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Retirement Plans

EU deal will make personal retirement plans available in Europe on cross-border basis

European Union institutions reached an agreement that will make personal retirement plans available to savers in Europe on a cross-border basis, according to a statement by EU Council on Wednesday.

Considered a new class of retirement arrangement, the pan-European pension product, or PEPP, will allow mobile workers, who travel between countries to work, and others to save into a single retirement savings vehicle even if they change their employer and country of work.

PEPP was proposed to allow savers access to liquid markets at a lower cost and to reduce public funding, the EU Council said, helping 73% of Europeans age 25 to 59 who currently lack a supplementary or occupational retirement plan and rely on only a state pension.

Money managers, insurance companies, banks, occupational pension funds and investment firms will be eligible to offer one savings vehicle in all European markets under the new rules, which are expected to be fully in place within 12 months.

Under these rules, savers would be defaulted into a safe investment option but could choose different risk-return investment options and a decumulation strategy.

"We think (the agreement) is very positive for cross-border approach (of) European DC plans because this is a first-ever (legislative) framework for a pan-European product," said Christian Lemaire, global head of retirement solutions at Amundi, in a telephone interview. "However, it is going to be complementary in Europe," Mr. Lemaire said, adding that a higher retirement income and second-pillar occupational DC arrangements are still needed.