COMMISSION STAFF WORKING DOCUMENT Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL, THE COUNCIL, THE EUROPEAN CENTRAL BANK, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS Enhancing the capacity of the EU supplementary pension sector to improve retirement income and supply long-term capital to the EU economy
Date: 2025-11-20
Institutions: Directorate-General for Financial Stability, Financial Services and Capital Markets Union, European Commission
Subjects: capital market, demography, economic conditions, economic growth, investment, labour market, pension scheme, population ageing, risk management, social policy

   EUROPEAN COMMISSION  Brussels, 20.11.2025  SWD(2025) 367 final  COMMISSION STAFF WORKING DOCUMENT   Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL, THE COUNCIL, THE EUROPEAN CENTRAL BANK, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS Enhancing the capacity of the EU supplementary pension sector to improve retirement income and supply long-term capital to the EU economy {COM(2025) 839 final}  
 
 
Table of Contents 

GLOSSARY ............................................................................................................................................... 4 

1. 

INTRODUCTION: POLITICAL AND ECONOMIC CONTEXT ............................ 5 

2.  PROBLEM DEFINITION .......................................................................................... 8 

2.1 What are the problems? ......................................................................................... 8 
Small contribution of private savings to retirement income ....................... 8 
2.1.1 

2.1.2 A low contribution of savings channelled via capital markets to investment 
and productivity ......................................................................................................... 14 

2.2 What are the problem drivers? ............................................................................ 16 
2.2.1 Information gap in a complex decision environment ....................................... 17 

2.2.2 Behavioural bias towards procrastination and time inconsistency ................... 19 

2.2.3 Lack of attractive products ............................................................................... 21 

2.2.3.1 High fees leading to low returns  .................................................................. 22 

2.2.3.3 Conservative investment by pension providers ............................................. 26 

2.2.3.2 Many small providers serving a fragmented landscape ................................ 31 

2.3 Out-of-scope drivers ............................................................................................ 35 

2.4 How likely is the problem to persist? .................................................................. 36 

3.  WHY SHOULD THE EU ACT? .............................................................................. 36 

3.1 Legal basis ........................................................................................................... 36 
3.2 Subsidiarity: Necessity of EU action .................................................................. 37 
3.3 Subsidiarity: Added value of EU action .............................................................. 38 

4.  OBJECTIVES: WHAT IS TO BE ACHIEVED? ..................................................... 39 

4.1 General objectives ............................................................................................... 39 
4.2 Specific objectives............................................................................................... 40 
4.2.1  With  respect  to  increasing  participation  in  supplementary  pensions  to 
ensure adequate income in retirement ....................................................................... 40 

4.2.2 With respect to improving pension funds’ capacity to direct households’ 
savings into productive and innovative investment .................................................. 41 

5.  WHAT ARE THE AVAILABLE POLICY OPTIONS? .......................................... 42 

5.1 What is the baseline from which options are assessed? ...................................... 42 
5.2 Description of the policy options ........................................................................ 43 
5.2.1  With  respect  to  increasing  participation  in  and  transparency  of 
supplementary pensions to ensure adequate income in retirement ........................... 43 

5.2.2 Fostering access to attractive pension products ............................................... 56 

5.3 Options discarded at an early stage ..................................................................... 63 

6.  WHAT ARE THE IMPACTS OF THE POLICY OPTIONS? ................................. 64 

1 

 
 
6.1 Recommendation on pension tracking, pension dashboards and auto-enrolment

 ......................................................................................................................... 64 
6.1.1 Pension tracking ............................................................................................... 64 

6.1.2 Pension dashboards .......................................................................................... 66 

6.1.3 The possible impact of auto-enrolment ............................................................ 68 

6.2 IORP Review....................................................................................................... 72 
6.3 PEPP Regulation ................................................................................................. 74 

7.  HOW DO THE OPTIONS COMPARE? .................................................................. 77 

7.1 Pension Tracking Systems (PTS) ........................................................................ 77 
7.2 Pension Dashboards ............................................................................................ 78 
7.3 Auto-Enrolment (AE) .......................................................................................... 79 
7.4 IORP review ........................................................................................................ 81 
7.5 PEPP review ........................................................................................................ 82 

8.  PREFERRED OPTION ............................................................................................ 83 

8.1 The preferred policy measures ............................................................................ 84 
8.2 Interactions between the different policy measures ............................................ 86 
8.3 Expected effects of the pension package............................................................. 87 

9.  HOW WILL ACTUAL IMPACTS BE MONITORED AND EVALUATED? ....... 90 

ANNEX 1: STAKEHOLDER CONSULTATION ........................................................... 91 

ANNEX 2: WHO IS AFFECTED AND HOW? ............................................................ 104 

1.  EVIDENCE  ON  THE  IMPACT  OF  INTRODUCING  PENSION  TRACKING 

SYSTEMS ............................................................................................................... 106 

2.  THE 

IMPACT  OF  A  PENSION  DASHBOARD  ON  DIFFERENT 

STAKEHOLDERS.................................................................................................. 109 

3.  EVIDENCE ON THE IMPACT OF AUTO-ENROLMENT ................................. 109 

4.  QUANTITATIVE IMPLICATIONS OF THE INITIATIVE ................................. 124 

5.  SUMMARY OF COSTS AND BENEFITS ........................................................... 142 

ANNEX 3: ANALYTICAL METHODS ........................................................................ 145 

1.   A PRIMER ON THE PENSION STATISTICS USED .......................................... 145 

2.   PRINCIPAL CONSIDERATIONS ON THE RELATIONSHIP BETWEEN PAY-

AS-YOU-GO AND SUPPLEMENTARY PENSIONS .......................................... 146 

3.   REPLACEMENT RATES ...................................................................................... 148 

4.  LOW AND UNEQUAL ACCESS TO SUPPLEMENTARY PENSIONS ............ 149 

5.   EU INVESTOR BASE IN COMPARISON TO THE US ...................................... 152 

6.   THE FEES OF PENSION FUNDS AND PRODUCTS ......................................... 153 

7. 

 PROFITABILITY AND SCALE EFFECTS ......................................................... 155 

8.  

INVESTMENT DESTINATIONS AND HOME BIAS ......................................... 159 

9. DATA GAPS IN PENSION DASHBOARDS ........................................................... 161 

2 

 
ANNEX 4: COUNTRY-SPECIFIC INFORMATION ................................................... 164 

ANNEX 5: SUMMARY OF NATIONAL TAX TREATMENT PEPP ......................... 171 

3 

 
 
 
GLOSSARY 

Term or acronym 

Meaning or definition 

AE 

AE study 

AuM 

CFA 

ECB 

EIOPA 

ESMA 

ETF 

ETS 

IORP 

OECD 

PEPP 

PPP 

R&D 

SILC 

SIU 

UCITS 

Auto-enrolment 

European  Commission  (2021),  Best  practices  and 
performance of auto-enrolment mechanisms for pension 
savings, available at https://op.europa.eu/en/publication-
detail/-/publication/6f40c27b-5193-11ec-91ac-
01aa75ed71a1/language-en  

Assets under management 

Chartered Financial Analyst 

European Central Bank 

European 
Authority, located in Frankfurt 

Insurance 

and  Occupational  Pensions 

European  Securities  and  Markets  Authority,  located  in 
Paris 

Exchange Traded Fund 

European tracking services, a project that aims to connect 
national pension tracking services 

Institutions for occupational retirement provision 

Organisation 
Development 

for  Economic  Co-operation 

and 

Pan-European pension product 

personal pension products 

Research and Development 

Statistics on Income and Living Conditions 

Savings and Investments Union 

Undertakings  for  Collective  Investment  in  Transferable 
Securities, a special form of investment funds accessible 
to retail investors 

4 

 
 
 
• 

INTRODUCTION: POLITICAL AND ECONOMIC CONTEXT 

Across the EU, ageing populations increasingly put the sustainability of pension systems and 
the  adequacy  of  retirement  income  at  risk.  Moreover,  upon  continuation  of  past  trends, 
investment, innovation and therewith productivity growth in the EU would be insufficient to 
allow a declining working age population to cater for an increasing share of retirees. The EU 
needs to address these challenges so that people can maintain adequate living standards in the 
face  of  unfavourable  demographic  trends  and  subdued  economic  growth  and  productivity 
progress. The way the EU addresses these issues will have broader implications, shaping its 
ability to manage the unprecedented transformative challenges such as the green and digital 
transitions and geopolitical challenges in the decades ahead.  

The  pension  challenge  refers  to  the  problem  of  how  an  increasingly  larger  share  of  the 
population  can  maintain  adequate  living  standards  after  retirement.  Principle  15  (“Old  age 
income and pensions”) of the European Pillar of Social Rights, states that “workers and the self-
employed in retirement have the right to  a pension commensurate to their contributions and 
ensuring  an  adequate  income.  Women  and  men  shall  have  equal  opportunities  to  acquire 
pension  rights” (1).  Although  many  Member  States  have  carried  out  pension  reforms,  the 
working-age population will be under increasing pressure from the ‘double burden’ to finance 
the  growing  number  of  pensions  directly  through  higher  contributions  or  indirectly  through 
higher  tax  transfers  to  the  statutory  pension  system,  and,  in  addition,  to  save  for  their  own 
retirement. Reallocating part of their savings from low-yielding short-term financial assets into 
supplementary pensions (occupational and personal) and accomplishing higher returns, which 
are inherent to long-term savings, would help individuals achieve a higher retirement income 
(see Box 1 for the definition and delineation of supplementary pensions). 

The  Draghi  and  Letta reports  (2)  started  by  pointing  to  the  changing  demographic  context, 
stressing that in the face of a shrinking workforce, the EU needs much stronger productivity 
and  investment  growth  to  maintain  current  living  standards.  In  that  vein,  the  Draghi  report 
states: “The EU must also better channel households’ savings to productive investments. The 
easiest and most efficient way to do so is via long-term saving products (pensions). To increase 
the flow of funds into capital markets, the EU should encourage retail investors through the 
offer  of  second  pillar  pension  schemes,  replicating  the  successful  examples  of  some  EU 
Member  States” (3).  This  important  role  attributed  to  the  supplementary  pension  sector  is 
motivated  by  its  key  role  in  helping  convert  long-term  private  savings  into  productive 
investments  and  channelling  the  returns  generated  from  productive  investment  back  into 
households’ retirement savings.  

This  approach  is  largely  in  line  with  that  taken  by  the  European  Council.  In  its  April  2024 
conclusions, the European Council called for advancing the work on developing pensions and 
long-term  savings  products.  It  further  echoed  the  importance  of  greater  private  capital 
participation  to  support  the  digital  and  the  green  transitions,  and  to  stimulate  European 
businesses growth potential, and called on the Commission to advance work on greater retail 

1  The  European  Pillar  of  Social  Rights,  https://employment-social-affairs.ec.europa.eu/european-pillar-social-
rights-20-principles_en. 
2  Draghi,  M.  (2024),  ‘The  future  of  European  competitiveness’,  https://commission.europa.eu/topics/eu-
a  Market’, 
competitiveness/draghi-report_en; 
https://www.consilium.europa.eu/media/ny3j24sm/much-more-than-a-market-report-by-enrico-letta.pdf . 
3 See Draghi, M. (2024), ‘The future of European competitiveness’, part A, p.67. 

‘Much  More 

(2024), 

Letta, 

Than 

E. 

5 

 
 
participation  in  capital  markets,  including  via  pension  products,  in  its  20  March  2025 
conclusions. 

In  2019,  a  high-level  group  of  experts  on  pensions,  with  the  participation  of  social  partner 
representatives, provided policy advice on how supplementary pensions could contribute to the 
adequacy of old age incomes and how the supplementary pensions market could be developed 
in the EU (4). In 2025, the European Court of Auditors concluded that the EU was “not effective 
in  strengthening  occupational  pensions  and  establishing  a  pan-European  personal  pension 
product”, justifying its findings by the relevance of these pension schemes in contributing to 
adequate retirement income for EU citizens in the future (5).  

The  design  of  the  overall  pension  system  is  under  the  competence  of  Member  States.  They 
determine the role of public pensions, which in turn define in practice how much scope there is 
for supplementary pensions. This does not allow for one-size-fits-all policy proposals at EU 
level. Many Member States have introduced reforms of their pension systems or are planning 
to do so. However, this entails in several cases lower public pension replacement rates (6), a 
shift  from  defined  benefit  to  defined  contribution  schemes,  and/or  an  increase  of  the 
pensionable  age.  In  this  context,  the  role  of  occupational  and  personal  pension  schemes  in 
supplementing public ones becomes increasingly relevant to ensure the adequacy of the overall 
system for future incomes of retirees. 

While  supplementary  pensions  largely  fall  under  national  law,  EU  frameworks  such  as  the 
Institutions for Occupational Retirement Provision (IORP) II Directive (7), the Pan-European 
Personal  Pension  Product  (PEPP)  Regulation (8)  and  the  Directives  on  the  Safeguarding  of 
Supplementary  Pension  Rights (9)  and  on  Acquisition  and  Preservation  of  Supplementary 
Pension  Rights (10)  establish  important  common  standards  across  the  single  market  and 
facilitate  the  free  movement  of  workers.  Occupational  and  personal  pension  offer  has 
nevertheless remained predominantly national. In addition to PEPP, there are about 200 types 
of national pension products and schemes in the EU. Institutions providing personal pensions 
are not covered by IORP II. Many of them are insurance corporates that fall under Solvency II 

of 

on 

Level 

Forum 

the  High 

the  Capital  Markets  Union, 

4  Final  report  of  the  High  level  group  on  Pensions  (2019),  December  2019,  https://employment-social-
affairs.ec.europa.eu/policies-and-activities/social-protection-social-inclusion/social-protection/pensions_en. 
It 
advocated for Member States to “take a long-term and holistic approach to developing multi-tier pension systems, 
based on strong public pensions and acknowledging the specific roles of different types of schemes”. In view  of 
pension  inadequacy  risks,  the  High-level  forum on  the  Capital  Markets  Union  reasoned  in  2020  that  “A  more 
comprehensive view than currently available is needed to […] create a political setting that incentivises identifying 
and addressing shortcomings at Member States’ level”. See ‘A new Vision for Europe’s capital markets’, Final 
Report 
2020, 
https://finance.ec.europa.eu/publications/high-level-forum-capital-markets-union_en. 
5 European Court of Auditors (2024), ‘Developing supplementary pensions in the EU’, Special report 14/2025, 
https://www.eca.europa.eu/en/publications?ref=SR-2025-14. 
6 See annex 4.6. The replacement rate measures how effectively a pension system provides a retirement income to 
replace earnings, the main source of income before retirement, for example the OECD defines the “net pension 
replacement rate”  as  the  individual net  pension  entitlement  divided  by  net  pre-retirement  earnings,  taking  into 
account personal income taxes and social security contributions paid by workers and pensioners. 
7 Directive (EU) 2016/2341 on the activities and supervision of institutions for occupational retirement provision 
(IORPs) (recast). 
8 Regulation (EU) 2019/1238 on a pan-European Personal Pension Product (PEPP). 
9 Council Directive 98/49/EC on safeguarding the supplementary pension rights of employed and self-employed 
persons moving within the Community. 
10 Directive 2014/50/EU on minimum requirements for enhancing worker mobility between Member States by 
improving the acquisition and preservation of supplementary pension rights, 

June 

6 

 
 
(11), others under national rules (12). The table below shows a breakdown of available pension 
products and schemes by applicable EU law. 

Table 1: Number of pension products by applicable EU law/regulation 

In Member States 

Types of pension products/schemes 

IORP 
IORP combined with other 
Solvency II 
Solvency II combined with other 
national legislation 
other EU 
other 

22 
6 
16 
3 
18 
8 
1 

66 
19 
65 
10 
34 
16 
2 

Others are UCITS, AIFMD, CRD, i.e. rules that apply to investment funds and banks. 
Source: FISMA calculations with EIOPA’s pension product database. 

The new EU initiatives on supplementary pensions aim, above all, to encourage and to support 
the efforts of Member States for addressing the pension challenge. Policies on supplementary 
pensions at Union level are complementary to Member States’ measures and respect Member 
States’  competence  to  decide  on  the  organisation  of  their  multi-pillar  pension  systems, 
including the role of fiscal incentives, the autonomy and prerogatives of social partners.  

Jointly with the Member States, the Commission has monitored the adequacy and sustainability 
of pensions for more than a decade through the ageing and the pension adequacy reports (13). 
Legislative action at EU level has been limited to the few selected cases presented above. In 
her political guidelines 2024-2029, President von der Leyen announced that the Commission 
would propose a European Savings and Investments Union. She has also tasked in her mission 
letter to Commissioner Albuquerque, with working on the potential of private and occupational 
pensions to help EU citizens with their retirement and channel their savings into the economy. 
When the Commission set out its strategy on the Savings and Investments Union (SIU) in the 
19 March 2025 Communication, it noted the key role supplementary pensions could play in 
converting private savings into productive investments and channelling the returns generated 
from  productive  investments  back  into  households’  retirement  savings.  The  Commission 
announced  that  it  would  prepare  both  legislative  and  non-legislative  measures  to  further 
develop  the  supplementary  pension  sector  with  a  view  to  developing  capital  markets  and 
facilitating pension fund investment into equity and alternative asset classes by pension funds.  

Box 1: Definitions and delineations  

Pension systems across the European Union Member States differ in structure and relative importance 
of different types of pension schemes, or ‘pillars’. 

Statutory public pensions are the main source of old-age income for retired Europeans. These are 
financed from social security contributions or general taxation on a non-funded (‘pay-as-you-go’) 

11 Directive 2009/138/EC on the taking-up and pursuit of the business of Insurance and Reinsurance. 
12 Some pension funds that are comparable to occupational funds are outside IORP II, for example pension funds 
of liberal professions. 
13 They have provided an overview of the current and projected retirement income and economic and budgetary 
sustainability across the EU every three years since 2006 and 2012 respectively, with the latest releases in 2024. 

7 

 
 
 
basis. Several Member States have also introduced statutory funded pensions, where part of 
participants' social security contributions are converted into funded savings. 

Statutory  pensions  are  complemented  by  occupational  and  personal  pensions  of  strongly  varying 
magnitude and policy attention. The latter two are collectively referred to as “supplementary pensions”. 
Both  form  an  integral  part  of  the  multi-pillar  pension  system  present  in  the  EU  Member  States. 
Occupational pensions are collective pension schemes linked to an employment relationship  typically 
based on contractual agreements between employers and employees, or linked to a professional activity. 
Personal pensions are individual retirement plans managed by pension funds, insurance or investment 
companies, typically based on an individual contract with the saver, with more flexibility and investment 
options. Occupational pensions are the more important part of the two supplementary pension pillars in 
most Member States, but hardly existing in some others, implying that private pension savings in the 
latter  rely  strongly  on  personal  pension  schemes.  Both  types are mainly  funded  (i.e.  assets  backed), 
which means that their larger use would enable individuals to make better provisions for a more adequate 
income at retirement using long-term investment opportunities offered by capital markets.  

The different types of pensions are sometimes referred to as the ‘first’ (public), ‘second’ (occupational) 
and ‘third’ (personal) pillar; however, in several Central and Eastern European Member States the term 
‘second pillar’ refers to statutory funded pensions. Hence, terminological clarity is important in a cross-
country context. 

Pension products differ from other financial products that households can use to save for retirement in 
being  offered  by  financial  intermediaries  able  to  provide  professional  management  services  and 
sophisticated  risk  management  for  assets  that  are  tied  up  for  decades  and  diversified  investment 
strategies that can follow a life-cycle strategy to lock in gains and reduce risk towards pay out. They 
also differ in the payout phase if a form of an annuity is chosen or offered. The latter means the risks 
taken depend on the time until the expected pay-out. Prudential rules aim to ensure the reliability and 
financial  soundness  of  pension  providers,  including  that  pension  managers  follow  sound  investment 
strategies in the interest of their members, taking into account the high predictability of the contributions. 

2. 

PROBLEM DEFINITION   

2.1 What are the problems?  

The potential of supplementary pensions to address the pension challenge has so far remained 
unfulfilled.  While  supplementary  pensions  can  complement  public  pensions  in  supporting 
future retirement income and in intermediating finance into productive investment, this pension 
sector  is  currently  too  small,  and  the  offered  products  earn  mostly  too  low  returns  due  to 
predominately conservative investment strategies. 

▪  Small contribution of private savings to retirement income 

Demographic trends are one of the key causes of the pension challenge (14). The projected fall 
in the ratio of working-age to pension-age individuals is from 2.7 workers per pensioner in 2024 
in the EU to 2.2 by 2035 and 1.7 by 2070. This puts a growing strain on economic growth and 
social welfare policies. If left unaddressed, it will challenge the sustainability of public pension 
systems  and  the  adequacy  of  the  income  that  they  provide  to  retired  persons.  Measures  to 
stabilise  the  public  pension  system  through  higher  contributions  to  public  pensions,  higher 
retirement age to boost the number of contributors to the pension system or labour migration 
are out of the scope of this policy initiative. For the comparison of statutory with supplementary 
pensions, it is  however important  to  note that increasing  contributions  to the public pension 

14 See the European Commission’s ‘Demographic change in Europe: a toolbox for action’, COM/2023/577 final. 

8 

 
 
system levied on the younger generation bears the risk of disincentivising their labour supply 
if these contributions  are considered  a tax and not  as payment to  an actuarial  fair insurance 
scheme.  In  contrast,  contributions  to  supplementary  pensions  are  more  likely  to  incentivise 
young  workers  to  contribute,  as  they  see  direct  and  personalised  benefits  from  their 
participation (see Annex 2.4).  

