Commission proposes to promote supplementary pensions to secure retirement income

The European Commission adopted on 20 November a package of measures to help citizens obtain an adequate income in retirement through better access to better and more efficient supplementary pensions. The aim is to complement, not replace, public pensions, which form the basis of pension systems in all Member States.

The adopted package is part of the Commission’s Strategy for a Savings and Investment Union (SIAU), which aims to create more opportunities for households to increase their wealth through capital markets while stimulating economic growth and EU competitiveness.

In the light of changing demographics and labour market dynamics, which require the adaptation of pension systems, supplementary pensions, whether occupational or individual pension schemes, can help citizens to obtain a more diversified retirement income and thereby achieve greater financial security and stability in retirement. They can also complement public pension benefits, which in many cases will not be sufficient to maintain an adequate standard of living, especially among vulnerable people and women, as the gender pension gap between women and men currently stands at 24.5%.

Stronger and more efficient supplementary pension schemes can also contribute to Europe’s economic growth and competitiveness by mobilising long-term savings for productive investments.

The objective of the proposed measures is to increase both the demand for and the supply of supplementary pensions. The initiatives fully respect Member States’ competences for the organisation and planning of their national pension systems, as well as the autonomy of the social partners when they are responsible for setting up and managing pension schemes.

This package complements and builds on other Savings and Investment Union initiatives announced so far by the Commission, such as those on financial literacy and the Recommendation on savings and investment accounts, which together aim to improve the financial well-being of EU citizens, including by widening the options to get a better return on their savings.

Proposed measures

Recommendation on pension tracking systems, pension scoreboards and automatic enrolment in supplementary pension schemes

The Commission recommends the following to the Member States:

1. Implement, in line with national circumstances and in full respect of the role and autonomy of social partners and collective bargaining prerogatives, automatic enrolment of workers in supplementary pensions, with full freedom for individuals to opt out. Existing EU best practices and lessons learned from other countries will serve as a guide. This is a way to increase participation in supplementary pension schemes and unlock supplementary pension markets on a larger scale.
2. Promote comprehensive pension tracking systems to provide citizens with a clear view of their pension entitlements and benefits across pension schemes. Such tracking systems will help to address the problem of low participation in supplementary pensions, often due to citizens’ lack of information about their future pension. They should be compatible with the European Pension Tracking Service and support cross-border mobility.
3. Create national pension scoreboards to give policy makers in Member States a better picture of the coverage, sustainability and adequacy of their multi-pillar pension system. These national scoreboards would ultimately feed into an EU-level pension scoreboard.

Legislative proposal to amend the IORP II Directive

The IORP II Directive establishes common EU rules to ensure sound management and supervision of IORPs, while respecting the role of the social partners. However, many schemes remain too small to diversify their investments and deliver optimal results for savers.

To realise the potential of occupational pensions, the Commission proposes strengthening and modernising regulation to better support efficiency, scale and confidence in supplementary pensions.

The review strengthens the protection of savers and removes obstacles to market-led consolidation and other ways of fostering economies of scale. These measures will help IORPs to operate more efficiently, reduce costs and diversify their investment portfolios, including in equities, in order to offer a better return on citizens’ savings. This will also help to expand funding opportunities for the benefit of European companies.

Legislative proposal to amend the Regulation on Pan-European Individual Pension Products (PEPPs)

The revision of the PEPP Regulation aims to make the Pan-European Individual Pension Product (PEPP) a more attractive, accessible and cost-effective option for savers. It will remove existing requirements and design features that have hindered the take-up of the PEPP, while continuing to ensure a high level of consumer protection.

The revision introduces an affordable and easily accessible “core PEPP”, which is invested in simple financial assets and offered to the public without advice. Savers will also have access to “tailored” PEPPs, which may include more complex assets and collateral, requiring advice to ensure consumer understanding. As a result, PEPP will be adaptable to different investor preferences and tailored to different types of providers, e.g. asset managers and insurers. The PEPP can also be used in the workplace and could serve as a vehicle for automatic membership, where permitted by national law, while fully respecting the prerogatives and autonomy of the social partners.

These changes will alleviate barriers to supply and distribution and widen choice for savers, supported by favourable and consistent tax treatment, as Member States will be obliged to provide comparable tax treatment between national individual pension products.

Clarification of the prudent person principle:

The prudent person principle governs how IORP and PEPP providers should invest and manage their asset portfolios. However, this principle has been interpreted and applied very differently in different Member States, often limiting the ability of pension schemes to diversify investments, especially in equities. In line with the Strategy for a Savings and Investment Union, the Commission’s Communication adopted today clarifies this principle, with the aim of increasing investment in both private and listed equity to help people get a better long-term return on their savings and tap new sources of finance for the EU economy.

Next steps

Proposals to amend the IORP II Directive and the PEPP Regulation 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 through various mechanisms, including the European Semester. It will promote the exchange of experiences and best practices between Member States.

Background

These measures are in line with recent high-level policy statements. Several reports have also emphasised the crucial need to mobilise private capital for long-term investments. These include the statement of the Eurogroup in extended composition of March 2024, the European Council Conclusions of April 2024 and March 2025, the European Parliament’s Competitiveness Report of September 2025 and the Letta and Draghi reports. Given the long-term nature of pension liabilities, the supplementary pensions sector can be an essential potential provider of long-term capital for investment in the EU economy. In the Competitiveness Compass and the Savings and Investment Union (SIU) Strategy, the Commission committed to bring forward measures to tap this potential.

More information: European Commission