By Sebastiaan Niels Hooghiemstra

Currently, there is a dynamic and ongoing improvement in life expectancies that is not accounted for in pension systems designed to provide financial security in retirement. All over Europe, there are currently employment-based (2nd pillar) pension funds and first pillar pay-as-you-go (PAYG) state pensions systems that are facing huge funding deficits as a result of that. Recently both the EU parliament and the EU Council took their stance on the introduction of an European legal framework for Pan-European Personal Pensions (“PEPP”) an “European 401(k) account” that may prospectively be provided by, amongst others, banks, fund managers, and insurance companies. The introduction of the PEPP could potentially be a solution to mitigate the growing challenge of this so-called “pension gap”, i.e. the gap in savings most people have to ensure they have a good standard of living in retirement. Over the next months the EU parliament and EU Council will be exchanging on how to combine their perspectives in view of a final vote for the introduction of a Pan-European Pension Product Regulation (“PEPPR”). In anticipating a final vote, this contribution discusses the huge opportunity that the introduction of a PEPPR offers to the Luxembourg fund industry. For that purpose, this contribution first provides an overview of the PEPP as a “wrapper (Fund) product”.

Source: SSRN