Q #1 Why is the launch of the PEPP of such strategic importance for the funds
industry and overall success of the Capital Markets Union (CMU)?
Above all, the PEPP is a recognition of the importance of individual pension savings at a time
in which European governments have become increasingly fiscally constrained. This has
consequences both for state pension provision and for wider investment in the European
The recent final report of the High-Level Forum on the CMU highlights that “pension inadequacy
risks are becoming a political and budgetary challenge for Member States”, also noting that
funded pension systems represent a significant opportunity for the emergence of a true CMU
The funds industry is undoubtedly viewed as a critical part of the CMU solution, in particular as
the co-legislators have agreed to amend the Commission’s proposal to allow the Basic PEPP
to be based on life-cycling investment strategies. These strategies are consistent with the
overall objectives of the CMU project as they offer exposure to long-term assets throughout the
accumulation phase, while reducing the impact of market risk as the saver approaches
Q #2 Why is making the PEPP a success across Europe so important for
By laying the foundation for a European market for simple, efficient and competitive personal
pensions, the PEPP could offer European citizens a transparent, good value product
underpinned by high standards of governance and investment expertise. The cross-border
portability of the PEPP will increase its attractiveness to young people and mobile workers.
With CMU aiming to ensure a far greater role for market-based finance in supporting European
companies and infrastructure provision, the PEPP should be a ‘win-win’ for savers who see
economic growth reflected in higher standards of living and attractive long-term returns.
Simultaneously, there are a number of essential pre-conditions for success, both in terms of
the PEPP’s legislative measures and its interaction with national tax and regulatory
regimes. The European Parliament is entirely right to highlight that the “tax treatment will be
a key consideration for the take-up of future PEPPs”, which requires in particular that
Member States ensure that PEPPs are subject to the same tax treatment as national pension
products to become an option for savers.
Q #3 What are your views on the Level 2 measures published by EIOPA in
EIOPA should be congratulated for having delivered a very extensive and ambitious set of
legislative proposals in a timely fashion. We welcome the more pragmatic approach being
taken towards the design of investment strategies, which allows PEPP providers to develop
their own models to determine the risk and pension benefit projections of their PEPPs. The
proposed approach to disclose information to customers is also innovative, and open to the
opportunities of digitalisation and online distribution.
Unfortunately, very significant concerns remain within the investment management industry
that EIOPA’s proposal to keep the initial cost of advice within the 1% fee cap for the Basic
PEPP will make the PEPP unworkable for many investment management firms looking to enter
The fact that the Regulation requires that prospective PEPP savers receive personalised
financial advice - and its insistence this advice is provided within an overall fee cap of 1% that
covers all other costs (with the important exception of guarantees) - will impose very high
barriers to entry, particularly for investment managers.
It does not seem possible to break this deadlock by reducing or streamlining the requirements
for the provision of advice since EIOPA considers this would be “a regulatory circumvention”.
EIOPA additionally recognises that “there are limitations to the processes that can be
automated or semi-automated, in particular the provision of a personalized recommendation.”
The most pragmatic solution would be to exclude the initial cost of advice until the first review
of the fee cap. This would give all interested PEPP providers an opportunity to enter the market,
and ensure a level playing field between fund managers and insurers as EIOPA’s proposal to
exclude guarantees from the scope of the fee cap will give a clear competitive advantage to