The latest Ageing Report shows that public pension benefits will become less generous in many 
Member States. It projects that the public pension benefit ratio (average pensions to average 
wage) will decline from 43.8% to 35.6% and the gross replacement rate (pensions relative to 
pre-retirement wage) will decline from 43.4% to 38.2% in the EU by 2070 (Figure 2). Future 
replacement and benefit ratios are projected to be lower in most  Member States, though the 
national situations vary widely (15). 

Figure 1: Key demographic factors, Projections for the EU-
27 

Figure 2: Benefit ratio of public pensions, projections for 
the EU-27 and selected Member States 

Note: The benefit ratio describes the average public pension to average wage  
Source: Ageing Report 2024. 

The projected fall in replacement rates will affect different parts of the population differently. 
The risk is that the demographic pressure on pay-as-you-go (PAYG) pensions will reinforce 
today’s  challenges  to  balance  the  objectives  of  providing  actuarially  fair  payments  to  all 
contributors and delivering adequate pensions to those with special needs, for example those 
with  low  wage  income  or  career  interruptions  due  to  caregiving  activities.  Almost  20%  of 
people above 60 years old are at the risk of poverty. The gender pension gap stands at 25%, 
indicating  that  women’s  average  retirement  income  is  75%  compared  to  that  of  men.  The 
Commission’s  Pension  Adequacy  Report  demonstrates  trends  and  developments  at  granular 
level and different dimensions of adequacy across Member States. 

15 The 2024 ageing projections predict gross replacement rates to decline between 2024 and 2035 by more than 5 
%-pts in IT, LV, PL and SK and to increase by more than 5%-pts in CZ and CY. This compares to an EU average 
decline of 2.3%-pts. 

9 

 
 
 
 
 
According to the 2024 Pension Adequacy Report16, in the case of a standard, 40-year career, 
overall pension replacement rates are set to fall over the next four decades in most countries. 
Compared with the 2022 values, the 2062 values are lower in 21 countries, while being higher 
in only seven countries. One way of looking at this is to say that a 40-year career is less likely 
to lead to a higher pension for standard career in 2062 than it did in 2022. 

Figure 3: Net theoretical replacement rates (TRR17), base case (40 years to statutory pension age), average earner, 2022 and 
2062, men, pp, EU-27 Member States and Norway 

Citizens are increasingly aware of the pension challenge, and consequently sceptical about the 
adequacy of their retirement income (18). In a 2024 Eurobarometer, 28% of respondents replied 
that  they  were  'not  too  confident'  that  they  will  have  enough  money  to  live  comfortably 
throughout their retirement years and a further 25% feel 'not at all confident' (19).  

Access to supplementary pensions improves confidence. The share of respondents being not 
confident about their retirement income is at 58% among those that do not have supplementary 
pensions, compared to 43% that are enrolled in occupational pensions and 33% that have both 
occupational and personal pension products. Among those that own pension products, 40% of 
those with occupational pensions said that these are important or very important part of their 
retirement income and another 43% that these are rather important. For personal pensions, the 
corresponding numbers are 34% and 50%” (20).  

However, only a small share of the population uses supplementary pensions. Participation in 
supplementary pensions is still at a low level in the EU, notwithstanding that it has increased 

16  The  2024  Pension  Adequacy  Report,  current  and  future  income  adequacy  in  old-age  in the  EU,  joint report 
prepared by the Social Protection Committee (SPC) and the European Commission (DG EMPL). 
17  The  theoretical  replacement  rate  (TRR)  methodology,  based  on  stylised  cases  assuming  standardised  career 
profiles, make it possible to project how the income replacement capacity of pension could develop in the future 
by comparing income replacement rates after similar careers today and in 40 years from now. 
18 See EIOPA’s Consumer Trend reports 2022, 2023 and 2024. 
19  Replies  to  question  16  in  https://www.eiopa.europa.eu/document/download/dd67f6de-f4ed-4bde-b221-
8b1ec075b520_en?filename=Presentation%20-%20Eurobarometer.%20Consumer%20trends%202024%20-
%20IPSOS.pdf.   
20 This was asked in EIOPA’s 2022 Eurobarometer. 

10 

 
 
 
over the last two decades (21). The coverage varies across Member States and data sources (for 
variation across Member States, see Table 44 in Annex 3.4).  

–  Eurostat  reports  data  from  the  Labour  Force  Survey,  according  to  which  83%  of 
pensioners  (81%  of  males,  85%  of  females)  had  no  other  pension  than  a  statutory 
pension in 2023 (see Figure 4). A further 15% of pensioners received a statutory pension 
in  combination  with  an  occupational  and/or  personal  pension.  2.1%  received  an 
occupational or personal pension and no statutory pension (22).  
In EIOPA’s 2024 Eurobarometer, 20% of surveyed EU citizens report participating in 
an  occupational  pension  and  just  18%  own  a  personal  pension (23).  Ownership  of 
pension  products  was  smaller  among  retirees  at  17%  respectively  11%.  The  larger 
number  for  the  population  at  large  than  for  retirees  suggests  that  supplementary 
pensions have become more important over time.  

– 

–  When the participation rates are measured as the number of members of pension funds 
relative to population, for which data is available in EIOPA and the ECB, the rate is 
much higher for some Member States (Table 42 in Annex 3.4). The higher number is 
likely due to a sizeable number of people being member in more than one pension fund, 
for example in two different occupational pension funds after a change of job. 

Latvia 

Hungary, 

21 See  EIOPA’s 2024 Consumer trend report and the underlying data  to table 9.1 in OECD 2023 Pension at a 
Glance. 
22 While the share of pensioners receiving only statutory pensions was higher than 75% in all EU Member States 
except  Sweden,  the  Netherlands,  Denmark  and  Ireland,  was  is  particularly  high  at  above  98%  in  Romania, 
Bulgaria, 
https://ec.europa.eu/eurostat/statistics-
Cyprus. 
explained/index.php?title=Pensions_and_labour_market_participation_-
_main_characteristics#Most_people_received_only_the_statutory_old-age_pension. Data extracted in December 
2024. 
23 The unit responding in Eurobarometer is the household and not the individual person, which explains part of the 
difference to the labour force survey. Shares are slightly higher in a survey conducted by Invest Europe: 31% of 
respondents said they had an occupational pension plan, 28% a personal pension plan and 12% a national product. 
see, 
saving 
39% 
https://www.insuranceeurope.eu/mediaitem/ce4f9788-85f7-4c2b-8f02-
a0d0875421a3/Pension%20priorities%20in%20Europe%202023.pdf. 

among  which  44%  of  women 

and  34%  of  men. 

indicated  of  not 

and 

See 

11 

 
 
Figure 4: People receiving an old-age pension by type of pension in % of pension receivers, EU 2023  

Source: Eurostat (labour force survey). 

Quantifying the actual contribution of supplementary pensions to retirement income is possible 
for  only  a  few  Member  States.  Table  43  in  Annex  3.4  shows  data  on  the  amounts  saved  in 
supplementary pensions for all Member States from different statistical sources. 11 EU Member 
States provide a breakdown of their old-age benefit ratio between public and supplementary 
pensions (Figure 5) for the Ageing Report, yielding a significant contribution of the latter to 
retirement  income  for  only  Denmark,  Netherlands  and  Sweden.  Using  a  different  approach, 
namely by calculating how much the theoretical replacement would increase if supplementary 
pensions were added, OECD data allows for a more comprehensive coverage of Member States. 
Mandatory  public  pensions  deliver  a  replacement  rate  of  49.5%  for  a  person  that  earns  the 
average  income  in  the  EU-27.  Adding  the  contribution  from  supplementary  pensions  (both 
mandatory and voluntary) to the public replacement rate increases the gross replacement rate 
by 8%-pts to 57.8% in the EU (24). While there are notable differences across Member States, 
these figures highlight an uptake of supplementary pensions which is insufficient to effectively 
reduce pension gaps.  

24 OECD Pensions at a Glance, Table 4.2. OECD replacement rates differ from those in the Commission’s Ageing 
report in that they are based on assumptions about the career path of the retired person whereas the latter reflect 
actual development. See Annex 4.6. 

12 

 
 
 
Figure  5:  Benefit  ratio  of  public  and  supplementary 
pensions, 2022 (selected Member States) 

Figure 6: Household wealth, EU-27 2021 in billion EUR 
and % of total (25) 

Source: Ageing report 2024. 

Source:  Eurostat,  pension  statistics,  national  accounts  and 
annual sector accounts. 

The somewhat higher share of pension products measured in monetary terms than participation 
rates is due to an overproportionate use of supplementary pensions by households with higher 
income. The 2019 High level group of pension experts on supplementary pensions observed 
that women, lower income groups, and people in non-standard forms of work have less access 
to  supplementary  pensions.  Lack  of  inclusiveness  is  therefore  also  a  problem  along  the 
following dimensions for which Annex 4 gives additional information. 

While  supplementary  pensions  are  underused  by  households  in  many  Member  States, 
households have ample leeway to save more in pension products. EU households save a lot of 
their income on average (26), but not in a form that fully supports their retirement. The sum of 
household financial wealth (27) is almost at par with their statutory pension claims (see Figure 
6).  Overall,  however,  households  save  mostly  in  bank  deposits.  Official  statistics  show  that 
30.6% of the EU households’ financial wealth, excluding accrued statutory pension rights, was 
in the form of bank deposits or cash in 2024. They save a slightly higher share of their financial 
wealth in long-term financial products that offer higher returns. Claims against occupational 
pension funds accounted for 13.5% in 2024, against life insurers and personal pension funds 
for 13.1%, their investment fund shares for 10.4%. 

Thus, while many households may not afford to save more, there is scope for most of them to 
save in better ways than in bank deposits. Bank deposits have offered a low return over the last 
few years, below the rate of inflation (28). While housing is an attractive long-term investment 

25 The 2021 observation is due to the latest availability of public pension data in Eurostat. More recent data will 
be  released  in  2026.  Public  pensions  cover  accrued  rights  in  social  security  schemes  and  DB  schemes  for 
government employees from pension statistics (sum of all MS 2021 except 2018 for PL), other mandatory pensions 
are  claims  against  pension  managers  from  sectoral  financial  accounts,  Households’  dwellings  from  national 
account balance sheets (sum of all MS, no data for IE), Claims against life insurance companies include voluntary 
pension products, ownership of investment funds and equity, respectively, other financial assets are mainly bank 
deposits. 
26 Eurostat reports 13.5% of their disposable income in 2023. 
27 Using different statistics, (OECD, 2021) found that EU citizens hold much more in real estate than the OECD 
average (64% of total assets relative to and OECD average of 50%).  
28 Eurostat’s national account data suggests that interest income yielded an implied average nominal return of 0.8% 
in the EU over the years 2014-2023. The average interest paid on bank deposits to households in the euro area was 
0.4% in the same period. This compares to consumer price inflation averaging 2.7% in the EU and 2.4% in the 
euro area. 

13 

 
 
 
 
that can be used for accommodation when old, it offers no means for risk diversification and is 
difficult to liquidate. (See Section 2.2.3 for the return of pension products). 

2.1.2  A  low  contribution  of  savings  channelled  via  capital  markets  to  investment  and 

productivity  

Next to demographic trends, a second source of the pension challenge is the lack of productivity 
increase. Productivity growth needs to play a larger role to ensure a level of economic growth 
that is capable of supporting a larger share of retirees when the labour force is shrinking. Over 
the  last  decade,  employment  growth  contributed  to  about  two-thirds  of  GDP  growth,  and 
productivity growth around one-third. The low contribution of productivity growth will not be 
sufficient  to  keep  up  EU  living  standards  in  face  of  low  population  growth  and  a  declining 
working-age population.  In order to accomplish  higher productivity growth which is able to 
offset the deteriorating contribution from employment, productive investment would need to 
increase stronger than observed over the last decade. 

Table 2: EU-27 growth rates in %, average 2015-2024 in constant prices 

GDP 
1.7 

Employment 
1.1 

Productivity 
0.6 

Investment 
2.4 

Population 
0.2 

Note: GDP in chain-linked volumes 2015, domestic employment, productivity in persons employed, investment 
is gross fixed capital formation in chain-linked volumes 2015, national population. 
Source FISMA calculations with Eurostat data. 

Empirical work by the IMF notes that an absence of business dynamics is an important factor 
behind Europe’s weak productivity performance (29). It found this absence to be visible in both 
large leading firms innovating less and younger firms being less disruptive than their peers in 
the US. Lack of market size, human capital and equity financing were identified as the main 
determinants.  

Lack of scale and competitiveness of EU capital markets (relative to other important players, 
such as the US and the UK) goes in tandem with an underdeveloped mobilisation of household 
savings and their channelling to capital markets. A further SIU initiative aims to support market 
consolidation and supervisory integration to foster more integration and scale on EU capital 
markets. Better mobilisation of household savings for productive uses via long-term investment 
would  be  instrumental  in  enabling  the  future  smaller  labour  force  to  generate  products  and 
services that allow a decent living for the future larger class of retirees. In this vein, the Draghi 
report points to the underdevelopment of the EU pension funds sector as one of the main reasons 
of  the  under-supply  of  long-term  capital  in  the  EU  relative  to  other  major  economies.  It 
therefore designs it as indirect cause of the productivity slowdown of the EU economy and its 
eroding  competitiveness.  This  necessitates  efforts  to  strengthen  the  efficiency  of  EU  capital 
markets, and foster the role of pension funds in the allocation of capital in line with the SIU 
strategy. 

Pension funds, alongside investment firms and insurance companies, represent a vast pool of 
long-term capital and thus are a significant force in financing the real economy. Pension funds, 
in particular, have the potential to act as key enabler of transformative change towards green, 
digital and innovative growth needed to boost productivity and at the same time be instrumental 

29 Adilbish, O.E. et al. (2025), ‘Europe’s Productivity Weakness: Firm-Level Roots and Remedies’, IMF Staff 
Working  Paper  2025/040,  https://www.imf.org/en/Publications/WP/Issues/2025/02/14/Europes-Productivity-
Weakness-Firm-Level-Roots-and-Remedies-561771. 

14 

 
 
in  addressing  the  pension  challenge.  Their  capacity  to  gather  households’  savings  in  large 
patient  capital  pools  that  can  be  allocated  in  well  diversified  ways  to  long-term  oriented 
investment projects, including via equity funding to innovative entrepreneurs, makes them one 
of the main actors for advancing the SIU agenda. Through their function as anchor investors in 
domestic markets and by contributing to the development of EU capital markets, a stronger role 
for supplementary pensions could provide important private sources of financing for the green 
and  digital  transition  (that  is  likely  to  rely  more  on  equity  financing  than  loans),  as  well  as 
productive investments that strengthen the EU’s competitiveness (30).  

Confirming the important role of pension funds and capital market development, the academic 
literature  documents  a  robust  correlation  between  the  size  of  pension  savings  and  the 
development  of  capital  markets.  Some  researchers  are  suggesting  a  causal  effect  from  the 
development of a pension sector to capital market (31). EU Member States with well-developed 
supplementary  pension  vehicles (specifically  DK,  NL  and  SE  )  are  also  home  to  large 
institutional investors and have well-developed capital markets (32).  

One of the most striking differences between the EU and US investor base is that the relatively 
small market share of pension funds as investors in private equity and the stock markets in the 
EU. EU pension funds are about 15% of the size of US pension funds in total assets, and their 
holdings of listed shares amount to 7% of what US pension funds are holding (Annex 4). The 
differences in the role of pension funds as investors between the EU and the US might therefore 
be a central structural  element determining the different paths in  capital  market activity and 
therefore an indirect reason behind differences in competitiveness and economic adjustment. 

In fact, a number of empirical studies underpin the notion that supplementary pensions are an 
important driver of financial development (33). Those studies show a capital market deepening 
following  pension  reform.  They  also  show  an  increase  in  US  venture  capital  and  R&D 
investment after pension funds were permitted to invest there.  

A  recent  analysis  with  Danish  data  found  that  pension  funds’  equity  investment  in  firms 
improves their productivity by a substantial amount, estimated at 3-5% (see table below) (34). 
Complementary research by the IMF found evidence that supplementary pension vehicles make 

30 The large share of households’ savings kept in bank deposits cements the bank dependency of the EU economy 
and directs financing into firms that can offer collateral and a stable business history to the disadvantage of the 
growth prospects of innovative and disruptive firms, which often have neither stable revenues nor collateral. The 
large share of household investment in housing contributes little to productivity. 
31 For example, Walker/Lefort: ‘Pension reform and capital markets: are there any (hard) links?’, World Bank 2002, Meng/Pfau: 
‘The role of pension funds in capital market development’, GRIPS 2010, Babalos and Stavroyiannis: ‘Pension funds and stock 
market development in OECD countries’, Finance Research Letters 2022. 
32 It is notable that the EU Member States with the most developed capital markets, DK, IE, SE, NL were in the 
global  top  10  in  the  2025  World  Competitiveness  Ranking,  see  https://www.imd.org/centers/wcc/world-
competitiveness-center/rankings/world-competitiveness-ranking/rankings/wcr-rankings/#_tab_Rank . 
33 The analysis of the links between pension systems and financial structures in a theoretical model by Scharfstein 
(2018) suggests that a larger share of supplementary pensions would help accomplish the objectives of the SIU. 
His model predicts that a larger role of pay-as-you go pensions coincides with less risk taking in the economy, 
smaller  capital  markets,  more  capital  allocated  through  banks  and  loans  to  business,  smaller  firms  and  larger 
corporate ownership by insiders to the firm. His empirical analysis confirms these findings and additional estimates 
dismiss the notion of reverse causality, i.e. that the financial factors determine the design of the pension system. 
See Scharfstein, D.S (2018), ‘Presidential Address: Pension Policy and the Financial System’, Journal of Finance, 
Vol 73, No. 4, pp. 1483-1512. 
34 Beetsma, R. et al. (2024) ‘Do Pension Fund Equity Investments Raise Firm Productivity? Evidence from Danish 
Data’, 
https://research-
api.cbs.dk/ws/portalfiles/portal/100193319/roel_beetsmaet_al_working_paper_02_2024.pdf. 

15 

 
 
it easier for firms to raise long-term capital via their investment in stock markets. It emphasised 
that  pension  funds’  investment  broadens  the  access  to  capital  market  instruments  for 
households, which means that more households could benefit from higher returns on capital 
market investments (35). 

Table 3: Empirical results about the productivity effect of pension investment on the productivity in Danish firms 

Pension fund investment 
Equity investment by at least one pension fund compared 
to otherwise identical firms without an equity stake by a 
pension fund 
An  increase  by  one  percentage  point  in  the  combined 
equity stake of all funds investing in a firm 
An  increase  by  one  year  of  one  or  more  pension  funds 
maintaining a positive equity stake 
In non-listed compared to listed firms, 
In smaller firms 

Source: International Centre for Pension Management (ICPM) (36). 

Firm productivity effect 
3 – 3.5% higher 

0.21 – 0.22% higher. 

0.40 and 0.50% productivity gain 

6.5 to 7% larger 
from 8.7 to 10% stronger 

2.2 What are the problem drivers?  

There are many reasons why households do not make better use of their savings for retirement 
and  why  pension  funds  contribute  so  little  to  the  capital  allocation  in  the  EU  economy. 
However, the importance of the different reasons is likely to be different across Member States. 
In any case, it is undisputed that long-term saving decisions are complex for individuals. They 
need to overcome the information gap between what they know and want to know before they 
take a decision (driver 1). Behavioural economists point to delaying decisions as a wide-spread 
human  strategy  to  deal  with  complex  decision  making  (driver  2).  Households  have  also 
objective reasons to stay away from pension products if they do not find them attractive enough 
(driver 3). Reasons for an unattractive product offer are linked to high fees and costs charged 
by financial intermediaries and low returns generated for savers (driver 4). Low returns are a 
consequence of risk-averse investment policies by pension funds (driver 5), which interact with 
their small scale (driver 6) and lead to both a low share of pension savings allocated in riskier 
asset classes and the generation of low returns for savers. With little demand for supplementary 
pension products and both demand and regulations fragmented across Member States, many 
pension funds cannot reach the scale economies necessary to offer attractive pension schemes 
and thus to access investment opportunities that fund innovation and productivity. 

35 Khan, S. et al. (2025), ‘Pension Reform and Stock Market Development’, IMF Working Paper WP/25/49. 
36 ICPM (2024), ‘The Four Ways Through Which Pension Funds Increase the Productivity of Firms They Invest 
https://www.icpmnetwork.com/wp-content/uploads/2024/05/ICPM-Research-
In’, 
Whitepaper_The-Four-Ways-Through-Which-Pension-Funds-Increase-the-Productivity-of-Firms-They-Invest-
In.pdf . 

