edition of its report on Pension Savings: The Real Return.

He wrote: “With the Pan-European Personal Pension (PEPP) product lies new opportunity and hope. I firmly believe it has the potential to positively disrupt the current pensions market and deliver some impulse for better retirement provision,” he stated.

Kleinlein also believes that savers must be granted “adequate protection” in the case of crises, like the current coronavirus pandemic. Consider the significant market shares of insurance-based pensions, he believes a “harmonised insurance guarantee scheme across the EU should be urgently adopted”.

“It may be that 2020 is a turning point for our pensions outlook. The measures to be taken must be swift and have at their core EU citizens as the main, largest source of long-term funding for the economy,” he stated.

The report found that although all returns improved in 2019 thanks to strong equity and bond market performances, too many pension schemes covered by the report still reveal either negative or very low long-term returns once charges and inflation are deducted.

“The report finds again fees, taxes, and asset allocation to weigh significantly on long-term nominal net returns of pension products. Pension policies must be reformed to ensure that private retirement savings can deliver adequate real long-term investment returns,” he stated.

He said that the authors of the report are facing “increasing difficulties” in merely updating already scarce information on charges and returns. He also said that disclosure should be “fair, clear and not misleading” to enable savers to make informed decisions on their pension savings.

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