1.   When using a risk-mitigation technique that establishes reserves from PEPP savers’ contributions or investment returns, the PEPP providers shall set out in the PEPP contract, in a transparent and comprehensible manner, the allocation rules of the accumulated capital and the investment returns to the individual PEPP saver’s account, to and from the reserves, and, if applicable, to the corresponding group of PEPP savers.

2.   The PEPP provider shall allocate contributions and investment returns of the earmarked assets to the reserves in a transparent and comprehensible manner, with the objective of building adequate reserves in times of positive investment returns. Equally, the PEPP provider shall allocate from the reserves to the individual PEPP saver’s account and, if applicable, to the corresponding group of PEPP savers, in a fair and transparent manner, in times of negative investment returns.

3.   The PEPP provider shall clearly identify and earmark the assets invested for the PEPP savers. The PEPP provider shall not be able to trade assets on its own account with the assets earmarked for the PEPP savers.

4.   In the first 10 years of the establishment of a new PEPP, the PEPP provider may contribute to the establishment of the reserves by providing a loan or an equity investment to the PEPP savers’ assets. In that case, the PEPP provider shall specify and present in a transparent and comprehensible manner in the PEPP contract the terms and conditions of its contribution and profit sharing, as well as the pattern of the gradual dis-investment over the maximum period of 10 years.