Research 

Paper, 

16 

 
 
Figure 7: Problem tree 

2.2.1 Information gap in a complex decision environment 

Information  problems  can  weigh  severely  on  the  individual  choice  of  a  pension  product, 
considering that such long-term investments amount to a long-term commitment that requires 
a good understanding of the personal needs and available options. Asked about what features 
of insurance and pension products  they consider most important,  59% of respondents  to  the 
2024 Eurobarometer survey quoted an extensive or accurate coverage at first place. This was 
followed by low costs (37%) and good returns (34%). These preferences translate into a number 
of parameters a decision on a pension product needs to take into account (37). For an illustration 
of such factors, Mercer/CFA (2024) lists the following parameters as relevant for investments 
into defined contribution pension plans: 

1.  Which pension provider to choose; 
2.  The amount of pension contributions on top of contributions to mandatory pensions and 

the frequency of payments; 

3.  Their risk attitude and, dependent on that, the type of investment strategy; 
4.  The planned age of retirement and/or statutory retirement age; 
5.  Whether retirement savings are paid out in a lump sum, or via annuities until a fixed date 

or until death; and 

6.  The magnitude of pay-outs and when they start. 

Information  is  an  important  issue.  In  the  2024  Eurobarometer  survey,  a  quarter  of  the 
respondents said that it is difficult to find information about pension products and a third that 
information is difficult to understand. 16% replied that the main reason why they do not own a 

37 Further features were communication with providers (29%)  and ease to manage (27%). See Q5 in EIOPA’s 
2024 Eurobarometer. 

17 

 
  
 
 
private  personal  pension  is  that  it  would  be  difficult  to  find  a  good  pension  product  (38). 
Responses  of  those  individuals  that  have  no  personal  pension  product  suggest  that  lack  of 
information about long-term saving opportunities is a driving factor (39). 10% of respondents 
said that they are not aware of any such product with sufficient protection being available and 
another 10% are not aware that such products are available at all. One in five persons indicated 
not having thought of pension products yet, which suggests that awareness or procrastination 
may also matter (see next section). Among those that do not have a personal pension product, 
28% said they cannot afford it. While the share of people not being able to afford a pension 
product is significant, it is much lower than the 47% share of population saying they cannot 
afford buying investment products. 

The  interaction  between  education,  income  and  affordability  is  also  evident  in  the 
Eurobarometer responses. The share of households indicating having neither pension products 
nor comparable investment  products  is  negatively correlated with  education levels: 18% for 
highly educated versus 34% for those with lower education levels; it is also much higher for 
females than for males (31% versus 23%), consistent with  lower levels  of financial literacy 
among women than men (40). The Eurobarometer replies are consistent with results of academic 
studies that analyse why personal pension products are little used in Germany: low educational 
attainment,  uncertainty  and  judgement  errors  about  future  retirement  levels,  and  an 
underestimation  of  life  expectancy  (41).  A  Swedish  study  points  to  education  attainment, 
complexity of pension decisions and procrastination behaviour to be major determinants (42). A 
number  of  studies  found  that  trust  is  an  important  determinant  of  participation  in  pension 
schemes and a recent Dutch paper was able to establish that there is a causal link from trust to 
participation (43). 

Figure  8:  Responses  to  the  question  about  the  main  reason  why  people  do  not  own  a  private  personal  pension

There is a large variety of EU and national requirements for pension fund providers to inform 
their members on the performance of pensions funds (e.g. the IORP Pension Benefit Statement), 

38 Q11 and Q6 in EIOPA’s consumer Eurobarometer 2024. 
39 Q12 in EIOPA’s consumer Eurobarometer 2024. 
40 Q6 in Flash Eurobarometer 509, 2022. 
41 See the overview and references in ‘Fokusgruppe private Altersvorsorge’, Abschlussbericht, July 2023, p. 14. 
42 See Elinder, M. et al (2020), ‘Who lacks pension knowledge, why and does it matter? Evidence from Swedish 
retirement savers’ IFAU Working Paper No 2020/24. 
43 See Goodkoep, F. et al. (2023), ‘Trust in the financial performance of pension funds, public perception, and its 
effect on participation in voluntary pension saving plans’, DNB Working Paper No 783, June 2023 and the papers 
quoted therein. 

18 

 
 
 
but these provisions are inconsistent and not harmonised across different categories of pensions 
products (e.g. occupational versus personal) and regimes (EU versus national), or even within 
the  same  pillar  (IORP  occupational  pensions  are  pension  fund  regulated  under  the  covering 
Institutions for Occupational Retirement Provisions II Directive, here “IORPs” versus Solvency 
II  occupational  pensions,  insurance  backed  pensions,  regulated  under  the  Solvency  II 
Directive), and they differ across Member States.  

Furthermore, even for those individuals who are saving in supplementary pension products, a 
lack of transparency and an incomplete overview of their entitlements can hinder career and 
retirement  planning  and,  by  implication,  pension  adequacy.  In  modern  social  protection 
systems, individuals' awareness of their pension rights is increasingly important to enable them 
to make informed decisions about their career and savings needs and thus to secure adequate 
pensions. With growing professional and geographical mobility of workers (44), an increasing 
complexity of pension systems and shifting of responsibility for ensuring adequate pensions 
towards  individuals  (45),  workers  face  the  challenge  of  following  pension  entitlements  in 
different  schemes  to  which  they  were  affiliated  during  their  career.  For  their  part,  pension 
providers need to provide information to their members and former members as they move job 
and  change  address  over  very  long  periods.  Countries  that  monitor  unallocated  forgotten 
pension claims found that the amounts can be in the millions of euro (46). 

2.2.2 Behavioural bias towards procrastination and time inconsistency 

Analysis by the OECD shows that procrastination on the decision to save for retirement has a 
large impact on the amount savers can earn. It suggests that people “delay saving into their 40s 
or 50s”. Since compounded return accumulates over time, an earlier start yields higher amounts 
by  the  time  the  retirement  age  is  reached.  In  particular,  equity  investments  tend  to  generate 
much  higher  returns  the  longer  the  periods  are  (47).  Short  contribution  periods  reduce  the 
benefits savers can draw from equity investments and increases their exposure to stock price 
volatility. 

Behavioural  economists  refer  to  the  delay  of  taking  a  decision  on  pension  savings  as  the 
“procrastination effect” (48). This effect is independent from the effect of a lack of information. 
Consistent with this distinction, research with German data found that more education will not 

44 Annual Report on Intra-EU Labour Mobility 2024, Directorate-General for Employment,  Social Affairs and 
Inclusion, European Commission, 7 February 2025. 
45 Final report of the High-level Group of Experts on Pensions, European Commission, 2019. 
46  Most  information  about  lost  pension  claims  is  not  recent.  See  for  France,  the  Netherlands  and  the  UK: 
https://www.vie-publique.fr/en-bref/270850-ces-retraites-qui-ne-percoivent-pas-lintegralite-de-leur-pension, 
https://www.iamexpat.nl/expat-info/dutch-news/millions-euros-unclaimed-pensions-netherlands, 
pensionspolicyinstitute.org.uk/media/yxgdozgx/202210-bn134-lost-pensions-2022-whats-the-scale-and-
impact.pdf. 
47 See OECD Pension Outlook 2024, chapter 4, which finds that the accumulate  assets are larger the longer the 
contribution period across age cohorts for all countries analysed and for all investment strategies. The increase is 
larger for portfolios with equity. In the specific example, the saved amount at retirement is 2.9 times the sum of 
all contributions after four years for a domestic fixed-income portfolio and 7.6 times for a portfolio with diversified 
equities. 
48 The seminal source is Samuelson W and R. Zeckhauser (1988), ‘Status quo bias in decision making’,  Journal 
of Risk and Uncertainty, Vol. 1 pp. 7-59, March 1988. 

19 

 
 
undo it (49). Briere (2025) notes in this context, that 46 % of financial advisors in the US, i.e. 
those with good knowledge of financial issues, do not have a retirement plan. 

Procrastination  reflects  time-inconsistent  behaviour  of  savers,  reflected  for  example  in  the 
discrepancy between widespread concerns about future retirement income in the Eurobarometer 
surveys quoted above, which reflects that people are aware that they would need to act, and a 
small share of respondents acting and either enrolling in pension saving schemes or acquiring 
long-term saving products. In an often-quoted US survey from 2001, most respondents said that 
it was important to save for retirement. However, only 3% stated they were actually doing so; 
24% replied they planned to start in the “near future” and 68% that they were saving too little 
(50). A survey by the Irish statistical office revealed that for those that had no pension coverage, 
45.2% indicated they “had never got around to organising it”; compared to 40% arguing they 
could not afford it (51). Almost half of those without pension coverage are expected to rely on 
public welfare pensions.  

Most  empirical  analysis  about  procrastination  has  been  with  US  data.  Nevertheless,  a  small 
number of studies find a similar effect in EU data. For example, Elinder et al. find evidence of 
procrastination on pension decisions in Swedish data, Krijnen et al. (2016) in Dutch data and 
Piotrowska (2019) in Polish data (52). A telling analysis about the large share of retail investors 
not reacting to clear advantages was done by Chetty et al. (2013) (53). They identified that only 
15% of the addressees reacted to a tax incentive, leaving the remaining 85% passive.  

Despite  passiveness  being  adversely  correlated  with  financial  literacy,  education  and 
information provision is unlikely to fully undo the effect of procrastination as behavioural bias. 
Behavioural economists find it important to distinguish between time-inconsistent behaviour as 
determined by preferences on the one hand, and information problems determined by lack of 
financial  education  or  understanding  on  the  other  hand.  The  distinction  is  useful  because 
suitable policy measures to address them differ. Rules to commit undertaking specific actions 
are suitable to address the former problem, while financial education and information provision 
is for the latter (54).  

49 See Gill, A et al. (2022), ‘Time inconsistency and overdraft use: evidence from transaction data and behavioural 
measurement experiments’, SAFE Working Paper No 242, March 2022. 
50 The survey done in 2001 before autoenrollment was introduced in the US also reported that 68 percent of 401(k) 
participants feel their saving rate is “too low,” 31 percent feel their saving rate is “about right,” and only 1 percent 
believe  their saving rate  is “too high. See  Choi, Laibson, Madrian, and Metrick (2002), ‘Defined Contribution 
Pensions: Plan Rules, Participant Choices, and the Path of Least Resistance’, Tax Policy and the Economy, Vol 
16. 
51  Central  Statistical  Office,  Pension  Coverage  2021,  https://www.cso.ie/en/releasesandpublications/ep/p-
pens/pensioncoverage2021/introductionandkeyfindings/ . 
52 An application on retirement savings on women with Polish data is at OAR@UM: Why women do not save for 
retirement : in search of determinants of saving procrastination, against the background of changes in pension 
systems 
53 Chetty, R. et al. (2013), ‘Subsidies vs. nudges: Which policies increase saving the most?, Centre for retirement 
research at Bost College, Marc 2013, number 13-3.  
54  See  Thaler,  R.H  and  S.  Benartzi  (2004,  ‘Save  More  Tomorrow’:  Using  Behavioral  Economics  to  Increase 
Employee  Saving’,  Journal  of  Political  Economy  ,  Vol.  112,  No.  S1,  Papers  in  Honor  of  Sherwin  Rosen:  A 
Supplement to Volume 112 (February 2004), pp. S164-S187 or Gill, A. et al. (2022), ‘Time Inconsistency and 
Overdraft  Use:  Evidence  from  Transaction  Data  and  Behavioral  Measurement  Experiments’,  SAFE  Working 
Paper No. 347, March 2022. 

20 

 
 
2.2.3 Lack of attractive products 

Pension  products  are  unattractive  if  they  do  not  correspond  to  the  needs  of  those  that  are 
supposed to buy them and especially if they are costly (section 2.2.3.1) or yield little returns 
(section 2.2.3.2).  A  lack  of  attractive  pension  products  is  evident  from  the  low  take  up  of 
personal pension products in many Member States. Less than 20% of households reported to 
hold a personal pension product in the EIOPA Eurobarometer quoted above. Examples from 
two Member States highlight the issue that low net returns discourage participation. 

(2) Germany subsidised contributions to personal pension products (‘Riester-Rente’) in the 
early  2000s,  but  has  since  observed  that  households  have  stopped  or  reduced  their 
contributions in reaction to low net returns on their investment (55). While the Riester-
Rente  allowed  and  subsidised  investments  via  savings  plans,  fund  savings  plans  and 
insurance plans, the largest share of the discontinued contracts were insurance based, 
with  both  expensive  capital  guarantees  and  an  expensive  distribution  system  as  cost 
drivers.  This  resulted  in  severely  subdued  and  sometimes  even  negative  net  returns 
despite public subsidies (56). The government in July 2025 announced plans to reform 
this system (57).  

(3) In 2002 Estonia introduced a second pillar pension scheme in which younger workers 
were  automatically  enrolled  with  an  option  to  opt  out,  with  savings  managed  by 
Estonian pension funds.  After years of criticism  over low long-term real  returns and 
high fees from these pension funds, Estonia passed a reform that took effect in January 
2021,  making  participation  voluntary  and  allowing  withdrawals.  In  the  first  wave 
following the reform,  some 19% of participants exited from  the scheme, taking €1.3 
billion with them. As of 2024 this figure has risen to 30% of participants (58). 

Since most product features can be adjusted to the features demanded, low net returns are the 
main determinant of unattractiveness. Better Finance researchers identified four reasons for low 
returns: (i) inflation, (ii) tax treatment, (iii) the fees financial intermediaries charge, and (iv) the 
asset allocation of pension funds (59). A further critical determinant of the returns of pension 
products in their riskiness. Pension products with guarantees have a significantly lower return 
than products without guarantees. In an analysis with Danish data, Sondergaard (2025) found a 
return  difference  of  about  200  basis  points  between  guaranteed  and  non-guaranteed 
occupational pension schemes60. While surveys consistently reveal that savers have a strong 
preference for safety, the costs of this safety is not transparent to them. 

See 

the  relatively 

income  groups 

low  return  and  high  costs  don’t 

https://www.bmas.de/DE/Service/Statistiken-Open-Data/Statistik-zu-Riester-Vertraegen/statistik-

55 
zusaetzliche-altersvorsorge.html and Figure 27 in Annex 3.4. 
 56 Finanztest calculated that these insurance based Riester-Rente products are only a sensible investment for an 
adult with several dependent children and a low income due to the comparably high public subsidies, while for all 
investment.  See 
other 
https://www.finanztip.de/riester/. 
57 https://www.bundestag.de/presse/hib/kurzmeldungen-1097994 . 
58  https://news.err.ee/1609079921/economists-second-pension-pillar-closures-mainly-in-low-savings-households 
. 
59 Better Finance (2024), ‘Will you Afford to Retire? The Real Return on Long-term and Pension Savings’ 2024 
edition. 
60 See charts 10 and 17 in Sondergaard S. G. (2025), ‘The road to more risky assets in the Danish pension sector, 
2025, 
Danmarks 
https://www.nationalbanken.dk/media/343my12n/the-road-to-more-risky-assets-in-the-danish-pension-
sector.pdf. 

Nationalbank 

September 

Insurance 

Pensions, 

justify 

and 

this 

21 

 
 
The energy price shock of 2022/23 had a sizeable impact on average inflation figures, leading 
to low real returns of many investment products even over a 10-year average. Tax treatment is 
analysed in Annex 2. High fees (driver 4) and low returns can be due to a lack of competition 
and transparency. They can also be the result of the costs of product features such as provision 
of  advice,  guarantees  or  flexibility  clauses  attached  to  a  pension  product.  They  are  also 
determined by two further drivers that have a direct effect on the contribution of pension savings 
to the financing of the economy. The lack of scale of pension providers (driver 5) augments 
costs that lead to higher fees. Conservative investment policies of pension providers (driver 6) 
show up in their asset allocation and yield low returns that can be distributed to members. Lack 
of scale and conservatism of investment policies are interrelated. Large funds have both better 
opportunities  to  exploit  scale  economies  on  the  cost  side  and  better  access  to  investment 
opportunities that promise higher returns. 

2.2.3.1 High fees leading to low returns  

Even well-informed savers, conscious of the need to avoid procrastination, may choose not to 
save  in  retirement  products.  The  2024  Eurobarometer  survey  referred  to  earlier  provides 
evidence that a lack of attractive products could discourage a significant proportion of savers. 
When asked why they did not buy a personal pension product, almost 20% replied that this is 
because of high costs and fees, and 10% because of poor performance and limited coverage. 
While these percentages do not look high, they need to be seen in in  conjunction with 62% 
unallocated responses (61). That means that half of those that gave a response to this question 
considered costs and fees as too high. 

Analysis  using  different  methodologies  and  data  point  to  overall  low  returns  of  pension 
products for savers in the past decade.  

•  Frequently  quoted  research  by  Better  Finance  showed  a  median  annual  return  of  16 
occupational pension products corrected for inflation of 0.9% over the 10-year period 
2014-2023, that of 22 personal pension products was negative at minus 0.1% (category 
1 and 2, respectively, in Figure 9.  

•  Calculations  of  an  implied  return  of  households’  occupational  pension  claims  with 
Eurostat data yielded an average return of 2% across the EU Member States over the 
same  period.  While  this  is  still  lower  than  inflation  over  this  period,  it  was  about  1 
percentage point higher than households’ return on their holdings of bank deposits and 
bonds, implying a 100 basis points in foregone revenues to hold a liquid asset.  

•  EIOPA’s cost and performance report paints a marginally better picture with nominal 
returns of IORPs ranging between 1.3% and 6.1% in nominal terms averaging 2017-
2021. This translates into inflation adjusted returns of -0. 4 to 4.2%.  

Low  historical  returns  mean  that  citizens  do  not  experience  the  long-term  value  of 
contributing  to  such  schemes,  which  ultimately  weakens  the  overall  uptake  of  pension 
products. 

61 Either no answer or not classified. 

22 

 
 
Figure 9: Real returns on pension products, 2014-2023 

Source:  Implied  returns  on  pension  products  are  FISMA  calculations  replicating  a  Eurostat  method (62)and 
adjusted  for  HICP  inflation.  Better  Finance  numbers  are  from  the  2024  publication.  The  breakdown  between 
category 1 and 2 differs across Member States and is for BE: ORPs vs assurance group and pension saving plans, 
DE : #N/A vs life insurance, EL : P2 vs P3, FR: corporate DC vs life insurance CG, CY: mandatory vs voluntary, 
LV: contractual vs open pension funds, LU: mandatory vs voluntary, HU: P2 vs P3, AT: occ vs life insurance, PL: 
employee vs voluntary pension funds, RO: mandatory vs voluntary, SK: pension funds vs supplementary pension 
funds ex PEPP, SE: AP7 Såfa vs other premium pension funds. 

The  data  from  Better  Finance  reveals  substantial  differences  between  Member  States.  Data 
collections  from  Better  Finance,  EIOPA  and  OECD  suggest  that  fees  for  pension  products 
amount to about 1% of assets (Figures 10 and 11). By contrast, Swedish or Dutch pension funds 
charge less than 0.05% (63). As any fee generated by the provider is paid for by the ultimate 
savers, it reduces the net return they received by the same amount. Thus, a 1% fee deducts 100 
basis points from the returns the pension managers generate though their investments. Low fees 
are therewith key determinants of the income from pension savings in the pay-out phase. 

Pension  funds’  costs  are  lower  than  those  of  actively  managed  investment  funds.  This  is 
evidenced by the comparison of the 1% quoted above with ESMA’s data on investment funds. 
ESMA identified annual costs for equity and mixed UCITS at 2%, bond UCITS at 1.5%; though 
costs for ETFs are considerably lower at 0.5% (64).  

Costs are generally lower for occupational pension funds than for personal pension products 
due  to  largely  mandatory  participation,  scale  and  significantly  lower  distribution  costs. 
Comparisons  of  personal  pension  products  suggest  that  annually  accumulating  distribution 
costs consume a significant part of the return on capital investments and hence depress the net 
return. Employers and social partners as sponsors of occupational pension funds are equipped 
with  more  bargaining  power  vis-à-vis  financial  intermediaries  than  individual  savers,  which 
may be another reason for the lower fees for occupational pension funds. This bargaining power 
is  particularly  strong  for  the  very  large  pension  funds,  who  can  decide  to  manage  certain 

62 See Gaya Riera, P. et al (2022), ‘Consistency of property income’, in: Eurostat Review on National Accounts 
and Macroeconomic Indicators 2022, chapter 4, pp. 77-108. 
63 According to the data by Better Finance. 
64  This  concerns  the  time  period  201-2023,  see  ESMA  Market  report  on  Cost  and  Performance  of  EU  Retail 
Investment Products 2024. 

23 

 
 
 
strategies  in-house  or  to  outsource  them 65.  Annex 3  gives  more  details,  including  on  the 
breakdown  between  returns  and  fees  of  occupational  and  personal  pensions  and  other 
observations for some Member States. The statistical annex to EIOPA’s technical input shows 
a breakdown across cost categories and cost differences between types and size of IORPs.  

Figure 10: Charges of supplementary pension providers 
% 
in 

Figure  11:  Expense  ratio  of  IORPs  offering  defined-
contribution pension schemes, 2023 

Source:  FISMA  calculations  with  Better  Finance 
data. 

Source: EIOPA Cost and performance report 2025 

Country-specific  empirical  research  for  Austria  and  Germany  has  documented  that 
administrative  costs  and  onboarding  fees  for  personal  pension  products  are  high  in  these 
Member  States.  Cost  structures  are  complex,  and  portability  is  costly.  Moreover,  restrictive 
contract designs and guarantees are  costly for providers (66). Since replies  from  Austrian or 
German  respondents  to  the  Eurobarometer  surveys  are  not  different  from  those  from  other 
Member States, it is likely that if such research is undertaken in other Member States, it would 
find comparable results (67). 

