On Friday 18 December, the European Commission specified in a delegated regulation the requirements for information documents, costs and fees, and risk mitigation techniques for the Pan-European Personal Pension Product (PEPP) (see EUROPE 12159/17).
The Commission sees the PEPP as “an important milestone on the road to addressing the pension gap and achieving a pan-European market for personal pension products within the Capital Markets Union”.
In particular, the regulatory technical standards specify the key information on PEPPs that consumers must receive in order to be able to make informed investment decisions. They thus define the general requirements for the format and content of the PEPP’s Key Information Document (KID), including a presentation of the product, its risks and returns, and its costs.
Furthermore, given that online distribution is an important feature of the PEPP, the Commission stresses that it is particularly important that consumers can easily access, understand, and use the information presented in a digital environment.
For example, the text sets out requirements to ensure that information presented by digital means (website, mobile application, audio or video) is the same as that presented in the paper version of the KID and is equally effective and transparent.
There are also requirements to ensure that information is provided in a standardised manner that facilitates comparability between investment options.
The text also seeks to ensure that risk and potential return are displayed in a manner that is “accurate, fair, clear, and not misleading”.
The design of the overall risk indicator should also make it possible to distinguish between “superior” and “inferior” investment strategies and risk mitigation techniques so that consumers have the information they need to know whether a riskier investment option actually offers the potential for relatively higher returns, the text says.
The Commission also recognizes that projections of future retirement income are important for consumers to understand the PEPP and its relevance to individual retirement goals. Thus, it believes that the KID should present the results of inflation-adjusted pension returns.
The text also clarifies how costs and charges are to be presented and what types of costs and charges are to be included in the 1% ceiling for the default investment option (‘Basic PEPP’).
Unless the European Parliament and the EU Council object, the text will be deemed adopted within three months. See the delegated regulation: http://bit.ly/3p9ixda (Marion Fontana)