SECTION I — Investment rules for PEPP providers
Investment rules
1. PEPP providers shall invest the assets corresponding to the PEPP in accordance with the ‘prudent person’ rule and in particular in accordance with the following rules:
(a)
the assets shall be invested in the best long-term interests of PEPP savers as a whole. In the case of a potential conflict of interest, a PEPP provider, or the entity which manages its portfolio, shall ensure that the investment is made in the sole interest of PEPP savers;
(b)
within the prudent person rule, PEPP providers shall take into account risks related to and the potential long-term impact of investment decisions on ESG factors;
(c)
the assets shall be invested in such a manner as to ensure the security, quality, liquidity and profitability of the portfolio as a whole;
(d)
the assets shall be predominantly invested on regulated markets. Investment in assets which are not admitted to trading on a regulated financial market shall be kept to prudent levels;
(e)
investment in derivative instruments shall be possible insofar as such instruments contribute to a reduction in investment risks or facilitate efficient portfolio management. Those instruments shall be valued on a prudent basis, taking into account the underlying asset, and included in the valuation of a PEPP provider’s assets. PEPP providers shall also avoid excessive risk exposure to a single counterparty and to other derivative operations;
(f)
the assets shall be properly diversified in such a way as to avoid excessive reliance on any particular asset, issuer or group of undertakings and accumulations of risk in the portfolio as a whole. Investments in assets issued by the same issuer or by issuers belonging to the same group shall not expose a PEPP provider to excessive risk concentration;
(g)
the assets shall not be invested in a non-cooperative jurisdiction for tax purposes identified in the applicable Council’s conclusions on the list of non-cooperative jurisdictions for tax purposes, nor in a high-risk third country with strategic deficiencies identified by the applicable Commission Delegated Regulation adopted on the basis of Article 9 of Directive (EU) 2015/849;
(h)
the PEPP provider shall not expose itself and the assets corresponding to the PEPP to risks stemming from excessive leverage and excessive maturity transformation.
2. The rules set out in points (a) to (h) of paragraph 1 apply only to the extent that there is no more stringent provision in the relevant sectorial law applicable to the PEPP provider.
SECTION II — Investment options for PEPP savers
General provisions
1. PEPP providers may offer up to six investment options to PEPP savers.
2. The investment options shall include the Basic PEPP and may include alternative investment options.
3. All investment options shall be designed by PEPP providers on the basis of a guarantee or risk-mitigation technique which shall ensure sufficient protection for PEPP savers.
4. Provision of guarantees shall be subject to the relevant sectorial law applicable to the PEPP provider.
5. PEPP providers referred to in points (c), (d), (e) and (f) of Article 6(1) may offer PEPP with a guarantee only by cooperating with credit institutions or insurance undertakings that can provide such guarantees according to the sectorial law applicable to them. Those institutions or undertakings shall be solely liable for the guarantee.
Choice of investment option by the PEPP saver
Having received the relevant information and advice, the PEPP saver shall choose an investment option when concluding the PEPP contract.
Conditions for modification of the chosen investment option
1. If the PEPP provider provides alternative investment options, the PEPP saver, while accumulating in the PEPP, shall be able to choose a different investment option after a minimum of five years from the conclusion of the PEPP contract and, in the case of subsequent changes, after five years from the most recent change of investment option. The PEPP provider may allow the PEPP saver to modify the chosen investment option more frequently.
2. The modification of the investment option shall be free of charge for the PEPP saver.
The Basic PEPP
1. The Basic PEPP shall be a safe product representing the default investment option. It shall be designed by PEPP providers on the basis of a guarantee on the capital which shall be due at the start of the decumulation phase and during the decumulation phase, where applicable, or a risk-mitigation technique consistent with the objective to allow the PEPP saver to recoup the capital.
2. The costs and fees for the Basic PEPP shall not exceed 1 % of the accumulated capital per year.
3. In order to ensure a level playing field between different PEPP providers and different types of PEPPs, EIOPA shall develop draft regulatory technical standards specifying the types of costs and fees referred to in paragraph 2, having consulted the other ESAs where applicable.
When developing the draft regulatory technical standards, EIOPA shall take into account the various possible types of PEPPs, the long-term retirement nature of the PEPP and the various possible features of the PEPPs, in particular out-payments in the form of long-term annuities or annual drawdowns until at least the age corresponding with the average life expectancy of the PEPP saver. EIOPA shall also assess the peculiar nature of the capital protection with specific regard to the capital guarantee. EIOPA shall submit those draft regulatory technical standards to the Commission by 15 August 2020.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1094/2010.
4. Every two years from the date of application of this Regulation, the Commission shall, after having consulted EIOPA and, where applicable, the other ESAs, review the adequacy of the percentage value referred to in paragraph 2. The Commission shall, in particular take into account the actual level and changes in the actual level of costs and fees and the impact on the availability of PEPPs.
The Commission is empowered to adopt delegated acts in accordance with Article 72 to amend the percentage value referred to in paragraph 2 of this Article in the light of its reviews with a view to allowing appropriate market access for PEPP providers.
Risk-mitigation techniques
1. The use of risk-mitigation techniques shall ensure that the investment strategy for the PEPP is designed in order to build up a stable and adequate individual future retirement income from the PEPP and to ensure a fair treatment of all generations of PEPP savers.
All risk-mitigation techniques, whether applied under the Basic PEPP or for the alternative investment options, shall be sound, robust and consistent with the risk profile of the corresponding investment option.
2. The applicable risk-mitigation techniques may include, inter alia, provisions:
(a)
for gradually adapting the investment allocation to mitigate the financial risks of investments for cohorts corresponding to the remaining duration (life-cycling);
(b)
establishing reserves from contributions or investment returns, which shall be allocated to PEPP savers in a fair and transparent manner, to mitigate investment losses; or
(c)
for using appropriate guarantees to protect against investment losses.
3. In order to ensure the consistent application of this Article, EIOPA shall, after consulting the other ESAs, and after conducting industry testing, develop draft regulatory technical standards specifying the minimum criteria that the risk-mitigation techniques have to satisfy, taking into account the various types of PEPPs and their specific features, as well as the various types of PEPP providers and the differences between their prudential regime.
EIOPA shall submit those draft regulatory technical standards to the Commission by 15 August 2020.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1094/2010.
SECTION III — Other aspects of the accumulation phase
Conditions related to the accumulation phase
1. The conditions related to the accumulation phase of the national sub-accounts shall be determined by Member States unless they are specified in this Regulation.
2. Such conditions may include in particular age limits for starting the accumulation phase, minimum duration of the accumulation phase, maximum and minimum amount of contributions and their continuity.
Source: EUR-Lex (Publications Office of the EU), © European Union, reuse permitted under Commission Decision 2011/833/EU.