Aside from scale effects, one reason for the magnitude of fees charged by pension funds and 
other financial intermediaries are the costs of advice to households. Most financial institutions 
signalled during the consultations that the combination of mandatory advice and a cap on fees 
was an important reason why they did not offer PEPP. When comparing with other financial 
products, it is notable that many financial institutions increased their offer of execution-only-
products  to  retail  customers  or  offered  robo-advice,  which  can  be  interpreted  as  adjustment 
strategy to reduce on-boarding costs. The higher costs of advice when the product is offered to 
individual  households  compared  to  occupational  pensions,  which  do  not  require  individual 
onboarding, is an explanation why fees are lower for occupational pensions than for personal 
pension products.  

65  See  Bikker,  J.A  and  J  J.  Meringa  (2022),  ‘Have  scale  effects  on  cost  margins  of  pension  fund  investment 
portfolios disappeared?’ Applied Economics, Vol. 54, No 39, pp. 4501-4518. 
66 For Austria, Pensionen: Verwaltungskosten fressen Beiträge bei privaten Pensionen auf - Momentum Institut; 
For  Germany,  see  the  overview  and  references  in  Fokusgruppe  private  Altersvorsorge,  Abschlussbericht,  July 
2023, p. 14.  
67 For a focus on product offers and costs in Central and Eastern European economies with Better Finance data, 
see Rutecka-Gora, J. (2021), ‘Inadequacies of regulations on supplementary pension plans in Central and Eastern 
European countries’, European Journal of Social Security, 2021, Vol. 23(3), pp. 232–246. 

24 

 
 
 
  
 
Cost structures differ between pension funds that offer defined benefits  (DB) and those that 
offer (DC) schemes (68). Costs for investment strategies are higher for the former, since their 
portfolios are larger and more complex, and the investment strategies often make use of active 
management and derivatives. Administrative costs are higher for DC schemes because member 
accounts and individual choices need to be managed. A further cost driver are guarantees that 
cater  for  households’  perceived  primary  interest  in  safety  (69).  Occupational  pensions  limit 
guarantees to the necessary minimum as they drive up prices. 

High  costs  and  fees  may  also  be  a  reason  why  many  employers  do  not  offer  occupational 
pension  schemes  to  their  employees,  unless  a  member  state  has  a  strong  tradition  of 
occupational pension schemes. Employers face costs from directly contributing to occupational 
pensions, which is  part  of their labour  costs. Other costs  relate to  the set-up of the scheme, 
administration and regulatory compliance costs, and fees paid to providers. A study comparing 
pension schemes in eight EU Member States quantified that employers finance 50% of both 
public  and  occupational  pensions,  with  large  variation  across  Member  States.  Employers 
contributed  the  most  in  Sweden  and  Finland,  whereas  employees  contributed  most  in  the 
Netherlands (70). Employers’ contribution to occupational pensions reached between 3 and 4% 
of GDP in 4 Member States (DK, FR, NL, SE) and less in DE, FI and IT (see Figure 12). The 
analysis did not try to estimate to what extent the employers’ pension contributions are offset 
by lower wages paid out to employees, nor the extent they can be deducted from corporates’ 
tax  bill.  See  Annex  4  for  more  details  on  tax  treatment.  Information  about  other  costs  to 
employers is known from the UK pension regulator, suggesting low amounts even for micro 
firms  (71).  Fees  to  pension  providers  are  included  in  the  fees  paid  on  occupational  pensions 
presented above, i.e. between 0.2 and 1.5% according to EIOPA data. 

in 

the 

2023 

carried 

pension 

68 See EIOPA 92025), ‘Statistical Annex on IORP data’, BOS-25-420. 
69 55% of the respondents rate safety as their main priority, followed by 28% that point to the robustness of the 
Europe, 
survey 
provider 
https://www.insuranceeurope.eu/mediaitem/ce4f9788-85f7-4c2b-8f02-
a0d0875421a3/Pension%20priorities%20in%20Europe%202023.pdf . 
70 Widlund, M. et al (2022), ‘Pension contribution levels and cost-sharing in statutory and occupational pensions 
-A  cross-national  study  of  eight  European  countries’,  Finnish  Centre  for  Pensions,  Report  07/2022, 
https://www.julkari.fi/handle/10024/145464 . 
71 More than 60% of the micro firms with four or less employees had no start-up costs, costs for adjusting the 
payroll administration varied between GBP 75 and 300 with an average of GBP 150, monthly costs for external 
advisors ranged between 42 for firms with 1 to 4 employees and GBP 175 for firms with 10 to 49 employees. See 
https://www.thepensionsregulator.gov.uk/employers/new-employers/im-an-employer-who-has-to-provide-a-
pension/choose-a-pension-scheme/understanding-your-costs.  

Invest 

out 

by 

25 

 
 
Figure 12: Pension contributions of employers, employees and 
public budget in % of GDP, 2020 

Source: Widlund et al (2022). 

2.2.3.2 Conservative investment by pension providers 

Asset allocation and returns 

EU  pension  funds’  low  returns  over  the  past  decade  reflect  their  conservative  investment 
strategies. OECD data points to average of nominal returns earned by pension funds of 4.4% 
over the ten years 2014-2023 which corresponds to 1.4% in inflation-adjusted terms in the EU 
(weighted average of the EU Member States, weight with pension assets). The figures below 
show that pension funds’ returns are volatile, especially when compared to households’ income 
from pension claims reported in section 2.2.3. Under the spell of the energy price shocks of 
2022, pension funds in almost all EU Member States recorded strongly negative yields in 2022, 
many in the double digits. They also suffered substantial losses in 2008 during the financial 
crisis. The similarity of the time profile of returns across Member States shown in Figures 13 
and 14 suggests that common cyclical factors are a more important determinant of returns than 
country-specific conditions. 

Figure  13:  Real  investment  rates  of  returns  of  pension 
providers across selected EU Member States 

Figure  14:  Real  investment  rates  of  returns  of  pension 
providers in the US, NL and other EU Member States* 

Source: OECD. 

Note:  *  The  unweighted  average  of  all  EU  Member 
States  for  which  data  over  the  full  time  span  2002-
2023 was available. 

Source: OECD. 

The  European  Commission’s  1997  Green  Paper  on  supplementary  pensions  (72)  already 
concluded that any comparisons of the rate of returns across asset classes are sensitive to the 

72 COM(97)283 final. 

26 

 
 
 
 
 
 
period chosen. The sizeable impact of the losses recorded during the 2008 financial crisis and 
the 2022 energy price shock on 10-year returns underpin the notion of the time horizon to be 
the  most  critical  determinant  of  the  return  on  retirement  savings.  The  ideal  benchmark  for 
pension  funds  would  take  account  of  pension  funds  building  up  asset  positions  for  their 
members  over  an  average  work  life  and  remaining  life  expectancy.  Statistics  suggest  the 
average work life is currently 37 years in the EU and the remaining life expectancy of people 
at age 65 to 67 is 18-20 years (73). Unfortunately, the longest available time series of pension 
funds’ investment returns goes back only to 2002 for some EU Member States74. 

Pension funds invest in three broad asset classes: equity, fixed income and other. The analysis 
of the actual breakdown is made complicated by pension funds’ use of investment funds for a 
large part of their asset allocations. They are not unique in this, also insurance companies and 
many investment funds do so. The OECD and EIOPA have different means to look through the 
asset allocation via investment funds. The former asks national authorities to provide a look-
through  of  their  pension  funds’  data  and  many,  but  not  all  do.  EIOPA  provides  a  detailed 
breakdown by types of investment funds, albeit limited to IORPs (75).  

Benefits and returns of equity investment 

The following analysis focuses on the share of equity investment, taking equity investment as 
a  proxy  for  “risky  investment”.  In  reality,  equity  investment  includes  listed  shares,  unlisted 
shares,  private  equity  and  infrastructure,  with  the  latter  two  perceived  as  riskier  than  listed 
shares. Recent research found that an increase in the expected risk-adjusted returns of private 
equity relative to listed equity led to higher investment of US pension funds into this and other 
‘alternative’  asset  classes  (76).  It  also  concluded  that  the  perception  of  higher  risk-adjusted 
returns was predominantly shaped by consultancy reports. There was limited empirical support 
for other factors that could explain an increase in pension managers’ risk appetite. 

The geographical dimension of pension funds’ investment and their home bias is analysed in 
Annex 3. 

OECD data suggests that EU pension funds invest a smaller share in equity and a larger share 
in debt instruments than in other OECD countries. The equity share is 28% for the average of 
EU Member States, 22% for a size-weighted EU aggregate. This compares to 30% in the UK 
and Switzerland, 35% in the US and Norway. Among the EU Member States, the equity share 
is particularly low in Germany, Czechia, Slovenia and Portugal, high in Estonia, Lithuania and 
Poland (see figure below).  

73  See  the  statistics  on  duration  of  working  life  (ESTAT    lfsi_dwl_a)  and  life  expectancy  by  age  (ESTAT 
demo_mlec). 
74 A positive example is Sweden’s AP7 fund which achieved an annual weighted net capital return of 11,5% over 
the past 25 years against a fee quota of 5-17% over that period https://www.ap7.se/english/. 
75 Limited to IOPRs with assets above EUR 25 million before 2025 and above EUR 50 million from January 2025. 
76  Begenau, 
‘The  Rise  of  Alternatives’,  https://www.icpmnetwork.com/wp-
al. 
content/uploads/2024/08/The-Rise-of-Alternatives.pdf .  

(2024) 

et 

J. 

27 

 
 
Figure  15:  Allocation  of  pension  assets  in  selected  investment  categories  in  EU  Member  States  and  OECD  countries, 
preliminary data end 2024. 

Source: OECD Pension in focus, June 2025. 

Detailed data from EIOPA for IORPs that allows the allocation of investments in investment 
funds (look-through) shows a somewhat higher equity share of about 30%. Only half of the 
equity share is direct investment in common equity, the other half was derived from the share 
invested via investment funds. 28% of IORPs assets was listed equity, 3.3% in unlisted equity, 
which  is  largely  in  private  equity  (77).  Apart  from  equity,  IORPs  invest  in  sovereign  and 
corporate bonds, real estate and a number of other asset classes.  

Regarding specific asset classes that are considered as requiring asset managers to engage in 
search, information and monitoring efforts, IORPs’ investment in private equity in 2024 was at 
3.7% of their exposure, into infrastructures at 2.2%. This is however caused by the relatively 
large Dutch investment in these riskier asset classes, which some Dutch pension fund can enter 
due to their large size (4.5 and 3% respectively). Without the Netherlands, the investment share 
for  all  other  EU  Member  States  covered  by  EIOPA  statistics  broadly  halves  to  2.2% 
respectively  0.9%.  That  some  Member  States  allow  only  investment  into  equity  traded  on 
regulated markets is another reason for the low numbers for these asset classes (78).  

The superiority of equity investment over bonds in the very long-term is demonstrated in an 
academic paper that analysed the performance of asset classes from 1870s to 2015 (79). Both 

77 For a breakdown by Member States and more details, see EIOPA (2025) Statistical Annex on IORP data, BOS-
25-420. 
78 OECD (2024) flags Bulgaria, Czechia and Greece in this respect. 
79 Oscar Jorda et al., (2019), ‘A century of returns: The Rate of Return on Everything, 1870–2015’, The Quarterly 
Journal of economics, Vol. 134, issue 3, pp. 1225-1298. 

28 

020406080100KoreaGermanyCzechiaJapanSloveniaPortugalBulgariaIrelandGreeceCosta RicaFranceDenmarkSwedenIsraelAustriaRomaniaItalyLuxembourgTürkiyeNetherlandsUnited KingdomMexicoSpainHungaryColombiaUnited StatesCanadaChileNorwayIcelandBelgiumAustraliaNew ZealandFinlandLatviaSlovak RepublicLithuaniaEstoniaPolandRepublika Srpska (Bosnia and Herzegovina)EquityBills and bondsCash and depositsCollective Investment Schemes (when look-through unavailable)Other 
 
 
equity and housing had average real returns of 7% per annum, bonds of 2.5%. When the sample 
is limited to the post-World War II time to account for the very low real returns of bonds in war 
times, the general conclusion does not change. Equity yielded above 8%, bonds 2.7%. Housing 
appeared as profitable as equity and less volatile, the authors however note that diversification 
and liquidation is much more difficult to realise with house ownership.  

The  table  below  displays  the  actual  returns  on  different  EU  asset  classes  taken  from  either 
benchmark  indices  or  for  the  three  non-listed  equity  classes  from  an  industry  benchmark 
publication (80). All numbers are illustrative for the broad performance and sample bias cannot 
be  excluded  (81).  Yields  on  sovereign  bonds  and  rated  corporate  bonds  were  relatively  low. 
Investment in listed equity would have earned more than twice than investment in sovereign 
bonds over the last 20 years. Investment in unlisted equity would have earned a higher return 
than on listed equity, though with a small difference for venture capital and infrastructure funds 
over the 20 years period, which includes the years of the great financial crisis. The 10-years 
period  is  characterised  by  a  low-interest-rate  environment,  visible  in  low  returns  on  bond 
investments.  

Table 4: Actual average returns on different EU asset classes over 10 and 20 years holding period 

Sovereign 
bonds 
(10Y) 

Corporate bonds (5Y) 

Equity 

10 years  
20 years  

1.5 
3.4 

A rated 
1.1 
1.6* 

BBB 
1.4 
1.9* 

High 
yield 
4.3 
5.1* 

Listed 
7.3 
8.1 

GCF 
23.6 
17.3 

VCF 
16.0 
8.3 

PIF 
18.0 
9.0 

Sovereign bonds are the average of EU Member States with 10 years maturity, Corporate bond indices along rating 
categories, maturity around 5 years, * averages over 15 years as longest available time period, listed equity is 
annual  change  in  %  of  Eurostoxx 600  performance  index, GCF  (Growth  capital  funds), VCF  (Venture  capital 
funds), PIF (private infrastructure funds) are returns on a sample of funds that were liquidated, i.e. returns realised.  
Source: FISMA calculations with ECB, Eurostat, Bloomberg and Invest Europe data. 

Their special position of sophisticated institutional investors with a very long-term investment 
horizon should make pension funds well placed to allocate a larger share of their investment 
into  equity  compared  to  other  market  participants.  When  analysing  pension  funds’  asset 
allocation and performance across member countries over the period since 2002, the OECD 
(2024) found that a higher equity share delivered higher returns. It also added that the higher 
returns  in  the  long  term  come  at  the  expense  of  short-term  volatility.  The  OECD  (2024) 
undertook analysis to account for the sensitivity of the returns on equity from the period chosen. 
Scenario analysis was performed that looked at historical returns since 1900 and derived which 
returns households would have obtained if a defined contribution pension plan had existed. For 
most age-cohorts equity performance would have outperformed bond investment. Even for the 
minority of age cohorts which would have accomplished a higher return with bond investment, 
the  return  difference  was  modest,  amounting  to  0.3  to  0.4  times  the  accumulated  value  of 
contributions. Additional model simulations yield a 90% probability that a saver with pay-outs 

80 For a comparable breakdown, see the expected returns by the Danish council of return expectations, quoted in 
Sondergaard S. G. (2025), ‘The road to more risky assets in the Danish pension sector, Danmarks Nationalbank 
Insurance  and  Pensions,  September  2025,  https://www.nationalbanken.dk/media/343my12n/the-road-to-more-
risky-assets-in-the-danish-pension-sector.pdf.  
81 For example, the composition of indices changes over time, which entails a survivor bias. This is most evident 
for bond indices, which do not fully reflect defaulting bonds since these tend to be downgraded before they fail. 
The corporate bond indexes are also not available for 20 years, as their first observation dates to mid-2009. The 
private equity benchmarks are based on a relatively small number of observations. 

29 

 
 
 
 
 
in the form of annuity until death accomplishes a higher replacement rate through equity than 
through bond investment.  

The lessons drawn by the OECD from the analyses concern the importance of starting as early 
as possible to save for retirement. Saving for 40 years instead of only for 20 years makes a 
significant difference and the more so, the higher the returns on equity investment because of 
the effect of compounded returns. See also the evidence on the interaction between the size of 
pension funds, their asset allocation and returns by Bikker and Meringa (2024) in Annex 3.  

Determinants of conservative investment strategies 

The  existing  governance  arrangements  between  members,  sponsors  and  pension  managers 
reward  risk-averse  behaviour.  Many  industry  representatives  stressed  their  interest  in 
generating a stable return for their members and cautioned against risk-taking in their replies to 
the consultation and in exchanges with Commission staff. Several managers from the pension 
industry repeatedly said they consider their entities following a social-protection strategy rather 
than a profit-maximising motivation. The incentive for sponsors of pension funds, for example, 
employers to ensure that the fund generates high returns for its members should also not be 
taken as a given. Since the benefits accrue only in the long term, they may be more interested 
that the fund manager produces a stable return and avoid risks. 

Prudential policy has an impact on both pension funds’ investment policy and their size. The 
IORP investment rules are complemented by often detailed national asset allocation rules, such 
as asset class limitations or allocation quotas, promulgated by either legislation or supervisory 
guidance.  Article  21  of  IORP  II  allows  Member  States  to  introduce  a  variety  of  investment 
restrictions and quotas for various asset classes (see table below). Some (but not all) of these 
national rules could restrain the levels of portfolio diversification necessary to achieve adequate 
investment returns for pension scheme participants. Evidence that regulation is a determinant 
of equity investment stems from the comparison of a 27% average equity share in countries 
with quantitative investment limits and 32% on average in those countries without (82). 

Table 5: Investment restrictions and quotas consistent with the investment rules and the prudent person principle in IOPR 2’ 
Article 21 

Asset Class  

Typical Capital Requirements (Varies by 
Jurisdiction)  

Venture Capital   High capital buffer (where allowed) or strict 

allocation cap  

Reasoning  

Considered highly volatile and 
illiquid  

Private Equity   High capital buffer or allocation cap (often 5-10%)   Illiquid, risk of long-term lock-in  

Infrastructure   Moderate capital buffer; increasingly encouraged 

for ESG  
Moderate capital buffer; often encouraged for ESG   Seen as stable, with high growth 

Illiquid but more stable over long 
term  

Renewable 
Energy  

potential  

It  would  appear  that  national  prudential  rules  are  (partly)  driven  by  the  need  to  cater  to  the 
reduced  risk-taking  capacity  of  often  small  size  of  European  IORPs.  Since  smaller  pension 
funds have weaker risk bearing and managing capacity than larger ones, prudential authorities 
seem to impose more stringent constraints the smaller the pension funds in their jurisdiction. 

82 See  OECD (2024), OECD Pensions Outlook 2024: Improving Asset-backed Pensions for Better Retirement 
Outcomes and More Resilient Pension Systems, OECD Publishing, Paris, https://doi.org/10.1787/51510909-en, p. 
80. 

30 

 
 
 
This may not only take effect through legal rules but also through supervisory guidance on the 
interpretation of the prudent person principle enshrined in the IORP prudential framework. 

2.2.3.3 Many small providers serving a fragmented landscape 

The low returns that many pension funds generated over the last years could be a consequence 
of their small size. Scale economies are present in many functions that pension funds cover, 
from the administration of members’ contributions and claims to the scope of their investment 
policies. The figures below show that IORPs costs decline with the size of the provider. The 
relationship between size and the returns that pension funds generate through their investment 
policy is more complex and not visible in cross plots. The theoretical arguments and available 
evidence is discussed in this section. 

Figure 16: Costs as percentage of total assets – DB schemes 

Figure 17: Costs as percentage of total assets – DC schemes 

Source: EIOPA. 

Most EU pension funds are small 

The landscape of pension funds is fragmented across EU Member States and within most EU 
Member States, leading to EU players that are much smaller on average than peers in non-EU 
jurisdictions. Although different structures of pension systems and in particular different roles 
of public pensions mean different size of supplementary pension markets and therewith size of 
pension  funds  acting  on  those  markets,  a  comparison  of  pension  funds’  actual  size  can  be 
informative. Such a comparison reveals that only the largest EU supplementary pension funds 
equal their peers in the US, Canada or Australia. According to the numbers of the P&I global 
league table used for Table 6, six EU pension funds have a balance sheet of more than USD 
100 billion, compared to 15 in the US. While the two largest EU pension funds have a size that 
makes them significant players on global markets, the third to twentieth largest pension funds 
in the EU have a balance sheet size that is about half of that of the third to twentieth largest US 
pension funds. The fiftieth largest US pension fund has more assets than the sum of all 347 
occupational funds in Spain. 

Table 6: Assets under management of the largest pension funds across jurisdictions, in billion USD, 2023Q3 

average of largest 3 

AuM of #5 

EU 

313.8 

112.6 

US 

515.1 

246.3 

UK 

62.8 

42.9 

CND 

266.4 

85.1 

AUS 

174.3 

84.9 

CH 

49.8 

33.6 

JPN 

641.0 

71.3 

31 

 
 
 
 
 
AuM of #10 

71.8 

130.8 

27.0 

32.0 

41.3 

21.3 

28.6 

AuM of #15 

56.0 

107.5 

24.8 

22.6 

21.8 

AuM of #20 
Memo: number of funds in 
world top 300 

41.8 

91.1 

11 
Source : FISMA calculations with data of AuM of individual pension schemes from The P&I/Thinking Ahead 
Institute World 300: Largest retirement funds, download 25 June 2025. 

