Personal pension plan now possible across borders

LB – 04/2022

EU citizens will have more retirement plan options to choose from in the future. Since 22 March 2022, the "Regulation on a Pan-European Personal Pension Product" (PEPP) also enables personal pension plan across borders, thus complementing the national pension systems. At the European level, financial companies and the economy also benefit from this.

European single market for personal pensions

The PEPP regulation is part of an action plan of the European Commission to strengthen the capital markets union. It is considered one of the most important measures in this context – PEPP creates a European single market for personal pension plan. In this way, the EU is responding both to the changing demographic structure and to modern forms of work and digitisation: For example, the still obligatory counselling of providers can be carried out with the help of a fully or partially automated system.

This not only lowers barriers to entry, but also reduces costs, which in turn benefits consumers. In addition, PEPP should help to channel savings into long-term investments, thus also boosting growth in the EU.

Financial companies can apply for authorisation since March

Personal pension plan, which is one of the three pillars of the pension system in Germany, for example, alongside the statutory and occupational pensions, has so far been limited to the national level. Since 22 March 2022, the regulation on a "Pan-European Personal Pension Product", also called "European Pension", which was already adopted in 2019, will now be applied in practice in the EU. This makes it possible for financial companies to apply for authorisation and distribute PEPP across borders.

Extended offer for savers

Pension savers thus have a wider choice – they are no longer limited to their respective country when it comes to personal pension plan, but can draw on providers from the entire European Union. At the same time, they benefit from the advantages of stronger competition and a more transparent and flexible product range. Consumer protection is strengthened.

When moving within the European Union, savers can simply "take" the European pension annuity agreement with them, which benefits the younger generation, in particular. However, the tax treatment of financial products continues to be national. PEPP is not automatically accompanied by tax incentives or state subsidies. It is thus not clear yet to what extent PEPP can contribute to making personal pension plans more attractive.

The English version of the regulation can be found here, key points and further background information can be found on the website of the European Commission page.