Pan European Pension Product (PEPP)
In March 2022, a new European pension solution will come into effect: the Pan European Pension Product, abbreviated as PEPP. It is eagerly awaited by expats, the self-employed and employees alike. The PEPP makes the different pension schemes in different Member States a thing of the past.
What exactly is the PEPP?
The new PEPP supplements current pension rules at national and EU level. This new PEPP pension product provides the option of adding extra pension savings to one’s current pension. The pension product is somewhat similar to an individual annuity.
Both EU citizens and citizens of other countries can now save for their old age digitally online via a PEPP, regardless of where they live or work. The PEPP makes complicated and costly value transfers when changing jobs or professions a thing of the past. An international company employing many expats can now also arrange a PEPP for its employees.
The advantages of the PEPP
- The PEPP is a simple, transparent and inexpensive pension product. It does not contain complicated redistribution or spreading mechanisms, as is often the case with pensions.
- 99% of the PEPP is incorporated in a harmonised EU Regulation. This means that it is independent of the legal systems of the EU Member States. The PEPP means that any difficulties that may arise between cross-border pension institutions, such as between the Netherlands and Belgium or conflicts between legal systems, will hardly occur at all.
- The PEPP is also a welcome improvement in terms of the transferability of pension entitlements and the right of ownership. PEPP providers provide a ‘portability service’ to PEPP savers. A PEPP provider, for example a bank, may have several national sub-funds. These are personal ‘pension account numbers’ that are in the name of the PEPP saver. This means that the savings accrued by a PEPP saver can easily be transferred to another Member State without having to switch to another PEPP provider.
- The PEPP is not only good for expats, but also for Europe. Once savers become familiar with it, the PEPP will help to address the problems that Europe’s huge ageing population is causing to existing systems and public finances of the Member States.
I am happy to help you make the right choice. I am ready to answer questions like: can I combine my different pension assets in the PEPP? Which type of PEPP is best for me given my personal or business circumstances? Which provider should I choose? What about the tax regime? I am also happy to guide you through the further process if you or your employer are interested in arranging a PEPP. Do you have any questions? Please do not hesitate to contact me.
Hans works as a lawyer within the Employment & Pension law department at GMW lawyers.