144 

17 

44 

16 

17 

13 

Data from ECB and EIOPA allows to calculate the average size of pension funds, with EIOPA 
data being limited to IORPs as a subset of pension funds across Member States. The about 1400 
IORPs have about EUR 2,720 billion assets under management, yielding an average size of less 
than 2 billion. 80% of the IORPs have less than EUR 1 billion, and a third less than EUR 25 
million.  The  table  below  shows  how  average  sizes  vary  between  Member  States,  being  the 
largest  in  SE, FR and the NL. In some Member  States, the average size is  less than EUR 1 
billion.  

Table 7: Average size of pension funds and number of IORPs, 2024 

Average size in billion 
EUR 

Pension 
funds 

IORPs 

0.3 
0.2 
- 
3.0 
2.6 
- 

0.0 
0.1 
0.1 
9.3 
0.5 
1.0 
0.0 
0.1 
0.1 
0.1 
0.2 
0.2 
8.1 
3.3 
3.1 
0.1 
- 

0.2 

0.3 
NA 
- 
0.4 
1.8 
- 

0.002* 
0.02 
0.1 
9.8 
0.01 
1.1 
NA 
0.1 
- 
0.2 
- 
0.03 
9.1 
3.8 
NA 
0.1 
- 

0.5 

The 
largest  
> 1B 
EUR 

11 

1 
64 

5 
21 

49 

105 
6 

6 

BE 
BG 
CZ 
DK 
DE 
EE 
IE 
EL 
ES 
FR 
HR 
IT 
CY 
LV 
LT 
LU 
HU 
MT 
NL 
AT 
PL 
PT 
RO 
SI 

Number of IORPs in EU market 

Larger 
500M>< 1B EUR 

Medium 
25M 
><500M 
EUR 

Smallest 
<25M 
EUR 

25 
1 
- 
4 
16 
- 
0 

19 
191 

20 
37 
0 
3 
0 
2 
0 
0 
7 

130 
- 

85 
0 
- 
6 
62 
- 
0 

7 
163 
1 
3 
66 
0 
3 
0 
8 
0 
0 
37 
0 
2 
41 
- 

1 

11 

- 
1 
16 
- 
0 

7 
1 

23 
0 

0 
2 
0 
0 
39 
2 

1 
- 

3 

32 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
SK 
FI 
SE 

0.5 
0.1 
0.8 

0.2 
0.1 
20.2 

13 

1 
2 
1 

17 
13 
0 

2 
17 

Note: B stands for billions, M for millions of total assets. Pension funds include IORPs. In several Member States, 
small IORPs are not covered by EIOPA statistics, which leads to an upward bias in the average size.  Member 
States with IORPs but incomplete data availability for the breakdown by size categories are indicated with ‘NA’. 
CZ, EE, HU, LT and RO do not operate IORPs; this is indicated with a dash (‘-‘). * Irish 2023 data from EIOPA 
2024 factsheet. 
Source: FISMA calculations with ECB for euro area pension funds and national statistics for non-euro area pension 
funds, EIOPA occupational pension statistic for IORPs. 

Scale economies for pension funds 

The relatively small size of pension funds in Europe implies that they cannot exploit important 
scale  advantages,  whereas  larger  pension  funds  can  benefit  from  scale  economies  related  to 
their  investment  strategies,  fee  negotiation  power,  their  cost  efficiency  and  risk  pooling. 
Annex 4.7 reviews the economic literature on pension funds’ scale economies. 

Compared to smaller funds and in particular individual savers, larger pension funds have better 
access to asset classes that are information intensive due to uncertain magnitude and timing of 
payouts, but that can deliver higher return over the long-term, such as infrastructure, or private 
equity.  In  addition,  a  small  size  impairs  the  capacity  to  run  sophisticated  investment, 
diversification and risk management strategies. These are elements for which scale economies 
imply  substantial  efficiency  gains.  Smaller  funds  usually  rely  strongly  on  investment  in 
standard financial instruments such as bonds and listed equity (83), while in some cases they 
take  complex  investment  decisions  despite  the  lack  of  expertise,  thereby  exposing  pension 
savers to undue risks (84). Even if they had the expertise to invest in private equity, the small 
amounts  they  can  commit  make  them  unattractive  counterparts  to  scale-up  firms (85).  The 
subsequent problem driver zooms in on actual investment strategies and their profitability. 

Larger  funds  have  also  better  possibilities  to  manage  processes  and  investment  in-house  to 
avoid paying fees to external providers. Small scale curtails the capacity to attract a high-skilled 
work force and to implement smart governance and control practices. This often translates into 
conservative investment policies, a low ratio of pension funds’ assets invested in equity and 
low returns for members.  

The larger a pension fund is, the better its possibilities to diversify investment risks by spreading 
investment  into  numerous  projects.  A  large  member  pool  enables  pension  funds  to  run  low 
buffers  for  individual  members’  positions.  Individuals’  investment  strategies  need  to 
incorporate  sudden  liquidity  requests  and  the  possibility  of  living  far  longer  than  average. 
Pension funds can pool these risks, therewith providing implicit insurance to their members. 
EIOPA  statistics  show  a  much  larger  variation  of  returns  for  small  than  for  large  IORPs, 
suggesting that smaller pensions funds are less diversified (86). 

83 See EIOPA (2025), ‘Statistical Annex on IORPs data’, EIOPA-BoS-25/420, September 2025. 
84  The  case  of  the  Berlin  Dentist  Pension  fund,  which  is  exempt  from  the  IORP  directive  illustrates  that 
shortcomings in the asset allocation can lead to serious reductions in pension pay outs, as Handelsblatt reports  
https://www.handelsblatt.com/finanzen/banken-versicherungen/versicherer/versorgungswerk-hat-sich-die-
zahnaerztekammer-mit-riskanten-investments-verzockt/100105863.html. 
85 See Keskiner, E. and R. Mathias (2024), ‘Is big really beautiful? The limits of pension consolidation’, McKinsey, 
Private equity, September 2018. 
86 See EIOPA (2025), ‘Statistical Annex on IORPs data’, EIOPA-BoS-25/420, September 2025. 

33 

 
 
 
 
 
There is also the perception of a lack of professionalisation of management in some smaller 
funds, which led Ireland to introduce requirements for small funds to invest via larger entities 
and Ireland and the UK to create masters trust to stimulate market-driven consolidation. 

Annex 3 reports on studies that investigate whether larger pension funds are more profitable. A 
series of Dutch papers diagnosed that the pension market in the Netherlands, which is the largest 
in  the  EU,  has  consolidated  to  a  stage  where  scale  effects  are  no  longer  present  (87).  In  all 
Member States except France and Sweden, the average size of pension funds is much smaller 
than in the Netherlands, suggesting ample scope to realise scale effects. 

Reasons for the dominance of smaller pension funds 

An  important  economic  reason  for  the  smaller  size  of  pension  funds  in  the  EU  may  be  the 
smaller  size  of  private  pension  markets.  The  largest  pension  funds  in  the  EU  are  in  those 
Member States with a large use of supplementary pensions, suggesting that lack of demand is 
limiting funds’ size. The growth potential of pension funds is also curtailed by the alternative 
use of retirement savings in either life insurance contracts, as corporates’ book reserves or by 
households’ preference to save cash or invest in property . Offers of pension products or close 
substitutes  from  providers  governed  by  different  rules  and  regulations  have  an  ambiguous 
impact  on competition.  In some Member States,  this segments the market, allowing smaller 
providers to remain in niches and specialise rather than to grow88. 

In  those  Member  States  with  many  pension  funds  populating  a  small  national  market,  it  is 
notable that some occupational  funds originated  from  social protection schemes for specific 
professions or workers in industrial sectors89. Their capacity to combine pension savings with 
other  targeted  insurance  services  for  these  members  creates  a  secure  market  niche  but 
complicates mergers with other schemes. This might explain why many pension funds have a 
long history, but limited membership and relatively few assets under management. A further 
obstacle to scale are the IORP rules on mergers among pension schemes sketched in the table 
below, which have often delayed or rendered (cross-border) mergers of occupational pension 
schemes impossible to undertake. 

Table 8: Regulatory requirement discouraging mergers and acquisition of pension schemes 

Regulatory 
Approvals  

Member and 
Beneficiary 
Consent  
Full Funding of 
Technical 
Provisions  

Transfers must be authorized by the competent authority in the receiving IORP’s Member 
State, after obtaining consent from the competent authority in the transferring IORP’s 
Member State.   
The transfer and its conditions should receive prior approval from a majority of the members 
and a majority of the beneficiaries concerned, or, where applicable, by a majority of their 
representatives.   
In the event of cross-border activity, the technical provisions must be fully funded at all 
times for the entire range of pension schemes operated.   

The absence of cross-border pension schemes is another reason for the lack of scale. However, 
differences in languages and cultural attitudes among members present obstacles to the creation 

87 Bikker, J.A. and J.J. Meringa (2022), ‘Have scale effects on cost margins of pension fund investment portfolios 
disappeared?’, Applied Economics, Vol. 54, No. 39 pp. 4501–4518. 
88 For example, there are 89 pension scheme providers for liberal professions in Germany outside the scope of the 
IORP II Directive catering for different professions and in different regions. See ABV - ESIP.eu 
89 This historical evolution happened for example in Germany, the Netherlands, Luxembourg and Austria. 

34 

 
 
 
of such schemes. Differences in taxation, labour and social law are important reasons why most 
pension funds remain national (90).  

•  Different  tax  incentives,  rates,  and  regimes  can  complicate  the  cross-border 

administration and attractiveness of pension plans.  

•  Compliance  with  different  social  and  labour  laws  in  each  member  state  requires 

complex administration.  

•  Other consolidation obstacles that matter in the cross-border context are differences in 
guarantees or other design elements linked to the product offers, governance rules and 
consultation obligations. Different levels of consumer protection regulations in Member 
States can lead to discrepancies in how pension products are offered, impacting their 
standardisation.  the consolidation obstacles that  matter especially  in  the  cross-border 
context  are  differences  in  guarantees  or  other  design  elements  linked  to  the  product 
offers, governance rules and consultation obligations. . 

While several multinational enterprises offer occupational pensions to their members, they do 
so with different schemes and entities managing them in the different EU Member States (91). 
This reveals that the above-mentioned obstacles for cross-border pension offers are material. 
Although  IORP  II  facilitated  cross-border  activity  for  IORPs,  only  28  IORPs  in  the  EEA 
actually operate in more than one Member State. More than half of them are domiciled in one 
Member State (BE) (92). 

2.3 Out-of-scope drivers 

Demographic  trends  and  low  productivity  growth  were  singled  out  above  as  important 
determinants  of  the  pension  challenge.  The  decline  in  the  share  of  working  age  population 
would be less of a challenge in an environment of high productivity growth. While this initiative 
aims to address the issue of low productivity growth in the EU by strengthening the role of 
pension funds on capital markets and therewith the role of capital markets in channelling funds 
to the most productive uses, demographic trends, other determinants of the weak productivity 
environment are considered out-of-scope drivers in this initiative. 

Public pensions are a key component of households’ retirement income. The design of public 
pensions is an important determinant of citizens’ interest to save privately for retirement. The 
calibration  of  public  pensions  is  considered  an  exogenous  factor.  The  promotion  of 
supplementary  pensions  should  not  be  accomplished  by  curtailing  the  adequacy  of  public 
pensions. Boosting the use of supplementary pensions also does not intend to create leeway for 
public  bodies  to  disengage  from  the  provision  of  adequate  public  pensions.  The  creation  of 
additional channels to save via supplementary pensions is not meant to undermine the benefits 
households  expect  to  receive  from  public  pensions.  It  is  intended,  however,  to  cater  for  the 
anticipation of many households that the claims they accumulate through their contributions to 
the public pension system may not be sufficient to ensure the income level they aspire for when 
in retirement.  

90  For  a  consultancy  perspective,  see  McKinsey  &  Company  (2020),  How  financial  institutions  can  help  fill 
European retirement needs’, Insurance practice, link.  
91 This is evidenced by names of many pension funds in different Member States that refer to the same name of 
the sponsoring multinational enterprise in EIOPA’s pension data base. 
92 European Insurance and Occupational Pensions Authority, EIOPA IORPs in Focus Report 2024, EIOPA-BoS-
25/016,  11  February  2025,  p.  22,  https://www.eiopa.europa.eu/document/download/4de6b580-521d-4ad0-af83-
2ecf133abdf4_en?filename=EIOPA-BoS-25-016_EIOPA%20IORPs%20in%20focus%20report%202024.pdf. 

35 

 
 
2.4 How likely is the problem to persist? 

If no action is taken, the pension gap will persist, and the supplementary pension sector will 
neither contribute meaningfully to adequate retirement income for citizens nor support the EU 
economy by mobilising long-term savings into productive, growth-enhancing investment.  In 
the absence of EU action, Member States may either not act or not sufficiently. The PEPP and 
IORP  framework  would  remain  inefficient  in  helping  address  the  problem  drivers.  Without 
targeted  reform,  the  supplementary  pensions  framework  will  contribute  little  to  retirement 
income. Thus, the pension challenges will not be successfully addressed.  

3. 

WHY SHOULD THE EU ACT? 

3.1 Legal basis 

The EU has the possibility to use binding and non-binding legal acts or a combination of them 
to  support  the  development  of  the  supplementary  pension  system.  The  use  of  non-binding 
recommendations is envisaged where there is a need to adjust the measures to country-specific 
factors to make them as effective as possible. The value added of effective rules set at Member 
States’ level tailored to different starting positions and the design of national pension systems 
outweighs the need for harmonised rules at EU level. Binding legislative measures are foreseen 
in  those  areas  where  EU  legislation  is  already  existing  and  the  benefits  from  a  common 
approach had been recognised when these were agreed. They cover the IORP II Directive and 
the PEPP Regulation. This initiative aims to make these frameworks more effective. 

The review of these existing EU legislative frameworks for supplementary pension provision 
aims to strengthen the internal market for supplementary pensions. With a view to the single 
market dimension, legislative measures can be based on Articles 53 and 62 of the Treaty on the 
Functioning of the European Union (TFEU), which provide a legal basis for the adoption of 
measures to coordinate the provisions laid down by law, regulation or administrative action in 
Member States on establishing and providing services, and on Article 114 TFEU, the objective 
of which is the establishment and functioning of the internal market by enhancing measures for 
the approximation of national rules. These legal bases would allow the review of the existing 
EU legislative frameworks for asset-backed pension provision, including the IORP II Directive 
and the PEPP Regulation since these aim at strengthening the internal market for supplementary 
pensions. 

Non-legislative  measures  can  take  the  form  of  recommendations  to  Member  States  without 
binding legal character based on Article 292 TFEU. They aim to encourage Member States to 
consider  measures  in  their  remit  to  improve  incentives  for  households  to  participate  in 
supplementary  pension  schemes,  for  providers  to  offer  such  schemes  or  to  help  overcome 
information problems and behavioural biases. Due to their non-binding character, the use of 
recommendations would not force Member States to act or prescribe the way how to act but 
rather present the recommended best practices based on tested experiences. The formulation of 
recommendations would also need to reflect that they do not affect the competences of Member 
States  to  organise  and  design  their  national  pension  systems,  as  well  as  the  autonomy  and 
prerogatives of social partners, in light of their key role in occupational pensions schemes.  

36 

 
 
 
 
3.2 Subsidiarity: Necessity of EU action 

The organisation of the pension system is a national competence and one of the main elements 
of Member States’ social protection policy. Supplementary pensions exist in all Member States 
though with large differences in their design and use. Over the last years, many Member States 
have introduced reforms aiming to strengthen supplementary pensions. A few Member States 
have also introduced auto-enrolment policies to enhance take-up of supplementary pensions.  

EU action is necessary to accelerate progress with pension reform. Taking the Mercer pension 
index as gauge (93),only few Member States have already accomplished a top-performer status. 
Moreover,  when  projecting  the  past  change  between  their  first  observation  and  2025 
observation in the Mercer index, most Member States will take still many years until they catch 
up to the best EU performers. On a positive note, none of the EU Member States covered in the 
2025 Mercer report received a rating worse than C. But only two Member States received an A 
rating and two a B+, i.e. the pension ratings are worse than the ratings of their public debt. 
Member States with the lower level in their first observations tend to show somewhat larger 
increases  in  their  general  pension  index,  suggesting  slow  convergence  towards  the  better 
performers.  

Table 9: EU Member States in the Mercer/CFA global pension index 

2025 

(Previous observations) 

Rating 

Total 
Index 

Adequacy  Sustainability 

(40%) 

(35%) 

Integrity 
(25%) 

Index 
2024 

Earliest 

Relates to 
year 

AT 

BE 

DE 

DK 

ES 

FI 

FR 

HR 

IE 

IT 

NL 

PL 

PT 

C 

B 

B 

A 

C+ 

B+ 

B 

B 

B 

C 

A 

C 

B 

54.5 

69.2 

67.8 

82.3 

63.8 

76.6 

70.3 

68.7 

67.7 

57.0 

85.4 

57.0 

67.6 

67.5 

81.5 

81.0 

82.9 

83.0 

77.4 

85.2 

66.8 

72.9 

69.4 

86.1 

59.5 

83.7 

24.0 

42.7 

47.5 

85.0 

34.2 

65.6 

48.6 

60.5 

51.6 

27.9 

83.5 

45.9 

36.4 

76.4 

86.8 

75.0 

77.6 

74.4 

90.6 

76.8 

83.2 

81.8 

77.8 

86.8 

68.6 

85.4 

53.4 

68.6 

67.3 

81.6 

63.3 

75.9 

68.0 

67.2 

68.1 

55.4 

84.8 

56.8 

66.9 

52.8 

63.4 

48.2 

82.9 

54.4 

74.3 

54.6 

62.3 

62.2 

49.6 

76.1 

58.6 

62.8 

2014 

2020 

2009 

2021 

2018 

2014 

2010 

2023 

2014 

2014 

2009 

2011 

2022 

SE 

B+ 

2009 
Rating classification: A > 80 includes also Iceland, Singapore, Israel; B+ 75-80 Australia and Norway; B 65-75 
UK,  Switzerland,  Canada;  C+  60-65  USA  and  Malaysia,  C  52-60  Brazil,  China,  Japan.  Other  countries  are  a 
selection of 52 countries covered. 

78.2 

74.3 

76.8 

76.3 

83.0 

73.5 

While Member States can, in principle, enact appropriate measures at national level that could 
possibly address some of the problems identified, action at EU level is warranted to address the 
problem drivers that led to the low use of supplementary pensions and thereby to their small 

93 The consultancy firm Mercer compiles an aggregate index, covering 14 EU Member States and some already 
since 2009. It is based on a survey with questions on adequacy, sustainability and integrity. The integrity index 
covers questions on regulatory quality, protection and coverage. The total pension index consists of the weighted 
average  of  11  questions  on  adequacy,  10  on  sustainability,  5  on  regulatory  quality  7  on  protection  and  1  on 
coverage. 

37 

 
 
 
contribution to additional retirement income and to capital market development. In the face of 
accelerating  demographic  change  and  growing  fiscal  pressure  of  first  pillar  pensions, 
supplementary  schemes  must  be  significantly  scaled  up  to  secure  future  income  adequacy. 
Coverage and transparency of supplementary pensions are common challenges for most EU 
Member States with the EU in a central place to promote the learning of good practices among 
Member  States.  At  the  same  time,  underdeveloped  capital  market  with  hereto  linked 
implications for the return opportunities of supplementary pensions is a common EU problem 
that EU Member States alone are not in the position to address. The EU needs a deeper and 
more integrated capital market that can fuel and harness long-term retirement savings. Failure 
to act, will result in a fragmented, inefficient status quo and squander the opportunity to deliver 
long-term value for both European citizens and the real economy. 

The  shortcomings  of  national  policies  in  fostering  supplementary  pensions  are  visible  in 
occupational and personal pension offers having remained predominantly national. Despite the 
EU wide regulatory regimes for occupational pension funds (IORPs) and pan-European pension 
products  (PEPP)  (94),  the  lack  of  scale  in  conjunction  with  low  degrees  of  competition  on 
national markets impairs the attractiveness of personal and occupational pension products for 
individuals  and  employers.  Regulatory  divergences  and  differences  in  supervisory  practices 
continue to  constrain  the development  of cross-border supplementary pension  provision  and 
prevent  economies  of  scale.  These  issues  limit  the  availability  of  attractive,  cost-effective 
pension  products  and  larger  supplementary  pension  providers,  and  reduce  the  capacity  of 
supplementary pension institutions to contribute to long-term investment in the EU economy. 
These objectives cannot be sufficiently achieved by Member States’ individual initiatives, but 
can rather, by reason of the scale and effects of the action, be better achieved at Union level. 
Moreover, old-age income adequacy and fiscal sustainability of national pension systems are 
crucial to the stability of the Union as a whole.  

