The European Commission has adopted a package of measures to help citizens secure adequate income in retirement by improving access to better and more effective supplementary pensions.
“Our goal is clear: everyone should be able to maintain good standard of living in retirement,” said Financial services Commissioner Maria Luís Albuquerque: “This is why we have adopted a comprehensive approach to strengthen supplementary pensions to complement, not replace, public pensions.”
In light of demographic shifts and labour market dynamics, which require pension systems to adapt, the Commission says supplementary pensions – both occupational and personal pension schemes – can help citizens achieve more diversified retirement income, enhancing financial security and stability when retiring.
They can complement the benefits of public pensions which in many cases will not be sufficient to maintain adequate living standards, especially among vulnerable people and women, where the gender pension gap between men and women currently stands at 24.5%.
Recommendation on pension tracking systems, pension dashboards, and auto-enrolment into supplementary pension schemes
The Commission recommends that Member States:
- Implement auto-enrolment i.e. the automatic inclusion of workers in supplementary pensions, with the full freedom for individuals to opt out. This will be guided by existing good practices in the EU and lessons learned from other countries.
- Further develop comprehensive pension tracking systems to provide citizens with a clear overview of their pension rights and projected benefits across all pensions schemes.
- Develop national pension dashboards, for Member States’ policymakers to have a better view of the coverage, sustainability and adequacy of their multi-pillar pension system.
Legislative proposal to amend the Directive on Institutions for Occupational Retirement Provision (IORP) II
The IORP II Directive set common EU standards to ensure sound management and supervision of IORPs, while respecting the role of social partners. However, many schemes remain too small to diversify their investments and deliver optimal outcomes for savers.
To unlock the potential of occupational pensions, the Commission proposes to strengthen and modernise the framework to better support efficiency, scale and trust in supplementary pensions.
The review enhances the protection of savers and removes barriers to market-driven consolidation and other forms of fostering economies of scale. These measures will help IORPs to operate more efficiently, reduce costs, diversify their investments portfolios including in equity, to deliver stronger returns on citizens’ savings. This also contributes to increased financing opportunities for European companies.
Legislative proposal to amend the Pan-European Personal Pension Product (PEPP) Regulation
The review of the PEPP Regulation seeks to make the Pan-European Personal Pension Product (PEPP) a more attractive, accessible and cost-effective option for savers. It will remove existing requirements and design features that have hampered the take-up of the PEPP, while at the same time continuing to ensure a high level of consumer protection.
The review introduces an affordable and easily accessible “Basic PEPP”, invested in simple financial assets and offered to the public without advice. Savers will also have access to “tailored” PEPPs that may include guarantees and more complex assets, requiring advice to ensure their consumer understanding. As a result, the PEPP will be adaptable to different investor preferences and suitable for various types of providers, including asset managers and insurers. The PEPP will also be open to workplace use and could serve as an auto-enrolment vehicle, where this is allowed under national law and fully respects the prerogatives and autonomy of social partners.
Those changes will ease barriers to provision and distribution, broaden choice for savers, supported by favourable and consistent tax treatment, as Member States will be required to offer comparable tax treatment between national personal pension products.
