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Main features PEPP

What is the pan-European personal pension product (PEPP)?

An EU-wide voluntary personal pension product which takes into account environmental, social and governance (ESG) factors and whose portable and long-term retirement nature is designed to be particularly attractive to young people and mobile workers among the EU’s citizens.

A personal pension product which is subject to a contract concluded voluntarily between the PEPP saver and the PEPP provider (the ‘PEPP contract’) and which is complementary to existing statutory and occupational pension schemes – in Slovakia comprising the first pillar (pay-as-you-go), second pillar (old-age pension scheme) and the third pillar (supplementary pension scheme). The PEPP does not replace but rather complements national personal pension products or schemes in the European Union. It involves long-term capital accumulation for retirement provision, with limited possibilities for early withdrawal.

Who is the PEPP intended for and who can be a PEPP saver?

The PEPP is an INDIVIDUAL pension product, which means that:

  • PEPP savers are natural persons who conclude a PEPP contract with a PEPP provider;
  • it is a non-occupational pension product;
  • it is a voluntary product and the PEPP savers themselves assess their ability to bear the investment risk;
  • the amount of contributions to the PEPP is not restricted.

For PEPP savers there are two principle phases:

Accumulation phase

The period during which assets are accumulated in a PEPP account and ordinarily running until the decumulation phase starts. This is the phase where PEPP savers pay their contributions, and the savings in their PEPP account earn investment returns for the saver under the management of the PEPP provider.

Decumulation phase

The period during which assets accumulated in a PEPP account may be drawn upon to fund retirement or other income requirements. Out-payments to PEPP savers may be in the following forms:

  • an annuity – a sum payable at specific intervals over a period, such as the PEPP beneficiary’s life or a certain number of years;
  • a lump sum
  • drawdown payments – discretionary amounts which PEPP beneficiaries may draw up to a certain limit on a periodic basis;
  • a combination of the above forms.

Advantages of the PEPP

Within a framework of EU-wide application:

  • Simplicity – in the case of the Basic PEPP, representing the default investment option, there is a precisely defined investment strategy;
  • Safety – the Basic PEPP features precisely defined risk mitigation techniques (for a systematic reduction in the extent of exposure to a risk) or the provision of a guarantee on the capital.
  • Affordability – costs and fees for the product are capped and may be even lower owing to lower-cost distribution of the product via websites.
  • Transparency – there are clearly stated rules for the provision of pre-contractual information to prospective PEPP savers about all aspects of the product, including past performance of the investment option and product costs, in language that is clear, succinct and comprehensible for the saver.
  • Sustainability of investments – environmental, social and governance (ESG) factors are integrated into the PEPP investment policy, thereby supporting green investment and precluding investment in the arms industry and tobacco products.
  • EU-wide portability – PEPP savers have the right to use a portability service which gives them the right to continue contributing to their existing PEPP account after changing their residence to another EU Member State and which allows them to retain all advantages and incentives granted by the PEPP provider and connected with continues investment in their PEPP.

PEPP saver protection

The activities of PEPP providers are subject to supervision and monitoring by national supervisory authorities as well as to monitoring by EIOPA, which will maintain a central public register of PEPP providers.