3.3 Subsidiarity: Added value of EU action 

The key value added from action at EU level originates from the long-term nature of the pension 
problem.  Costs  and  consequences  of  policy  measures  will  materialise  in  most  cases  beyond 
electoral  cycles  that  often  determine  policy  action  at  national  level.  The  EU  action  offers  a 
forward-looking long-term perspective to the pension challenge, thereby allowing stability of 
objectives and consideration given to the long-term effect of policy measures. While some of 
the  measures  will  need  to  be  implemented  by  Member  States,  their  support  through  an  EU 
framework that finds application in other Member States with comparable measure adjusted to 
national conditions influences the policy discourse and can facilitate their public acceptance. 

At the same time, all Member States face the pensions challenge and a growing pension sector 
in one Member State will have positive externalities on other Member States. Leveraging on 
existing best practices and joint efforts by Member States on auto-enrolment, pension tracking 
systems,  and pension  dashboards would also  be  more effective than individual initiatives to 
achieve  larger  scale,  coverage,  and  transparency  of  supplementary  pensions,  and  ultimately 
adequate pension income across the EU population. Joint efforts would in particular help boost 
capital market development in smaller Member States, which would not only benefit from a 
larger domestic institutional investor base but also from access to a larger institutional investor 
base in other Member States. 

94 While most are not, some supplementary schemes are also covered by rules on social security coordination.  

38 

 
 
4. 

OBJECTIVES: WHAT IS TO BE ACHIEVED? 

4.1 General objectives 

The general objectives of the supplementary pension package follow those formulated in the 
SIU Communication: (i) Ensure adequate income for citizens in retirement; and (ii) Enhancing 
the capacity of pension funds to channel households’ savings into productive and innovative 
investment. Both general objectives are complementary and mutually reinforcing.  

Increasing  citizens’  participation  in  supplementary  pensions  to  ensure  their  adequate 
income in retirement requires the creation of conditions for households to consider their 
participation by providing a suitable information base for them to decide and the setting 
of incentives to act. A larger share of household savings in supplementary pension schemes 
can complement public  pay-as-you go pensions  in  supporting future adequacy of  retirement 
income.  An  increased  coverage  of  supplementary  pensions  would  help  achieve  a  more 
comprehensive retirement income and therewith allow that citizens can maintain an adequate 
lifestyle after retirement and benefit from a secure financial future. Participation in asset-backed 
pensions depends not only on incentives and product design but also on trust in the institutions 
managing retirement savings. While pension institutions in the EU are generally well regulated, 
maintaining  and  reinforcing  this  trust  is  essential.  Enhancing  consistency  in  core  prudential 
safeguards across private pension providers could support long-term confidence and may justify 
a proportionate review of the existing rules and its scope. 

Enhancing the capacity of pension funds to direct households’ savings into productive and 
innovative  investment  requires  setting  conditions  and  incentives  for  pension  fund 
providers to allocate a reasonable share of pension savings to funding for corporations, 
including to innovative firms that require equity financing. The traditional investment focus 
of EU pension funds in sovereign and high-quality corporate bonds has only an indirect effect 
on productive investment via the transmission of lower interest rates on these markets into lower 
funding  costs  for  the  corporate  sector.  Enabling  pension  providers  to  make  stronger  use  of 
(public and private) equity markets would have a more direct effect on availability of funding 
and  their  costs.  The  higher  long-term  profitability  of  equity  investment  and  better 
diversification opportunities could generate higher returns for retirement savers, and it would 
yield a stronger and more immediate effect on competitiveness of the EU economy.  

Both  objectives  are  mutually  reinforcing.  Higher  returns  for  members  will  make  it  more 
attractive for citizens to enrol in supplementary pensions schemes. The take up of additional 
pension savings will  allow pension  funds to  realise scale  effects  and to  direct  an increasing 
share of their portfolio into the real economy. With their potential to significantly boost the pool 
of patient capital available, supplementary pensions could play a key role in fostering the EU 
capital markets for long-term investments.  

The  objective  of  adequate  retirement  returns  can  be  quantified  through  the  assumption  that 
individuals want to accomplish the current public benefit ratio when they retire, i.e. pension 
payments relative to average wage (95). The ageing report projects how this ratio will decline 
over  the  next  fifty  years  and  individuals  can  be  assumed  to  offset  this  decline  through 
supplementary pension savings. They could accomplish this through saving more or through 
earning a higher return on their savings. The figure below shows for the EU-27 aggregate which 

95 The forthcoming OECD Pensions at a Glance also quantifies the magnitude of pension gaps, applying a different 
methodology. 

39 

 
 
combinations  of  higher  participation  in  long-term  pension  savings  and  the  returns  on  these 
pension assets could offset the expected decline in the benefits that individuals can expect to 
receive from public pensions (96). The higher the targeted returns, and with that the risk of the 
investments, the less the person would need to save. If a pension fund is able to generate higher 
returns, the additional saving needs are lower and more of income is available for consumption. 

Table 10: Assumptions about the required contribution 
rate and yield to compensate for the projected decline in 
the public benefit ratio 

Figure  18:  Combinations  of  contribution  rate  and  yield 
required to compensate for the projected decline in the public 
pension benefit ratio, EU-27 

Public benefit 
ratio 
Years 

2025 

44.7 

2050 

37.7 

2070 

35.6 

actual 

statutory 

median  

longest  

67 

18.6 

62 

65 

22.6 

Retirement 
age 
Remaining 
life 
expectancy  
Note: Data for EU-27, median and longest relate to 
current age across Member States without already 
agreed future increases. 
Sources: Ageing Report, Eurostat. 

20.2 

4.2 Specific objectives 

4.2.1 With respect to increasing participation in supplementary pensions to ensure 

adequate income in retirement 

This objective can be decomposed into the following sub-objectives: 

-  Improving  information  for  citizens  about  their  future  pension  levels  and  pension 
products  available  to  them:  Awareness  and  being  able  to  take  informed  decisions  is 
conditional  on  individuals  having  access  to  clear,  comprehensive  and  easily  accessible 
information  about  their  entitlements  in  different  pension  schemes  and  the  expected  benefit 
amounts. Most people in the EU receive pension information from various pension providers 
and  need  to  aggregate  this  information  for  themselves.  Most  do  not  have  access  to  pension 
tracking systems that cover all pillars and provide such information in aggregated form. 

- Providing incentives for overcoming procrastination: Employers and for savers make little 
use of pension products. Employees’ participation in occupational schemes often suffers from 
inactivity bias when voluntary, and from the adverse perception of labour income being taxed 
if  participation  is  mandatory.  For  ensuring  that  participation  in  supplementary  pensions 
increases among groups where it has traditionally been lower, for example, women in lower-
paid  or part-time jobs  and taking longer career  breaks,  for self-employed, requiring  flexible 
contribution patterns to take account of volatile income streams, younger people working in 
precarious and “non-standard” employment and lower-income workers in general. 

96 The underlying assumption is that the person earns the average EU income along the current income profile over 
age, i.e. increasing with age, and expecting to live as long after retirement as current retirees do. 

40 

 
 
 
 
 
 
 
 
4.2.2  With  respect  to  improving  pension  funds’  capacity  to  direct  households’ 

savings into productive and innovative investment 

This second objective can be broken down into the following issues:  

-  More  efficient  management  of  retirement  savings  and  supervision.  While  retirement 
savers  are  not  in  the  position  to  monitor  pension  providers’  activity  and  request  corrective 
measures, supervisors can. Supervisors should have sufficient information, including on costs 
and  fees,  and  the  capacity  to  put  pressure  on  weak  performing  entities  to  take  action,  for 
example, to review their investment policies, pool assets with external asset managers or other 
pension funds, or consider merging with other pension schemes, thereby compensating for the 
lack of internal managers’ incentives to give more priority to returns.  

- Promotion of scale and competition forces. Building up scale reduce costs that are charged 
on pension savers and could lead to more diversified investment strategies. It would strengthen 
risk management capacity and access to more profitable, illiquid asset classes. The absence of 
a level playing field due to the differences in national legal frameworks is reducing competitive 
pressure on pension providers therefore risks subpar investment policies and high costs. Few 
occupational pension providers are active across borders. EIOPA identified obstacles to cross-
border  activity  that  impair  a  more  competitive  framework,  more  scale  and  more  efficient 
investment outcomes.  

-  Streamlining  explicit  investment  barriers  for  all  private  pension  providers:  Certain 
pension  institutions,  including  IORPs,  but  also  pension  funds  outside  the  scope  of  EU 
legislation, often face regulatory limits as regards the eligible investment universe, with fewer 
possibilities  to  diversify  and  create  returns  for  their  members.  A  review  of  national  capital 
requirements and quantitative limits to investments would strengthen pension funds’ capacities 
to  finance  productive  investment  (97).  Since  scale  determines  their  capacity  to  invest  in 
sophisticated,  riskier  and  illiquid  financial  instrument,  the  last  two  specific  objectives  are 
interrelated. 

- Ensuring cost-efficient pension products: Given the low returns on many pension schemes 
and products in the European Union, it is essential to enhance their cost effectiveness. Fostering 
large scale pension products, possibly at EU scale, could lower costs, fees and lead ultimately 
to higher returns for members. Providers of pension products need to be enabled to offer cost-
efficient products and to compete with incumbents, which necessitates ensuring transparency 
and competition on fees and costs and optimising the regulatory framework for these schemes 
and products. This can create the conditions to deliver better returns and increase the perception 
of  supplementary  pensions  as  a  valuable  long-term  investment  for  retirement,  ultimately 
boosting participation and engagement in these schemes and products.  

- Reducing regulatory fragmentation to encourage market-driven consolidation and the 
cross-border  offering  of  services.  Many:  pension  institutions  operating  funded  pension 
schemes,  where  the  level  of  benefits  offered  to  members  depends  on  the  amount  of 
contributions paid and on the performance of the institution in managing assets, are currently 

97 In this context, a parallel SIU policy strands aims to facilitate access for pension providers to suitable investment 
vehicles that offer a balance between high long-term returns, low volatility, and manageable risks. This entails 
particularly opportunities to co-invest alongside the public sector, for example in infrastructure projects and equity 
of  innovative  firms.  EIB  and  national  development  banks  have  tried  to  crowd  in  private  investors  into  their 
programmes, but so far with mixed success. 

41 

 
 
not captured by any EU prudential legislation (98), therefore subject to diverse national rules, 
including  different  supervisory  processes.  In  several  Member  States,  employment-related 
retirement provision is provided by funded institutions which are excluded from the scope of 
Directive  (EU)  2016/2341  pursuant  to  its  Article  2(2),  or  are  otherwise  not  covered  by  that 
Directive without being subject to any other Union prudential legislation. Taken together, such 
institutions excluded from the scope of Directive (EU) 2016/2341 hold very substantial assets 
and constitute an important component of the overall employment-related retirement landscape 
alongside IORPs. The absence of a minimum harmonisation EU framework for those funded 
pension  institutions  results  in  significant  disparities  in  the  protection  of  members  and 
beneficiaries across Member States. In addition, differences in pension schemes across Member 
States impair the portability of pension claims, which makes it  unattractive to  participate in 
national supplementary pension schemes for citizens intending to move jobs and particularly 
so if they plan to move into other Member States. Relevant for pension funds and savers are 
instances of tax discrimination across the EU Internal Market due to national tax legislation that 
enforcement  by  the  Commission  could  address.  Fragmentation  of  pension  savings  along 
national  markets  prevents  pension  funds  from  exploiting  scale  economies  and  reduces 
competitive  pressure  to  generate  returns.  The  cross-border  provision  of  services  would  help 
increase the scale and efficiency of the sector, thereby enhancing pension incomes.  

Figure 19: The link between problem drivers, specific policy objectives and possible policy levers 

5. 

WHAT ARE THE AVAILABLE POLICY OPTIONS? 

5.1 What is the baseline from which options are assessed? 

In  a  no-change  scenario,  the  supplementary  pensions  landscape  across  the  EU  will  remain 
complex, fragmented, unable to deliver adequate returns and underdeveloped, failing to deliver 

98 Except for the Sustainable Finance Disclosure Regulation (SFDR). 

42 

 
 
 
 
on its full potential. Market participation will remain limited, cross-border provision negligible, 
and disparities between Member States persistent.  

Replacement  rates  will  develop  along  the  projections  of  the  2024  Ageing  Report  and  the 
proportion of European citizens with access to supplementary pension arrangements would stay 
at its currently low level. People with low incomes and other disadvantaged population groups 
will remain reliant on public pensions whereas high-income earners continue to benefit over-
proportionally from the existing offer of personal pension products. Workers in atypical jobs, 
in  industries  dominated  by  small  firms,  and  in  sectors  or  countries  without  role  for  social 
partners will remain deprived from access to occupational pension schemes.  

Without measures to increase participation, pension funds will not be able to build up scale 
economies  so  that  measures  to  promote  pension  funds’  investment  strategy  would  lead  to  a 
diminished increase in returns. Without a stronger supplementary pension sector, productivity 
developments  in  the  EU  will  depend  more  strongly  on  other  policy  initiatives  that  aim  to 
enhance innovation, competition and structural change. The role of capital markets in funding 
productive investment and financing transformation change will be smaller without the boost 
to capital market development expected from a larger pension sector. Finance will therefore act 
less as an amplifier of other productivity-enhancing policy measures.  

Without measures to increase participation, pension funds will not be able to achieve sufficient 
scale  so  that  measures  to  promote  pension  funds’  investment  strategies  would  lead  to  a 
diminished increase in returns. 

5.2 Description of the policy options 

5.2.1  With  respect 

increasing  participation 
supplementary pensions to ensure adequate income in retirement 

in  and 

to 

transparency  of 

5.2.1.1 Pensions tracking systems to back informed individual choices.  

A way to incentivise more engagement with the pension question and thus improve coverage 
and future adequacy is through the development of pension tracking systems. Pension tracking 
systems  allow  individuals  to  obtain  an  overview  and  an  estimate  of  their  future  retirement 
income in one place, thereby identifying shortcomings and reacting accordingly early on. The 
value  added  of  such  a  system  consists  in  centralising  information  from  different  pension 
schemes in one place for easy overview of individual accrued pension entitlements. Annex 2.2 
presents evidence on the use and economic effects of pension tracking systems 

Online platforms that provide access to individual information about pension entitlements exist 
in the majority of Member States, however, their scope, design and governance vary widely. 
According to the 2021 EIOPA technical advice on pension tracking systems (99), 19 Member 
States provided digital personalised information on at least one type of pension. According to 
a  survey  carried  out  in  2024  by  the  European  Tracking  Service,  a  national  tracking  service 
(using a slightly different definition) existed in 17 Member States. At the same time, most of 
the national tracking services cover only one or two pillars of the pension system, thus falling 
short of the objective to provide a comprehensive overview of individual pension rights through 
a single-entry point. Furthermore, the existing tracking services used very different solutions 

99  Technical 
systems,  EIOPA, 
https://www.eiopa.europa.eu/publications/technical-advice-development-pension-tracking-systems_en . 

development 

tracking 

pension 

advice 

the 

on 

of 

2021, 

43 

 
 
with  regards to  digital identification tools (national,  private sector or tailor-made digital ID; 
eIDAS  compatible  or  not),  information  storage  (live  access  or  central  data  storage)  and 
governance (public, private, or public-private partnership ), limiting their development potential 
and compatibility.  

In the context of increasingly dynamic careers and multi-pillar pension systems, resulting in 
savers accumulating pension rights in different ‘pension pots’, there is clear demand for pension 
tracking to boost pension awareness and adequacy. This is illustrated by the fact that a growing 
number of Member States are setting up some type of a pension tracking service (e.g., Germany 
and Ireland in recent years). Member States that already have comprehensive platforms reported 
positive experiences in a survey to the Commission in 2024. At the same time, many Member 
States still lack any national tracking service, and most of those that have been set up fall short 
of the complete coverage of their national pension system. The existing digital information tools 
generally  cover  statutory  pensions;  however,  the  coverage  of  occupational  and  in  particular 
personal pensions remains much more limited. While the benefits of more complete information 
to individuals are obvious, setting up a comprehensive and compatible national tracking service 
requires solutions to address a number of technical, legal and organisational challenges.  

To  facilitate  access  to  pension  information  for  mobile  workers,  a  cross-border  European 
Tracking Service (ETS) is being developed (100), with the support of the Commission. As of 1 
July 2025, two Member States (101) are fully connected to the ETS, with at least 5-7 connections 
planned by 2029. Since the ETS operates by connecting national tracking services, its long-
term development, as well as its ability to cover a critical mass of the mobile workforce in the 
EU, remains conditional on the existence of comprehensive and compatible national tracking 
systems. 

EIOPA  technical  advice  on  the  development  of  pension  tracking  systems  (102),  prepared  in 
2021,  mapped  existing  pension  tracking  services  in  the  EU,  EEA  and  third  countries  and 
identified best practices with regard to design, governance and implementation. This technical 
advice can serve as the point of reference and valuable knowledge base for further action at 
national and EU level.  

100 www.findyourpension.eu . 
101 Belgium, France  
102  Technical 
systems,  EIOPA, 
https://www.eiopa.europa.eu/publications/technical-advice-development-pension-tracking-systems_en . 

development 

tracking 

pension 

advice 

the 

on 

of 

2021, 

44 

 
 
Figure 20: Main lessons learned from existing pension tracking systems 

Source: EIOPA. 

The ETS can also engage with national administrations and stakeholders to provide guidance 
and facilitate exchange of experience in the development of national tracking services. 

Box: PTS connectivity with the European Tracking Service (ETS) 

The establishment of a European Tracking Service (ETS) can contribute to the pension adequacy and 
facilitate free movement for workers within the EU103, ensuring they can access information on their 
pension rights acquired in different member states. The successful implementation of the ETS hinges 
on the ability of national Pension Tracking Systems (PTS) to connect to it seamlessly. According to 
the EIOPA technical advice on the development of pension tracking systems, key recommendations 
for achieving this connectivity include: 

•  Authentication:  National  PTSs  are  strongly  encouraged  to  adopt  eIDAS104-compliant 
authentication methods as it is an application fulfilling common standards. Since the ETS 
will use the eIDAS framework, this alignment is a prerequisite for a secure and functional 
connection, allowing users to access their cross-border pension data. 

103 E.g. Regulation (EU) No 492/2011 of the European Parliament and of the Council of 5 April 2011 on freedom 
of movement for workers within the Union (OJ L 141, 27.5.2011, p.1.) 
104 Regulation (EU) No 910/2014 of the European Parliament and of the Council of 23 July 2014 on electronic 
identification  and  trust  services  for  electronic  transactions  in  the  internal  market  and  repealing  Directive 
1999/93/EC. 

45 

 
 
 
•  Data Exchange Model: A "live access" model could be identified as a suitable approach 
for the ETS. In this model, the ETS would query national PTSs in real-time to retrieve a user's 
pension information, rather than storing the data centrally. This enhances data protection 
and relies on the stability of the underlying national systems.  

•  Standardisation: The most significant challenge is the creation of a common data model 
and universal standards for data exchange from very divergent national pension landscapes 
and multi-pillar pension schemes based on different accrual principles (e.g. pay-as-you-go v. 
capital  based).  This  involves  defining  the  specific  data  fields  (e.g.,  accrued  entitlements, 
projection methodologies, retirement dates), formats, and terminology to be used across all 
systems. Given the vast differences in pension schemes and legal frameworks across the EU, 
achieving this uniformity is complex. To prevent the costly scenario where pension providers 
must adhere to separate national and European rules, it is recommended that national PTSs 
develop  their  data  standards  to  be  compatible  with  the  ETS  from  the  outset.  Active 
participation and collaboration from all national PTSs in the development of the ETS data 
model  is  crucial  to  ensure  the  final  standards  are  robust,  flexible,  and  accommodate  the 
diverse pension systems. 

In addition, participating in a European forum of PTS and experts on pension communication within 
the  ETS  association  could  be  a  useful  practice  for  all  existing  PTSs  and  those  who  are  under 
expansion. 

The options for action at EU level are the following. 

Option 1: no measures at EU level 

The first option would be not to undertake any new action at EU level and to continue relying 
on national initiatives (coming from the public sector, industry, or both) to develop pension 
tracking services across the EU. Member States wishing to develop a national tracking service 
could use the existing EIOPA report and/or refer to the ETS for exchange and guidance. 

Option 2: A recommendation to Member States to introduce pension tracking systems 

A second option is that the Commission issues a recommendation that calls on Member States 
to  address  the  challenges  and  introduce  pension  tracking  systems,  making  use  of  the  most 
relevant good practices identified in the EIOPA advice and following certain minimum features. 
These features would pertain both to the standard of services offered to the national citizens 
and technical compatibility allowing connection to the ETS. 

Pension tracking systems should incorporate harmonised reporting under the IORP II Directive, 
the PEPP Regulation and the Insurance Distribution Directive to ensure consistent, comparable 
and comprehensive information on pension entitlements. 

Option 3: A legal obligation for all pension institutions to provide information through pension 
tracking system accompanied by a recommendation to use best practices 

A  third  option  would  introduce  a  legal  obligation  to  provide  information  through  a  pension 
tracking system, accompanied by a recommendation outlining best practices. Such obligation 
could be addressed to supplementary pension providers, replace existing legal obligations (such 
as IORPs requirement to produce pension benefit statements and to send them to their members) 
and  eventually  also  to  Member  States  to  design  their  pension  tracking  systems.  To  help 

46 

 
 
overcome individuals’ procrastination in making long-term saving decisions, pension tracking 
could  be  connected  to  platforms  that  present  information  about  pension  products  and  other 
information.  This  could  foster  individuals’  financial  literacy  in  a  moment  when  they  show 
interest in learning about financial matters and even could nudge individuals into simple default 
pension products. 

