The European Commission has proposed a set of measures designed to help ensure that EU citizens can save effectively, in order to maintain a good standard of living after retirement. The proposals, which are in line with the objectives of the savings and investments union (SIU) strategy, aim to expand and strengthen the supplementary pensions sector. The goal is that supplementary pensions – both occupational and personal pension schemes – act as a complement to, not a replacement of, public pensions.
Demographic and labour market changes
Pension systems play an important role in society ensuring people have sufficient income in retirement to maintain good standard of living. But demographic changes and shifting labour market dynamics are leading to new challenges across the EU. People are living longer and have more diverse careers than the ‘job‑for‑life’ model of previous generations. So, new ways to save for retirement are becoming increasingly necessary – and supplementary pensions can play an important role.
What is the Commission proposing?
The package of measures includes a Commission Recommendation, two legislative proposals, and also clarifies the ‘prudent person principle’.
Recommendation on pension tracking systems, pension dashboards, and auto‑enrolment
The EU continues to have low levels of participation in supplementary pensions, often because people don’t have a clear awareness and understanding of their future pension. So, the Commission is recommending that Member States further develop comprehensive pension tracking systems, to provide citizens with a clear overview of their pension rights and projected benefits across all pensions schemes. It also recommends that EU countries develop national pension dashboards, which will give policymakers a better overall view of the sustainability and adequacy of the pension system, including public pensions, and help guide so that policymakersthem in their decisions, citizens and stakeholders can get a better overall view of the sustainability and adequacy of their pension system. Finally, the Commission recommends that Member States adopt auto‑enrolment, which means that workers are automatically included in supplementary pensions, while still having the possibility to opt out. Previous experience in some EU countries has shown that this helps increase participation because people tend to remain enrolled in the pension scheme.
Legislative proposal to amend IORP II
To unlock the potential of occupational pensions, the Commission wants to amend the Directive on Institutions for Occupational Retirement Provision (IORP) II, in order to strengthen and modernise the framework. This will help IORPs operate more efficiently, reduce costs, and diversify their investment portfolios including in equity, in order to deliver stronger returns on citizens’ savings. It will also help increase citizens’ trust in occupational pensions by improving transparency, information and accountability.
Legislative proposal to amend PEPP
The review of the Pan‑European Personal Pension Product (PEPP) Regulation aims to remove certain 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 changes, which will ease barriers to provision and distribution, and broaden choice for savers and ensure consistent tax treatment between PEPP and national personal pension products, should make the PEPP a more attractive and accessible option for both savers and providers.
Clarifying the prudent person principle
The proposals clarify the standard for those managing pension schemes’ assets (the prudent person principle) to ensure that equity investments are not discouraged. This will help citizens earn higher long‑term returns on their savings and free up new sources of financing for the EU economy. governs how IORPs and PEPP providers should invest and manage their asset portfolios. However, this principle has been interpreted and implemented very differently across Member States, which has often left pension schemes constrained in their ability to diversify investments, in particular in equity. The Commission has provided clarification regarding the principle, with the aim of increasing investment into equity – both private and listed – in order to help citizens earn higher long‑term returns on their savings and free up new sources of financing for the EU economy.
What happens next?
The proposals to amend the PEPP Regulation and IORP II Directive will now have to be negotiated and agreed by the European Parliament and the Council. The Commission will monitor the implementation of the Recommendation at national level and promote the exchange of experience and best practices between Member States.
Related links
Legislative package to boost supplementary pensions
Occupational pension funds
Pan-European personal pension product
Savings and investments union
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