The European Insurance and Occupational Pensions Authority (EIOPA) has published a paper on the future of the Pan-European Pension Product (PEPP), outlining the reasons behind its limited uptake and proposed reforms.

Its staff paper set out the authority’s suggested improvements to the PEPP’s design, with the aim of overcoming supply-side, demand-side and structural barriers hindering its broader adoption.

As part of its demand-side fixes, EIOPA proposed the introduction of auto-enrolment for a personal pension scheme, like the Pepp, at the EU level.

“Automatically opening a scheme for every EU citizen reaching the age of 18 or entering the workforce would be an innovative step,” EIOPA stated.

“Such schemes should allow both regular and intermittent contributions to reflect diverse career paths.”

It also called for the development of pension tracking systems and the implementation of pensions dashboards to improve transparency regarding the adequacy and sustainability of national pension systems.

Member states were encouraged by the authority to grant PEPPs the same favourable tax treatment that national personal pension products receive, adding that EU-wide tax harmonisation for PEPP would facilitate cross-border sales and help providers reach economies of scale and keep costs low.

To tackle supply-side issues, EIOPA argued that the potential market for the PEPP must be expanded “significantly”.

EIOPA therefore proposed the combination of occupational and personal PEPPs into a single product, with the aim of allowing tax-efficient employer contributions with personal contributions within one PEPP to attract more providers.

It also proposed focusing on value-for-money considerations in the PEPP rather than a hard ceiling on costs, and creating PEPP labels for national products that adhere to a set of EU-wide common rules.

Furthermore, EIOPA suggested that the administrative burden should be reduced by making national sub-accounts voluntary, thereby making the cross-border feature of the PEPP optional, and called for the transfer of funds from other personal pension products into the PEPP to be allowed.

The PEPP was launched in 2022 with the aim of offering a simple, transparent, cost-efficient and mobile retirement savings option to reduce Europe’s pension gaps, provide adequate and sustainable retirement income, and supply capital to finance the long-term growth of the EU’s real economy, alongside the green and digital transitions.

However, EIOPA acknowledged uptake had been limited due to various supply-side, demand-related and structural factors, which warranted re-assessment.

“EIOPA is convinced that the PEPP’s core characteristics – simplicity, cost-efficiency, transparency mobility and flexibility – should remain the foundation for an updated version,” the authority stated.

“EIOPA strongly believes that European citizens, PEPP providers and member states stand to benefit greatly from a revised PEPP, from having a low-cost, long-term savings alternative that can deepen the EU’s capital markets and ease the pressure on state finances.

“EIOPA looks forward to engaging in discussions with stakeholders on the above proposals and to developing specific policy proposals ahead of the scheduled evaluation of the PEPP Regulation in 2027.”

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