5.2.1.2 Pension dashboards to assess the effectiveness of Member States 

pension systems.  

Another  way  to  incentivise  more  engagement  with  the  pension  question  and  thus  improve 
coverage  are  pension  dashboards.  Unlike  pension  tracking,  which  provides  personal  data  to 
individuals, pension dashboards show country-wide information on pensions with the objective 
of highlighting  gaps in  the sustainability  of pension  systems  and in their capacity to  deliver 
adequate pensions to the population. Thus, pension dashboards help Member States assess the 
performance of their multi-pillar pension system. Since some countries and the OECD refer to 
“pension dashboards” when meaning tools that track individual pension entitlements, there is 
some confusion about the term and the possibility for other names could be explored to underpin 
its notion of a surveillance and monitoring tool (105).  

Dashboards are a tool to create a political setting that allows for appropriate peer pressure to be 
exercised,  so  that  Member  States  identify  and  address  shortcomings  at  their  level  and  are 
incentivised to learn from best practices. They have been applied in the EU policy context in 
different policy areas such as for the single market monitoring, the macroeconomic imbalance 
procedure, the digital economy and society. The Commission already compiles data on pension 
adequacy and sustainability every three years, covering all EU Member States. While public 
pensions  are  well  covered,  information  about  supplementary  pensions  is  scarce  for  many 
Member States.  

The CMU High-level forum advocated the creation of pension dashboards to provide a more 
comprehensive  view  on  gaps  in  pension  sustainability  and  adequacy.  It  advocated 
comprehensive  cross-pillar  indicators  on  pension  adequacy  and  sustainability  across  the  EU 
including  target  levels,  i.e.  including  supplementary  pensions.  The  Eurogroup  invited  the 
Commission to develop a pension dashboard in collaboration with EIOPA in 2024. In reaction 
to the recommendation by the High-level forum, the Commission had already asked EIOPA for 
advice on pension dashboards and the advice, delivered in 2021, identified large data gaps. 

The motivation for the monitoring of pensions 

Many Member States have reformed their multi-pillar systems or are planning to do so. While 
the  need  of  pension  reform  is  widely  acknowledged,  surveys  document  an  entrenched 
opposition to pension reform in large parts of the population (106), leading to passionate and 
often contentious public debates. The provision and communication of fair and comprehensive 
information  about  reform  needs and its impact  may not  be a sufficient  condition  for reform 

105  EIOPA  (2021)  suggested  alternative  names  such  as  European  Pensions  Adequacy  and  Sustainability  Index 
(EPASI),  European  Pensions  Index  (EPI),  the  European  Pensions  Hub,  the  European  Pensions  Adequacy  and 
Sustainability Barometer (EPASB). 
106  The  seminar  source  is  Boeri,  T.  et  al.  (2002),  ‘Pension  Reforms  and  the  Opinion  of  European  Citizens’, 
American Economic Review- Papers and Proceedings, Vol. 92(2), pp. 396-401. More recently: Schutz J. et al. 
(2023),  ‘Pension  reform  preferences  in  Germany:  Does  information  matter?’  European  Journal  of  Political 
Economy Vol. 80, pp. 1-32. 

47 

 
 
proposals to get public acceptance, but it is a crucial precondition to obtain it. Without reliable 
data, an objective and informed debate about pension reforms is hardly possible. 

Communication about reform needs and the impact of pension reform would benefit from data 
and tools. While a lot of data, statistics and methods is available to analyse public pensions, 
there are still large data gaps with respect to supplementary pensions in many Member States, 
which impairs a systematic monitoring of the overall adequacy and sustainability of their multi-
pillar pension systems. The variation of participation rates in supplementary pensions across 
the various data sources documented in Table 30 in Annex 2.4 highlights inaccurate data on a 
basic parameter. Annex 5.1 investigates ways to fill data gaps. Less than a dozen Member States 
project expenditure on supplementary pensions as part of the Ageing Report. While the focus 
of this report on the sustainability of public pensions can justify that the other Member States 
do not do these projections, it is notable that information on the contribution of supplementary 
pensions to replacement rates is missing for broadly the same group of Member States in the 
OECD pension statistics. 

This  suggests  that  few  Member  States  seem  to  be  able  to  base  policy  decisions  about 
supplementary pensions on information that is sufficiently forward-looking into the long-term 
over which pension reforms are designed. They also lack a tool that allows them to compare 
national pension performance with that in other Member States as benchmark and inspiration 
to look for good practices from other Member States.  

Option 1: no EU action on pension dashboards 

In  a  survey  of  Member  States  only  two  reported  they  had  a  dashboard  at  national  level. 
Statistical  offices  or  other  public  bodies  in  several  others  have  public  websites  that  show 
information about use, trends and performance of the national pension system and in some there 
are also reports and websites with information on supplementary pensions. This suggests that 
the transparency on pension performance is beneficial for public authorities and the political 
debate in identifying challenges early on also at national level.  

Under this option, the Commission would continue to work with Member States on the pension 
adequacy report and the ageing report, which provide detailed country-specific information and 
projections every three years. EIOPA would collect data on insurance companies and IORPs 
for prudential purposes, while the ECB, Eurostat and the OECD would maintain their statistic 
coverage (107). 

Option 2: A recommendation to Member States to produce pension dashboards at national level 

The  objective  of  a  recommendation  would  be  to  entice  Member  States  to  compile  data  on 
pension coverage, contributions, expenditure and adequacy in form of a national dashboard at 
a central place. This data should include public pensions, which is already available to public 
authorities, and also existing data on supplementary pensions. The benefits of such a dashboard 
would be greater if it included long-term projections in addition to the most recent observations 
and past trends and if it provided a granular breakdown of adequacy across different population 
groups and dimensions of pension adequacy. 

107Eurostat  releases  a  website  with  key  pension  data  based  on  the  labour  force  survey  and  other  data  sources: 
https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Pensions_and_labour_market_participation_-
_main_characteristics#Highlights. 

48 

 
 
In  addition  to  covering  standard  indicators  on  pension  adequacy,  it  would  be  warranted  if 
pension dashboards covered possible adverse effects of rising supplementary pensions on other 
dimensions  of  pension  adequacy  and  sustainability.  Many  Member  States  provide  fiscal 
incentives  for  supplementary  pensions,  which  adds  to  the  sustainability  dimension.  Another 
important  dimension  of  pension  adequacy  is  the  reduction  of  poverty  risks.  Supplementary 
pensions are likely to cement income distribution (108). If wealthier individuals can make better 
use  of  the  new  opportunities,  the  income  distribution  may  even  widen.  It  also  seems  that 
wealthier individuals can afford to retire earlier. If the rise of supplementary pensions leads to 
a  decline  in  employment,  this  needs  to  be  spotted  early  on.  Member  States  could  be 
recommended to identify existing data or indicators to cover these dimensions in the dashboard. 

Option 3: A common approach to a European pension dashboard 

The starting point for a pension dashboard would be the data compiled by the Commission and 
Member States on pension adequacy and sustainability. These cover all Member States and are 
updated with the help of pension experts every three years. The focus of these reports is on 
public pensions since only few Member States provide data on supplementary pensions. A first 
step would be to recommend to Member States to increase the coverage of national data on 
supplementary pensions for the Pension Adequacy Report and to those of them that do not yet 
do so, to add projections on supplementary pensions in the Ageing report. 

A  common  approach  aims  to  ensure  comparability  of  data  across  Member  States.  Common 
definitions and methodologies would make national data more comparable. EIOPA suggested 
the steps towards such approach. The first step would be a mapping of pension products and 
pillars. For the second step, the Commission could create a data template and request Member 
States to collect data to fill the template. 

Figure 21: Basic steps to develop a dashboard 

108  See  Ebbinghaus,  B.  and  J.  Neugschwendner  (2011)  ‘The  public-private  pension  mix  and  old  age  income 
inequality in Europe’, in The Varieties of Pension Governance: Pension Privatization in Europe, by Ebbinghaus, 
B. 
2011. 
https://doi.org/10.1093/acprof:oso/9780199586028.003.0014. 

University 

384-422, 

Oxford 

Press, 

(ed.), 

pp. 

49 

 
 
 
Source: EIOPA. 

5.2.1.3 Auto-enrolment and its best practices 

A powerful method to overcome procrastination of workers would be to oblige them to join 
supplementary pensions schemes where such pension schemes are offered by their employer. 
Some  Member  States  have  made  the  use  of  occupational  pensions  mandatory  or  quasi-
mandatory for workers such as BG, DK, NL and SE.  

Auto-enrolment means that employees are enrolled by default in occupational pension schemes 
offered by their employers but are given the choice to opt out. The possibility to opt out is an 
important element of auto-enrolment and makes it different from mandatory enrolment. It also 
differs from  the standard approach in  voluntary occupational  pensions where employees are 
asked whether they want to participate and need to enrol actively. Due to the possibility to opt 
out,  which  is  an  essential  component  of  such  a  system,  it  is  less  intrusive  than  obliging 
employees  to  join  such  scheme,  which  is  the  main  reason  behind  the  high  take  up  of 
occupational pensions in DK, NL and SE.  

Behavioural economists have proposed the use of auto-enrolment as a commitment device to 
overcome  people’s  procrastination  and  bring  them  into  pension  schemes.  As  means  to 
overcome low voluntary saving for retirement, they recognised that it has a paternalistic element 
but was not imposing participation upon people (109). In legal advice provided ahead of the Irish 
introduction  of  auto-enrolment,  the  possibility  to  opt  out  was  noted  as  a  central  element  to 
ensure  compliance  with  employees’  property  rights  in  the  European  Convention  on  Human 
Rights  (ECHR)  and  the  Irish  Constitution,  since  it  minimises  the  weakening  of  these  rights 
while allowing to address a pressing social concern (110). 

Countries that introduced auto-enrolment like New Zealand or the UK have observed that it led 
to a significant increase in the coverage of occupational pensions. Auto-enrolment or elements 
of it already exist in some EU Member States (DE, IT, PL) or are being introduced (IE, SK) in 
occupational  pensions.  Auto-enrolment  helps  overcome  the  bias  in  decision-making  of 
remaining inactive. Studies identified design features that determine its success. The European 
Commission financed a study on the experiences and best practices in auto-enrolment that was 
published in 2021 (AE study hereafter) (111). 

Since starting positions of Member States differ strongly with respect to  the organisation of 
public pensions, labour market institutions and existing provisions in the field of occupational 
pensions  and  saving  behaviour  in  the  population  including  their  responsiveness  to  fiscal 
incentives  and  risk  attitudes,  a  harmonised  introduction  of  auto-enrolment  through  EU 
legislation would not be effective. The need to tailor the introduction to specific conditions in 
the Member States is so important that even a Directive could not be sufficiently granular to 
cover general principles while leaving sufficient discretion for Member States to adapt in their 

109  Thaler,  R.H.  and  S.  Benartzi  (2004),  ‘Save  More  Tomorrow™:  Using  Behavioral  Economics  to  Increase 
Employee  Saving’,  Journal  of  Political  Economy,  Vol.  112,  No.  S1,  Papers  in  Honor  of  Sherwin  Rosen,  A 
Supplement to Volume 112 (February 2004), pp. S164-S187.  
110 According to the Auto-enrolment regulatory impact assessment of the Irish Department of Social Protection. 
111  European  Commission:  Directorate-General  for  Financial  Stability,  Financial  Services  and  Capital  Markets 
Union,  LE  Europe,  Redington,  Spark,  Devnani,  S.  et  al.,  Best  practices  and  performance  of  auto-enrolment 
mechanisms 
2021, 
https://data.europa.eu/doi/10.2874/03565  

Publications 

pension 

savings 

Office, 

report, 

Final 

for 

– 

50 

 
 
transition in national law. A recommendation to Member States therefore appears to be the best 
suitable instrument. The following options differ in the scope of such a recommendation. 

Option 1: baseline: no action on auto-enrolment 

Under this option, a Member State would be able to  initiate a political  discussion about  the 
introduction of auto-enrolment in their jurisdiction, making use of the AE study. They could 
also apply for technical support from the Commission under the Technical Support Instrument. 
This possibility exists for some time but has been used only by few so far and only as option in 
the broader context of strengthening the position of beneficiaries (112). 

Option 2: Enabling auto-enrolment  

Legal barriers may exist in national legal systems that discourage the use of auto-enrolment or 
even  prevent  it.  These  obstacles  may  stem  from  the  fact  that  auto-enrolment  is  so  far  not 
envisaged in legal systems. Instead, often the law requires the savers to declare their willingness 
to enrol in a pension scheme. Undoing such barriers would enable the use of auto-enrolment. 
An explicit legal basis for auto-enrolment would be a strong enabling signal (113). It would also 
be an essential precondition to define the main features of auto-enrolment, e.g. which entities 
are entitled to enrol, which savers are eligible and which products are available to them. Auto-
enrolment has been practiced in employment contexts enabling employers or social partners in 
many  Member  States,  which  fostered  occupational  pension  schemes.  When  used  for 
occupational pensions, the regulatory framework may need to define what will happen to the 
accumulated pension savings if the employee changes job, industry or starts working abroad.  

To  protect  savers  that  are  auto-enrolled,  policy  makers  would  need  to  ensure  appropriate 
safeguards so that retirement savings are invested in a transparent and sufficiently safe way. 
Providers of retirement savings would need to be properly supervised and investment policies 
would  need  to  reflect  the  specificities  of  long  term  retirement  savings.  This  could  mean 
appropriate regulation of providers and supervisors would need to be well equipped to enforce 
prudential  safeguards  and  to  intervene  effectively  if  schemes  do  not  follow  appropriate 
investment and risk management strategies. 

To build and maintain the credibility of the system, this enabling approach should also include 
commitments that private retirement savings will not be merged with public pensions  in the 
future and that the government will not direct private retirement savings into investment for 
public  needs.  Governments  would  also  need  to  ensure  that  the  character  of  auto-enrolled 
pension savings as supplementary pensions are ensured. Auto-enrolment systems are intended 
to complement, not compete with, existing occupational pension schemes, particularly those 
established through social partnership or collective bargaining arrangements.  

This requires that parameters are set in  a way that the new schemes do not crowd out well-
functioning existing schemes. This would also mean a clear separation from public pensions so 
that the contributions to the supplementary scheme are understood to be individual savings and 

112 Auto-enrolment has been discussed as one of the options in a number of technical support projects, although in 
very specific contexts, in Greece, Ireland, Spain and Lithuania. 
113  In  Italy,  the  2005  TFR  law  (trattamento  di  fine  rapporto)  allowed  that  employees  could  be  automatically 
allocated 
2018 
Betriebsrentenverstaerkungsgesetz (Act to Strengthen Occupational Pensions) makes the use of auto-enrolment 
conditional on being part of collective wage agreements in Germany. The Pensions Act 2008 sets the legal basis 
in the UK. 

second-pillar 

out.  The 

employee 

pension 

unless 

opted 

funds 

the 

to 

51 

 
 
not  as  an  additional  tax.  Auto-enrolment  schemes  should  also  not  replace  already  existing 
private  schemes  with  a  mandatory  character.  Nor  should  the  enabling  of  auto-enrolment 
disadvantage members in already existing schemes.  

Option 3: promoting auto-enrolment through the application of good practices 

In  addition  to  enabling  the  use  of  auto-enrolment,  Member  State  governments  have  various 
means, at different intervention intensity, at their disposal to promote the use of auto-enrolment. 
Annex 2.1  analysis  the  evidence  on  critical  design  elements  and  Table  28  in  that  Annex 
provides a repository of good practices.  The importance of a good design  of the schemes in 
ensuring the success of auto-enrolment has been evidenced by the case of two Member States 
that have abandoned it. Estonia found that supplementary pensions produced low returns for 
savers114, Lithuania was inter alia concerned about distributive effects from tax incentives to 
the benefit of only part of the population. 

An  essential  ingredient  of  any  promotional  efforts  would  be  information  to  pension  savers, 
employers and other stakeholders. Accompanying information campaigns would need to create 
awareness, understanding and buy-in. Although auto-enrolment circumvents the passiveness of 
parts of the population in taking active saving and investment decisions, opt-out rates might be 
higher if there is no minimum awareness, understanding and trust. A public debate early in the 
design phase would be a good practice to define objectives, clarify warranted effects, create 
trust and address concerns. Historically, the introduction of auto-enrolment was accompanied 
by information campaigns on pensions in the UK, Italy and New Zealand. The Irish statistical 
office has monitored the population’s awareness on auto-enrolment via annual surveys since 
2022 (115). A survey by a private consultancy firm among businesses in Ireland 

 revealed that two thirds or respondents had concerns a year prior to the introduction of auto-
enrolment across the areas shown in the table below.  

Table 11: Employers concerns about the introduction of auto-enrolment in Ireland 

Issue 
Additional contribution costs 
Impact on existing pension scheme contributions 
Lack of clarity on design of system 
Set up costs 
Time needed to implement new systems 
Impact on eligibility conditions to existing scheme 
Total with “some concerns” 
Source: AON (2024) (116). 

% of respondents noting the issue as a concern 
28% 
28% 
22% 
21% 
19% 
18% 
67% 

Ideally, measures to improve financial literacy should run in parallel to information campaigns 
on auto-enrolment to create synergies. Targeted financial education programmes, aimed at the 
population eligible for auto-enrolment, might be good practice to exploit synergies resulting 
from providing information that is specific to individual needs and meeting them at a time when 
they are open to learning.  

https://news.err.ee/1609079921/economists-second-pension-pillar-closures-mainly-in-low-savings-

114 
households. 
115 https://www.cso.ie/en/releasesandpublications/ep/p-pens/pensioncoverage2024/awarenessofautoenrolment/ 
116 
https://www.aon.com/ireland/pension-auto-enrolment-ireland. 

Auto-Enrolment, 

Transforming 

Ireland’s 

‘Pension 

Landscape’, 

Pension 

AON, 

52 

 
 
A sufficiently prolonged and gradual implementation can be considered a good practice. The 
AE study describes a short implementation period as the reason behind the lack of success of 
auto-enrolment in Italy, Poland and Turkey. This short implementation gave stakeholders little 
time  to  prepare  for  their  obligations  or  for  the  competent  authority  to  establish  licensing 
arrangements, and reduced the effectiveness of the information campaign to raise awareness 
amongst  savers  before  the  regime  started  to  become  operational.  Ireland  consulted  and 
committed to introduce auto-enrolment in 2018, with the system becoming operational at the 
beginning of 2026. It organised various information sessions for different types of stakeholders, 
as well as an advertising campaign which began several months before the launch date. Despite 
the long preparation time, implementation was postponed several times, and it will ultimately 
take a decade for the scheme to be fully bedded in. 

Since auto-enrolment primarily targets savers that do not take active investment decisions, there 
should  not  be  a  complex  decision  environment  regarding  their  contribution  rates,  how  they 
invest and how they can use their accumulated pension claims later on. A single or a limited 
number  of  default  options  is  considered  good  practice.  In  occupational  pension  schemes, 
members contribute to the scheme set up by the employer or agreed by social partners as is the 
case  in  social  partner  agreements  in  Germany.  An  alternative  approach  is  used  in  the  UK, 
Poland and Canada, namely that employees can select funds pre-selected by their employers 
(117). The UK offered small employers to automatically enrol their employees into a standard 
scheme called ‘Nest’ (see below). A related successful example is the Swedish prime pension, 
which allocates contributions to a default fund unless members decide otherwise. Ireland will 
offer members a limited set of investment options along risk categories, with those who do not 
choose an option being enrolled in a default “life-cycle” option. Overall, most countries that 
use auto-enrolment also favour the use of pension funds with life-cycle strategies – including 
Poland, Canada and the UK’s Nest (see below). Outside auto-enrolment, the Swedish default 
AP7 Såfa plan is another example for applying a life cycle strategy.  

How  eligibility  and  default  options  are  designed  would  depend  on  Member  States’  specific 
policy objectives, legal and social conditions. Their choices would ideally be as inclusive as 
possible.  

1.  Since pension saving becomes more effective the longer the accrual period, it is advisable 
that  eligibility  criteria  foster  an  earlier  start  of  the  pension  savings  process,  while  not 
disadvantaging older workers enrolling in supplementary pension schemes. When used in 
an employment context, eligibility for employees with atypical work contracts and opt-in 
possibilities for self-employed could be a good practice.  

2.  The magnitude of the contribution rate cannot disregard the contributions to other parts of 
the pension system, other social security contributions and what savers can afford. A low 
contribution  rate  is  likely  to  reduce  the  number  of  opt-outs,  especially  for  low-income 
earners. At the same time, it reduces the cumulative retirement income of those most in 
need.  

3.  Beyond the level of the contribution rate, flexibility to adjust it, opt-out and re-enrolment 
conditions will incentivise people with career interruptions or atypical work patterns to 
enrol and keep enrolled. These parameters are particularly important for women since they 
are more often involved in caregiving activities than men, therefore interrupt their career. 
Re-enrolment occurs every three years in the UK and every two years in Ireland, unless 

117 For PRPPs in Canada and for PPKs in Poland, see AE study. 

53 

 
 
the employees are in another pension scheme. A different approach is used in New Zealand 
where new employers must enrol new employees.  

