The European Commission proposed granting pension providers a passport to distribute pension products across the European Union, the legislator said in a statement Thursday.
Currently, fragmented national jurisdictions prevent pension providers from offering cross-border products to mobile workers. Under the new proposal, they will also have the option to pool assets across borders in order to achieve economies of scale and reinvest the savings in the European economy, the commission said.
The pan-European personal pension product will not replace any of the existing products but the commission's proposal threw support behind the taxation status to boost its launch. According to the proposal, PEPPs should be taxed in the same way as any other pension product in individual EU member states.
The European pensions and fund management industry welcomed the proposal.
Janwillem Bouma, chairman of PensionsEurope, said in a news release: "Even considering the bulk of the retirement income is and will continue to be provided by social security pensions and workplace pensions, we believe that voluntary personal pensions are particularly needed and useful for those who don't have access to workplace pensions, as self-employed and workers in new forms of employment, or where personal pensions offered are not reliable or attractive."
William Nott, president of European Fund and Asset Management Association, said in a separate release: "The PEPP will bring much needed scale, choice and competition to the EU personal pensions market. I am also confident that the portability of the PEPP will make pension savings more attractive to younger people with increasingly mobile careers and lifestyles. By channeling more capital toward long-term investments and putting European savings to better use, the PEPP can become the figurehead of the capital markets union project."
Standard providers of pensions such as insurance companies, banks, occupational pension funds, investment firms and asset managers will be able to offer PEPPs but will need to obtain authorization from the European Insurance and Occupational Pensions Authority to do so, the EC said in its release.
The proposal will next need to be approved by the European Parliament and the European Council before it is adopted.