Pan-European personal pension product providers will be explicitly required to provide lifecycle investment strategies in the default investment option of these individual retirement plans, under regulations agreed to by the European Parliament and the European Union Council.
Considered a new class of retirement plan, 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.
The European Parliament on Thursday clarified some of the requirements for money managers, banks, occupational pension funds and insurance companies that intend to sell PEPPs. The firms will be required to disclose to plan participants the costs of investing; environmental, social and governance policies of their funds; and provide mandatory advice.
Under the PEPP regulation, a simple default investment option with costs capped at 1% of the accumulated capital per year will be available to savers. However, the PEPP will also provide capital protection — a capital guarantee or other risk-mitigation techniques aimed at helping savers preserve their original investment, the parliament said.
The regulations were welcomed by the retirement industry.
Matti Leppala, secretary general and CEO of PensionsEurope, a pan-European pension association, said in an emailed comment: "PEPP is an important step on the road to addressing pension gaps and demographic challenges."
Mr. Leppala added: "Further technical measures complementing the PEPP regulation have to be appropriately designed to allow all different PEPP providers to build on the own strengths and business models. Only then will PEPP support pension savings and long-term investments across the EU."
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.