PEPP initiative

With its initiative for a pan-European personal pension product, the Commission is addressing a fundamental need of European citizens for second- and third-pillar retirement provisions.

As highlighted by the European Commission in the introduction of its PEPP proposal, Europe is facing an unprecedented demographic challenge. For every retired person in 2060, there will only be two people of working age, compared to four today. Our social and welfare systems are coming under pressure. Part of the answer lies in occupational and personal pension schemes complementing state-based pensions.

ALFI hence welcomes the Commission’s initiative to create a regulatory framework for an innovative PEPP. ALFI believes that the investment fund industry in general, and Luxembourg’s internationally oriented fund sector in particular, can play a key role in facilitating long-term savings in Europe and in allowing individuals to build up additional retirement income. ALFI has already expressed on many occasions its conviction that there is an urgent need to encourage second- and third-pillar retirement provisions to complement first-pillar pension schemes, and that the asset management industry is of pivotal importance in this context.

The PEPP is conceived as a new type of voluntary personal pension with the advantage that it can be used in parallel with existing state-based, occupational and national personal pensions.

It is also commendable that PEPPs should have the same standard features wherever they are marketed in the EU, and that they can be offered by a broad range of providers, such as insurance companies, banks, occupational pension funds, investment firms and asset managers.

It is essential that PEPP providers benefit from an EU passport, allowing providers based in one EU Member State to offer personal pensions in other EU Member States and savers to sign up for a personal pension offered in other EU Member States. This will offer consumers more choice.

The foreseen "portability" of the PEPP, enabling savers to transfer the benefits accumulated in one or more Member State(s) when moving between them, is a feature that has been long awaited among an increasingly mobile EU workforce.

Luxembourg is very well positioned to support the swift uptake of the PEPP, given its long-standing experience in both (i) passporting funds such as UCITS across borders, as well as in (ii) setting up and administering pension fund vehicles, in many cases as cross-border and multi-employer funds.

Additional efforts at the level of investor education will be critical, along with the new product’s tax treatment, in making the PEPP a true success story.


David Zackenfels
Senior Legal Advisor, ALFI