At the end of March 2022, the so-called “Pan-European Personal Pension Product” (PEPPs), which constitute a common voluntary cross-border pension savings market, came into effect in Europe. Europe thus continues to expand individual funding to ease pressure on the public finances of its member States faced with rapidly aging populations, and to achieve pension systems that are more financially sustainable and provide better pensions for their workers.

The PEPPs, which can be established in any of the Member States of the European Union (EU) or the European Economic Area (EEA) and are accessible to all their citizens (whether dependent or self-employed), are a new option for citizens to actively save for retirement, encouraging voluntary private savings and complementing the sources of income for withdrawal from the ailing PAYGO systems and the mandatory individually funded occupational systems.

One of the advantages of PEPPs is that in addition to addressing the long-term sustainability of public PAYGO pension systems in EU countries, it will benefit workers through more portability options, greater competition, and more transparent and flexible product options, at a limited cost. Pension providers will also benefit from a single market and more efficient cross-border distribution, enabling them to create economies of scale. Finally, these products will contribute to channeling more savings towards capital markets and providing additional capital for long-term investment in the real economy, thus promoting higher economic growth in the EU.

Considering population aging in other continents, the unsustainability of public PAYGO pension systems and the need for greater savings to finance adequate pensions, one would imagine that future public policymakers would address the feasibility of establishing a common market for voluntary cross-border pensions in other jurisdictions.

To review the full Pension Note, click here.