Progress on the Pan-European Personal Pension Product (PEPP).

Dr. WSW – 09/2018

Another hurdle has been overcome on the way to establishing the Pan-European Personal Pension Product (PEPP). On 3 September, the European Parliament’s Economic and Monetary Affairs Committee (ECON) approved a compromise by rapporteur Sophie in ‘t Veld. The factions involved – from the Liberals to the Greens – outdid themselves with praise for the joint result. The Liberals (ALDE) and Conservatives (EPP) have now succeeded in launching a product that carries a ‘European safety label’ and gives consumers more freedom of choice. Parliament has added a standard option with very safe investment options – a basic product with capital guarantee as standard option.  


Comments by Green MEP Sven Giegold were equally euphoric. He praised the combination of safe and sustainable investment at significantly lower cost compared to the products already available. He now expects significantly more favourable offers as a result of more transparency and tough Europe-wide competition. In fact, the fees for the basic product should be limited to 1% of annual contributions. According to Giegold, this will make the PEPP ‘the first European financial market product for the general population that is committed to sustainable investment from the outset’. At the same time, Giegold wants to maintain strong public pension systems which he wants to focus on combating old-age poverty. He accused the opponents of PEPP that this would not be about protecting statutory pensions but rather about giving the financial lobby ‘an absurd gift’. 

Also noteworthy was the fact that the Social Democrats (S&D) abstained. Spokesperson Pervenche Berès was not satisfied with the standard level of protection and also criticised the fiscal framework that favoured ‘a race to the bottom’. Consumers could not even be sure that they would get their invested capital back. The European Trade Union Confederation ETUC is also sceptical and is calling for full protection of savings through more guarantees. Europe should also focus more on strengthening collective old-age pension schemes, that is, the first and second operational pillar, instead of promoting purely private pensions. 


The non-government organisation Better Finance was even more critical. It criticised the EP Committee’s compromise as ‘anti-consumer’ and the capital protection of the basic product as pure deception. It protects neither against inflation nor against a loss in the amount of premiums and fees. In order to maintain honesty, consumers should be told that their capital may only be 30% of its initial value after 40 years, despite the guarantee. However, Better Finance does not suggest a better guarantee, but rather a waiver of it. The standard option should then be an investment product that is life-cycle oriented and easy-to-understand. 


The Parliamentary Committee’s decision now gives MEPs the mandate to negotiate with the Council.