The European Commission has adopted a package of measures to boost supplementary pensions, with the aim of ensuring that EU citizens can secure an adequate retirement income and maintain a decent standard of living after retirement. The proposals do not replace public pensions, which remain the basis of national systems, but complement them by expanding access to occupational and personal pension schemes.
The package is part of the Savings and Investment Union (SIU) strategy, which aims to give households more opportunities to create wealth through capital markets, while boosting the EU's growth and competitiveness.
The Commissioner for Financial Services and the Savings and Investment Union, Maria Luis Albuquerque, said the goal is "for everyone to be able to maintain a good standard of living in retirement", underlining that the measures strengthen supplementary pensions to complement public pensions and give Europeans "the tools to plan their old age better and confidently", while freeing up new sources of financing for the EU economy.
Demographic ageing and the need for supplementary income
The Commission notes that the demographic landscape is changing radically: the population is ageing, the labour force is shrinking and informal employment is increasing. Public pension systems continue to be the backbone of pensions in the Member States, but the pressure on their sustainability is increasing.
In this context, supplementary pensions – occupational and individual – are becoming increasingly important. The Commission notes that they can help pensioners maintain a decent standard of living by complementing state benefits.
However, the supplementary pension sector remains underdeveloped in many Member States. According to EIOPA, only 20% of Europeans participate in occupational pension schemes and only 18% have a personal pension product. This leaves a large part of the population exposed to the risk of a significant reduction in their income after retirement.
The Commission believes that a more developed sector of supplementary pensions can enhance the financial security of citizens and at the same time supply European capital markets with long-term capital, financing growth and innovation.
What does the supplementary pension package provide?
The package aims to expand and strengthen the supplementary pension sector to ensure adequate retirement income. Includes:
1. Recommendation to Member States on three policy strands:
- Pension tracking systems:
Online platforms that will offer citizens a unified picture of their pension rights and the benefits provided, in all pillars (public, occupational and personal pensions). The aim is to enhance transparency and encourage better retirement planning. The Commission recommends that these systems should operate at national level and be provided free of charge to citizens. - Pension dashboards:
Tools for policymakers and stakeholders to consolidate key indicators such as coverage, contributions, pension income and fiscal costs. The national matrices will feed into an EU-wide matrix, facilitating comparison, mutual learning and reform planning. - Auto-enrolment in supplementary pension schemes:
Employees will be automatically enrolled in supplementary schemes, with the right to opt out if they wish. The Commission notes that automatic enrolment has proven to be effective in countries such as the United Kingdom and New Zealand, increasing participation, especially among women, young workers, low-wage earners, part-time workers and the self-employed.
2. Two legislative proposals in the financial sector:
- Revision of the Institutions for Occupational Retirement Provision Directive (IORP II/IORP II): The
aim is to make IORPs more efficient and on a larger scale, removing unjustified restrictions on investment, under enhanced supervision. It is provided for:- simplification of cross-border procedures;
- facilitating mergers or consolidation of funds;
- strengthening governance and risk management rules;
- stricter licensing and supervision procedures;
- regular stress tests.
The aim is to reduce costs, increase investment diversification – including equity investments – and strengthen member confidence.
- Revision of the Pan-European Personal Pension Products (PEPP) Regulation:
The Commission is seeking to make the PEPP more attractive and accessible. Proposed:- greater flexibility for providers;
- lifting the strict 1% cost cap;
- simplification of design and distribution requirements;
- better tax treatment so that the PEPP is treated on an equal footing with national personal pension products;
- Adjusting the frame to be suitable for workspaces and auto-recording schemes as well.
In parallel, the package is accompanied by a Commission Communication clarifying the "prudent person principle" for those managing pension assets, so as not to discourage investments in equity and long-term assets.
Who benefits and how
In the Commission's view, society as a whole should benefit.
- Citizens and households:
They will have more opportunities to increase their retirement income, greater financial security and more diversified sources of income in retirement. Particular emphasis is placed on groups with low supplementary pension coverage, such as women, younger workers, part-time workers, low-wage earners and self-employed. The Commission points out that the gender pension gap currently stands at around 24.5%. - EU economy and capital markets:
Stronger supplementary pension schemes can mobilise long-term savings for productive investment, enhancing competitiveness, innovation and job creation. They can also help finance strategic priorities such as the green transition, technological innovation, as well as security and defence. - Public pension systems:
More developed supplementary pensions can reduce pressures on the sustainability of state pensions, as more citizens will have supplementary incomes.
Role of the EU and national competence
The Commission stresses that pensions and the structure of pension systems remain a national competence. The package of measures does not change this framework. Member States retain the responsibility to organise their own supplementary pension schemes and to ensure citizens' access to them.
The EU's role is mainly supportive:
- providing guidance and best practices;
- establishing common standards through the IORP II Directive and the PEPP Regulation;
- transparency and comparability between systems.
The Commission underlines that there is no "typical" European pension system, nor a one-size-fits-all solution. For this reason, the Recommendation leaves flexibility for Member States to adapt the measures to domestic circumstances.
Monitoring, Evaluation and Next Steps
The Commission will monitor the implementation and effectiveness of the measures through:
- European Semester,
- the SIU Strategy monitoring procedures;
- Eurogroup framework and national reform plans.
The revision of the PEPP Regulation and the IORP II Directive will proceed through the legislative process, with the proposals being forwarded to the European Parliament and the Council for discussion and adoption.
The Commission will encourage Member States to report on the implementation of the Recommendation and comprehensively assess progress in the context of the mid-term review of the Savings and Investment Union Strategy in 2027.
