The scope of the Packaged Retail and Insurance-based Investment Products (PRIIP) regulation should not be extended to pension products, PensionsEurope has argued.

In response to the European Supervisory Authorities’ (ESAs) call for evidence on the European Commission mandate regarding the PRIIPs Regulation, PensionsEurope said the current exemptions for pension products should be retained.

The PRIIPs regulation was introduced in January 2018 and requires product manufacturers and distributors to provide retail investors with a Key Information Document (KID) and is aimed at strengthening investor protection and improving the investment decision and selection process. The call for evidence will form part of the ESAs’ advice to the European Commission on the PRIIPs KID.

“The PRIIPs Regulation and related RTS are designed for retail investment products, which have a different investment time-horizon (often short-term) and characteristics than pension products. Pension products have different and very specific objectives and are subject to different regulatory and fiscal treatments at the national level. Such specificities, and in particular their long-term nature, means that careful consideration is needed and that it is not possible to simply directly importing PRIIPs approaches,” PensionsEurope argued.

The association warned that comparing the riskiness of a designated pension product to a PRIIPs product would be very misleading for consumers, as they are designed for very different holding periods and exhibit very different risk and rewards characteristics.

“We note that in the context of the development of the pan-European Occupational Pensions Product (PEPP) Regulation and its delegated acts, the commission and the European Insurance and Occupational Pensions Authority (EIOPA) have considered whether PRIIPs KID would have been a good for PEPPs and reached the conclusion that it was not and that it was better to develop a separate regulatory framework and a specific disclosure document (PEPP KID) more fit for the purpose.

“The PEPP methodology, therefore, would constitute a better starting point for providing information on pension products. As the shapes and forms of pension products vary considerably between countries, we think that forcing pension products into the scope of the PRIIPs Regulation would result in misleading information for consumers. Because of this heterogeneity, we also question whether a meaningful comparison would be technically possible,” PensionsEurope stated.

It said that the commission and EIOPA should protect pension products’ specificities, which would also protect consumers as well.

“The different objectives, time-horizon and characteristics of pension products when compared to retail investment products are the reasons for which in 2014 the EU legislator left up to the member states the set-up of tailored information requirements on pensions. We do not believe the conditions have changed since then and we see no reason for extending the scope of PRIIPs to pension products.

“Also, we highlight that the PRIIPs KID is not fit-for-purpose for pension products, as it would not be able to grasp and properly communicate to members information on some of the specific characteristics of these products. For instance, the PRIIPs KID does not allow for detailed information on the specific rules falling under the remit of member states, such as the tax treatment, the retirement age, and information on the decumulation phase.”

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