Sorry I don't have an answer for you, hopefully someone with either GDPR or regulatory expertise will reply.
Is the reason why they are asking for separation of personal identification Information (PII) is that when the retention time is reached or when the retention of PII is no longer necessary (under the terms of retention as per GDPR), that this PII data will be destroyed because there is no longer a GDPR reason for retention? Separating or flagging PII data, will make it more efficient to find and remove when the time comes.

It could also be that they want to make sure that PII data is fully respected with regard to compliance with legal data protection requirements, when other data may not have such exacting requirements. That would assume that there was more than one standard for care or data in the archive and usually there is just one standard applied across all data/records as this is usually easier to implement and police.

I hope you get an answer