The implementation of Regulation (EU) 2019/1238 on a pan-European Personal Pension Product (PEPP)

The Malta Financial Services Authority (MFSA) issued a Circular on the 26th March 2021, concerning the implementation of Regulation (EU) 2019/1238 on a pan-European Personal Pension Product (the Regulation). This regulation will become applicable as from the 22nd March 2022. The Regulation identifies that despite EU households being amongst one of the highest savers in the world, the majority of those savings are held in bank accounts with short maturities. The Regulation also distinguishes that old age pensions constitute as an essential part of a retiree’s income.

The Regulation was presented with the intent of encouraging the provision and distribution of personal pension products across the internal market. In light of this some Member States do not yet have a market for personal pension products, and other States where such products are available have a high degree of fragmentation between national markets, limiting the degree of portability of these products.

The Regulation has introduced a portable pan-European Personal Pension Product (PEPP) with the main objective being to create an attractive product for the younger generation in order to benefit EU citizens to live and work across the Union. The PEPP will work in tandem with current public and occupational pension systems, as well as national private pension schemes.

The Meaning of PEPP?

PEPP means a long-term savings personal pension product, that is provided by an eligible financial undertaking and is subscribed to by a PEPP saver, in view of retirement. The Regulation requires that PEPPs should provide for long-term capital accumulation and thus the possibilities for early withdrawal are to be strictly limited.

The financial undertakings eligible to apply for registration of a PEPP are:

  • Credit institutions authorised in accordance with Directive 2013/36/EU
  • Insurance undertakings authorised in accordance with Directive 2009/138/EC, provided that these are engaged in direct life insurance according to that Directive
  • Investment firms authorised in accordance with Directive 2014/65/EU, providing portfolio management
  • Institutions for occupational retirement provision (IORP) authorised or registered in accordance with Directive (EU) 2016/2341 which are also authorised to issue personal pension products pursuant to national law
  • Investment companies or management companies authorised in accordance with Directive 2009/65/EC
  • EU alternative investment fund managers (EU AIFMs) authorised in accordance with Directive 2011/61/EU

The above-mentioned financial undertakings may also be authorised to issue a PEPP which is not manufactured by them. Other entities which can issue a PEPP and consequently fall under the category of a PEPP Distributor are investment firms providing investment advice, or insurance intermediaries as defined in the Insurance Distribution Directive.

In order to provide and issue a PEPP, any of the above financial undertakings first need to apply for registration through the MFSA. Following MFSA approval, the PEPP shall then be registered in a central register kept by EIOPA. Once registered, PEPP providers and distributors will then be able to sell their PEPP in all EU Member States.

Once registered with the MFSA, PEPP providers are obliged to provide requested information to the MFSA on an annual basis. These reporting requirements form part of the MFSA’s supervisory role of registered PEPPs. The MFSA intend to ensure that all PEPP providers are providing their products in accordance with the Regulation and that the PEPP providers are in accordance with the relevant sectorial supervisory regime and standards.

Obligations of PEPP Providers

Financial undertakings looking to provide of distribute PEPPs must first adhere to certain obligations arising out of the Regulation. A PEPP provider must first provide PEPP Savers with a Key Information Document (KID). This document will assist potential PEPP savers in obtaining knowledge on the PEPP as well as identify any risks and rewards prior to signing the contract. Once a contract has been successfully concluded, the PEPP providers shall then provide PEPP savers with a personalized PEPP Benefit Statement on an annual basis, which shall include the amount of contributions made, costs incurred and investment returns.

To read the full Circular on the implementation of Regulation (EU) 2019/1238 on a pan-European Personal Pension Product (PEPP) Click Here.

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