4.  Conditions  on  early  withdrawal  are  likely  to  influence  opt-out  rates  of  different  social 
groups and the cumulation of their retirement income, too. Early withdrawal is possible in 
several  countries  such  as  New  Zealand,  the  UK,  Ireland  and  France  under  different 
conditions, predominantly related to circumstances of individual hardship or inability to 
work due to disability or illness. 

It  would  also  be  warranted  to  set  rules  for  the  financial  intermediaries  that  manage  the 
investment of the pension savings. A good practice would be to ensure that savers have the 
choice between receiving a lump sum or an annuity (118). Governments may also want to require 
that financial intermediaries involved in the investment policy do not charge excess fees to the 
detriment of savers’ retirement income. This would also need to cover fees in the decumulation 
phase to avoid payments in form of an annuity becoming too expensive. 

Fiscal incentives and public subsidies are suitable means to promote the use of auto-enrolment 
in supplementary pensions. Experience shows that pension schemes are most successful where 
there is a fiscal incentive for individuals to remain a part of such schemes (119). Poland pays 
lump sum amounts to members from the public budget to reduce the opt-out of persons with 
low income. Ireland will provide a State “top up” of €1 for every €3 saved by an individual, 
while  the  UK  provides  tax  relief  on  contributions.  The  academic  literature  describes  tax 
deductibility as effective tool in making auto-enrolment attractive for middle-income earners. 
Since  auto-enrolment  is  usually  used  in  the  employment  context,  tax  incentives  can  also  be 
crucial  to  entice  employers  and  to  compensate  them  for  costs  they  incur.  It  is  common  that 
employers  are  obliged  to  contribute  to  their  employers’  occupational  pensions  (120)  and  can 
deduct their contributions from their tax duty. Many Member States set quantitative ceilings on 
the amounts deductible whereas Spain and Germany offer employers additional tax incentives.  

Different  policy  instruments  have  been  used  to  support  smaller  employers  in  offering 
occupational  pensions  and  could  also  be  used  to  promote  the  use  of  auto-enrolment.  These 
measures were applied in view of the supply of occupational pensions being often limited to 
either large firms or to employers participating in collective agreements with social partners. A 
successful  practice  in  Poland  and  the  UK  was  that  obligations  for  smaller  employers  were 
phased in with a delay to give them more time to prepare.  

EIOPA  identified  the  following  principles  as  important  for  the  success  of  auto-enrolment: 
(1) Raising public awareness and pension literacy for building trust, (2) Deciding on the timing 
of its introduction in a contextual setting, (3) The actual design of the scheme. The key features 
should include (a) start early, i.e. for young age cohorts, (b) keep it simple, i.e. avoid complexity 
and offer clear default options, (c) make it the norm, (d) build trust through stability, clarity, 
transparency and strong supervision (121). 

The replies to the targeted consultation revealed that stakeholders consider public incentives as 
the most important design feature, followed by the avoidance of adverse effects on statutory 

118 The AE study considers a well-functioning market for annuities an important pre-condition. 
119 For a comprehensive analysis, see OECD 2018 tax incentives report. 
120 For example in Italy, Poland, New Zealand and the UK. Their contribution is voluntary in Lithuania. See AE 
study. 
121 EIOPA (2025) Technical input for the reviews of the IORP II Directive and the PEPP Regulation in the context 
of the Savings and Investments Union, EIOPA-BoS-25/418, September 2025. 

54 

 
 
pensions and their sustainability. The other design elements asked for are in a broad range and 
only early withdrawal possibilities stand out as considered of lesser importance.  

Table 12: Hierarchy of best practices along their importance, stakeholder replies to the targeted consultation 

State incentives (e.g. tax or subsidies), with calibration based on income categories 
Preservation of statutory pension benefits and sustainability 
Starting with low contribution rates for participants with their gradual escalation over 
time 
other 
Starting with low contribution rates for participants with their gradual escalation over 
time 
Involvement of social partners in its design 
Duration and recurrence of opt-out windows and options for re-enrolment 
Full  or  partial  early  withdrawal  of  pension  benefits  (subject  to  penalty,  where 
relevant) 

Average  Frequency 
2.9 
3.5 

60 
57 

3.9 
3.9 

4.0 
4.0 
4.3 

5.6 

62 
15 

55 
67 
58 

51 

Note:  Average  measured  as  priority  on  a  scale  1  to  8  with  one  the  most  and  8  the  least  important,  frequency 
measured as how often referred to in 112 responses to the consultation.  

Option 4: Active government support: Obligations for employers and public administration 

The government can intensify its support for auto-enrolment by addressing some key obstacles. 
When applied in a work-place context, options 2 and 3 leave the decision on the actual use of 
auto-enrolment  to  the  discretion  of  employers.  Possible  employers’  resistance  to  offer  auto-
enrolment  to  their  employees  can  be  overcome  by  obliging  employers  to  auto-enrol  their 
employees.  The  cost  of  administrating  members’  pension  savings  and  allocating  the 
contributions into investments can be reduced by establishing a body that performs these tasks. 

An obligation for employers to contribute to their employees’ occupational pensions is standard 
in most systems. The fiscal burden is reduced by employers benefitting from possibilities to 
deduct their contributions from tax, see above. Auto-enrolment yielded a very strong increase 
in  the  participation  in  occupational  pensions  when  governments  obliged  employers  to  enrol 
their  employees,  i.e.  it  became  mandatory  for  the  employer  to  offer  occupational  pensions, 
though  not  mandatory  for  employers  as  they  have  the  possibility  to  opt  out.  The  AE  study 
described the obligation for employers to offer auto-enrolment as a best practice, referring to 
the results in the Canadian province of Quebec and some US States. The UK, Poland and Ireland 
apply it too (122). 

Some countries use a public body for the administration of supplementary pensions. Such a 
body  can  also  act  as  investment  vehicle  or  as  master  trust  that  outsources  investment 
management to private pension funds. Lithuania used the state social insurance body ‘Sodra’ 
to auto-enrol employees and self-employed and allocate them to pension providers. The UK 
created a new public body called ‘Nest’ and financed it for the first years. It serves as a master 
trust and was established to ensure that all employers are able to fulfil the obligation to offer 
auto-enrolment. Therefore, Nest is required to accept any employer, even if very small, and it 
also allows individuals to consolidate their multiple pension pots into one. Ireland has created 
a  one-stop  shop  (123)  to  determine  employee  eligibility,  collect  all  contributions  (employee, 
employer, State), administer these contributions and procure the service of investment firms to 
invest the proceeds. Although used in a mandatory and not in the auto-enrolment context, the 

122 With staggered implementation for small firms. 
123 National Automatic Enrolment Retirement Savings Authority (NAERSA). 

55 

 
 
 
Swedish AP7 Såfa functions as default investment fund; the administration is processed by the 
Swedish Pensions Agency (124). 

The use of a public body would allow synergies between public and supplementary pensions 
concerning  the  identification,  calculation  and  payment  of  contributions.  Such  a  centralised 
model,  with  state  agencies  acting  as  contribution  collectors  and  providers  of  investment 
schemes might further offer efficiencies of scale and simplified management. It would have 
more  bargaining  power  with  asset  managers  than  employers,  and  could  obtain  lower  fees. 
Delegating the administration to a public body would further imply that existing payroll systems 
in  firms  would  require  little  adjustment,  which  reduces  administrative  burden  for  firms  and 
over-proportionately benefits smaller enterprises. Since the use of such a body in the UK and 
Ireland is complemented with an obligation for employers to enrol their employees it passes 
part  of  the  administrative  burden  from  employers  to  the  public  thereby  evading  other  fiscal 
incentives  for  employers  to  make  use  of  auto-enrolment.  The  organisation  of  occupational 
pensions  through  social  partners  provides  a  comparable  function  in  some  Member  States, 
leaving  the actual use of auto-enrolment  to  the discretion of business  associations and trade 
unions. The creation of a public body would therefore be more suited for Member States without 
such a role for social partners.  

5.2.2 Fostering access to attractive pension products  

After discussing different options for increasing participation in pension savings, this section 
focuses  on  returns  and  better  risk  management  of  the  provided  pension  savings.  More 
specifically, the first sub-section discusses how to advance better investor returns, ensure more 
transparency  on  cost  and  returns  and  increased  risk  management  capacity  across  workplace 
schemes. The second sub-section looks into possibilities to allow the Pan-European pension 
product  PEPP  to  gain  market  traction  and  to  develop  into  a  product  that  can  compete  with 
national pension products and intensifies competition towards lower fees and better terms for 
pension savers.  

5.2.2.1 Fostering scale and performance of the IORP sector through the 

review of the IORP II Directive 

As  stated  previously  in  this  staff  working  document,  economies  of  scale  are  essential  to 
lowering administrative  and investment  costs, enhancing  risk diversification, and  expanding 
access to professional portfolio management. Without sufficient scale, pension providers may 
struggle to offer cost-efficient, resilient, and transparent products.  

The  Commission  intends  to  review  the  IORP  II  Directive  with  a  view  to  strengthening  the 
framework  for  asset-backed  pension  provision  and  fostering  better  long-term  investment 
outcomes. The review also seeks to make the IORP model more relevant for Member States 
where such institutions remain underdeveloped.  

The  primary  objectives  of  the  IORP  reform  are  to  promote  stronger  and  more  sustainable 
investment outcomes for beneficiaries, enhance transparency around both costs and returns, and 
strengthen risk management practices across supplementary pension schemes. In addition, it 
aims to remove barriers that hinder efficient investment and to support the scaling up of pension 
providers,  enabling  them  to  benefit  from  economies  of  scale,  improve  asset  allocation,  and 
deliver greater value. In doing so, the reform seeks to raise standards across the supplementary 

124 See AE study. 

56 

 
 
pensions  landscape,  fostering  greater  value,  increased  resilience  and  long-term  security  for 
members.  

A well-calibrated reform can help address persistent fragmentation, unlock more efficient and 
productive  long-term  investment,  and  ensure  that  a  wider  range  of  pension  arrangements 
operate under sound governance and transparency standards. 

Two basic option to achieve scale and performance are identified for IORPs – an option based 
on “moral suasion” and another based on “mandated scaling” approach. The two options are 
presented, in addition to the baseline scenario. 

Option 1 – No policy change 

This option would mean maintaining the current framework unchanged and relying on slow, 
organic growth to deliver scale and improvements over time. The underlying assumption is that 
time,  market  dynamics  and  national  implementation  will  gradually  lead  to  improvements  in 
scale, governance and cross-border activity. However, this evolution is currently unfolding at a 
very slow pace, and not uniformly across Member States. In several countries, IORPs remain 
marginal or entirely absent, and the existing framework does not appear well adapted to support 
the  development  of  occupational  pensions  in  these  contexts.  While  preserving  regulatory 
stability, this option risks reinforcing fragmentation and limiting the role IORPs can play in 
addressing pension adequacy and long-term investment objectives at EU level. 

Option 2: strengthening the prudent person principle 

Option  2  would  entail  providing  guidance  to  support  the  effective  and  consistent 
implementation of the prudent person principle referred to in Article 19 “Investment rules” of 
the IORP II Directive. The aim would be to promote a shift in the focus of IORPs investment 
policies  from  simplistic  conservative  asset  allocations  neglecting  the  return-leg  of  pension 
funds objectives to more balanced risk-return investment strategies that pursue long-term value 
for pension scheme members by diversifying across risks, including across asset classes, and 
that  are  guided  by  sound  governance,  and  the  knowledge  and  ability  to  manage  the  risks 
undertaken.  

Scale is essential for achieving genuine diversification. Larger schemes are structurally better 
positioned  to  spread  risks  across  a  wide  range  of  asset  classes,  including  alternative  asset 
classes, that require sufficient resources and expertise. The clarification of the prudent person 
principle should therefore stress that achieving adequate scale enhances the ability of IORPs to 
diversify  effectively,  manage  risks  holistically,  and  access  a  broader  set  of  investment 
opportunities, while maintaining sound governance and risk management standards. 

As the prudent  person principle is  a  concept  applicable to  the  entire supplementary pension 
sector and other retirement saving vehicles, a generalised guidance would have a wider outreach 
and benefit than limiting it solely to IORPs. 

The  prudent  person  principle  governs  how  IORPs125  should  invest  and  manage  their  asset 
portfolios. This principle has been interpreted differently across Member States, which often 
limits  pension  schemes  in  diversifying  investments  and  allocating  to  equities.  According  to 

125 The principle applies also to PEPP, as enshrined in Article 41 of the PEPP Regulation. 

57 

 
 
Article 19 of the IORP II Directive, the prudent person principle dictates that assets must serve 
the  long-term  interests  of  savers,  balancing  return  with  security,  quality,  and  liquidity. 
Portfolios  should  be  adequately  diversified  to  avoid  excessive  reliance  on  any  single  asset, 
issuer,  or  sector.  In  practice,  sufficient  scale  greatly  facilitates  this  diversification,  enabling 
schemes to gain more balanced exposure across asset classes and to manage illiquid investments 
prudently.  Investments  in assets outside regulated markets  are permitted  but  must remain at 
prudent levels. Environmental, social, and governance factors must also be integrated into the 
investment decisions. Those managing the schemes must possess the necessary expertise and 
maintain robust risk management systems. 

The principle is a flexible yet demanding fiduciary standard, establishing a decision-making 
framework based on diversification, risk management, and suitability rather than a fixed asset 
mix.  Scale  is  a  key  enabler  of  prudence,  as  it  strengthens  the  capacity  to  diversify,  manage 
complex risks, and pursue long-term investment strategies in line with the scheme’s objectives. 
Equity investments are not inherently imprudent; they can be crucial for a diversified, long-
term pension portfolio as long as their risks are well understood and aligned with the scheme’s 
objectives. It would be good practice for managers to document compliance with the principle 
in the statement of investment-policy principles for schemes under the IORP II Directive. This 
document  should  outline  investment  objectives,  diversification  targets,  exposure  limits,  and 
establish  oversight,  monitoring,  and  reporting  mechanisms.  It  should  also  include  rules  for 
managing  liquidity,  quality,  and  conflicts  of  interest.  The  principle  applies  to  both  defined 
benefit (DB) and defined contribution (DC) schemes, focusing on matching assets and liabilities 
for DB schemes and prudent selection and monitoring of investment options for DC plans. 

Option 3 – Enhanced supervision and moral suasion 

Option  3  would  entail  amending  the  IORP  Directive  to  reinforce  supervisory  oversight  and 
governance standards while relying primarily on moral suasion, that is, the use of supervisory 
pressure  and  transparency,  to  encourage  IORPs  to  improve  in  scale,  efficiency  and  scheme 
quality, including through thematic reviews by supervisors focusing on several key aspects.  

To complete the protection of members and beneficiaries of all pension institutions operating 
at  their  own  risk,  the  Member  State  option  to  allow  the  extension  of  the  application  of  the 
Directive  is  reinforced  to  explicitly  allow  extension  to  funded  institutions  that  are  excluded 
from the scope of Directive (EU) 2016/2341, in particular those that constitute an important 
component of the overall employment-related retirement landscape alongside IORPs, as well 
as  institutions  providing  only  personal  pensions  and  not  subject  to  other  Union  prudential 
legislation.  For  funded  institutions  operating  pension  schemes  under  Regulations  (EC)  No 
883/2004 and (EC) No 987/2009, this would only be possible insofar as it is compatible with 
the obligations arising from those Regulations. 

These regular reviews by supervisors would cover investment performance, the cost efficiency 
per participant, the fulfilment of indexation promises, and any curtailment of benefits due to 
performance or cost-related issues, while experiences and best practices will be shared within 
EIOPA. Furthermore, they would assess whether the investment strategy is properly aligned 
with  obligations  and  evaluate  the  competence  of  trustees  or  boards  overseeing  these 
investments.  The  strengthened  PPP  would  be  part  of  the  supervisory  dialogue.  In  case  of 
shortcomings remedial plans have to be agreed and acted upon, that could – where needed – 
consider potential means to scale up. Also, transfer rules would be simplified to make the IORPs 
framework more accessible, especially in Member States where it is currently underdeveloped.  

58 

 
Beyond  moral  suasion,  this  option  would  implement  most  of  the  recommendations  from 
EIOPA’s advice and technical input. 

In consequence, the core design features of Option 3 would be:  

•  A regular supervisory dialogue touching upon a series of early warning parameters, such 
as: insufficient levels of funding ratio, high costs per participant, backlog in indexation 
(i.e.  shortfall  in  promised  payouts),  moderate  returns,  number  of  benefit  cuts 
implemented, low number of scheme participants, closed funds, a fund with an aged 
population (so-called grey fund), declining number of (active) contributors, frequent or 
long-term  vacancies  at  fund  management  or  supervisory  board,  limited  investment 
experience of directors. The frequency and type of supervisory review would be based 
on a risk-based approach, proportional to the risks and deficiencies identified. 

•  Notification  or  disclosure  obligations  in  cases  of  sustained  underperformance.  This 
would ensure members are informed of risks to expected benefits and create pressure 
on providers to take corrective action (“accountability and disclosure”). 

•  National Competent Authorities (NCAs) to require a plan for remedial action, where 
fund  boards  need  to  indicate  how  they  would  manage  identified  vulnerabilities,  e.g., 
where building scale is a solution, by recourse to asset pooling, appointment of multi-
scheme asset managers or scheme mergers. Grant NCAs to set deadlines for remedial 
action – e.g., with respect to increasing low technical provisions or take measures to 
halt a drop in the number of participants. 

•  Failure  to  implement  the  action  plan  and  address  deficiencies  could  be  followed  by 

appropriate supervisory measures..  

This option would also involve amending the IORP II Directive to implement most of EIOPA’s 
recommendations  (126),  with  the  objective  of  gradually  improving  investment  practices, 
transparency and governance across supplementary pension schemes, as well as the optional 
application  of  the  Directive  to  other  funded  pension  schemes.  The  focus  would  be  on 
strengthening  risk  management  frameworks,  improving  disclosure  on  costs  and  returns,  and 
supporting more sustainable and balanced investment strategies. At the same time, the reform 
would seek to address structural barriers that limit efficiency and scale, such as fragmentation, 
limited cooperation between schemes, and uneven supervisory capacity. While these measures 
would not transform the landscape immediately, they could over time enable IORPs to operate 
more efficiently, manage risks more effectively, and offer more stable outcomes for members. 
The amendments would also aim to adjust certain design features of the current framework to 
make it more adaptable and functional in Member States where IORPs remain underdeveloped. 

Option 4 – Minimum scale and efficiency requirements 

This option would retain all the elements of Option 3, including thematic reviews, soft nudges, 
improved supervisory practices, and the implementation of most of EIOPA’s recommendations. 
However,  it  would  go  further  by  introducing  binding  regulatory  requirements  and  specific 
supervisory interventions to address persistent structural inefficiencies.  

A key measure would be the establishment of a mandatory minimum efficient scale for IORPs. 
This could include providing templates for winding up or merging schemes in cases where the 

126 EIOPA Technical advice for the review of IORP II Directive, 28 September 2023. 

59 

 
 
minimum efficient scale and performance are not achieved. Furthermore, it could involve the 
mandatory appointment of scheme trustees if existing vacancies are not promptly filled or if 
current officeholders lack the necessary skills required for effectively managing an investment 
portfolio strategy.  

In consequence, the most salient features of Option 4 would be the following:  

•  Mandatory  asset  pooling  requirement  for  IORPs  below  a  certain  threshold  of  assets 
under management, unless they can clearly demonstrate strong governance and value 
for members. 

•  NCAs to require all small schemes (defined as below a minimum efficient threshold of 
around 5 billion euro) with persistently low returns, high cost per member ratios, limited 
diversification, or governance failures to pool assets with other schemes, to join larger 
consolidated vehicles or transfer their portfolios to such larger vehicles. 

•  NCAs  to  draw  up  rules  and  guidance  on  “collective  value  transfer”  (e.g.,  make 
liquidation  easier  for  funds  that  cannot  comply  with  governance,  scale  and/or 
performance  requirements).  NCAs  would  also  establish  simplified  procedures,  e.g.  a 
digital notification form  with  explanatory notes as  in  the case of the Dutch National 
Bank, so that pension funds could report the collective value transfer and the liquidation 
of  the  pension  fund  easily  and  send  the  required  documents  to  beneficiaries  and 
regulators. 

Ultimately,  this  approach  would  provide  for  strong  supervisory  powers  to  address 
underperformance  and  other  inefficiencies  and  thus  foster  trust  in  occupational  pension 
schemes  by  promoting  stronger  governance,  higher  transparency  and  more  sustainable 
outcomes. 

5.2.2.2 Fostering access to attractive pension products through the review 

of the Pan-European Pension Product (PEPP)  

People that are well informed and overcome procrastination bias may still be discouraged from 
investing  parts  of  their  savings  in  pension  products  when  they  encounter  high  fees  and  low 
expected  returns.  Making  pension  products  more  attractive  is  therefore  an  important 
complement to incite engagement with the pension issue and foster a higher participation in 
pension savings. To ensure citizens’ trust  in  long-term  investment  products  such as  pension 
products, it is therefore central to both address the net risk/return ratio and to ensure the product 
provides a diversified asset allocation suitable for a multi-decade investment with an organised 
decumulation phase.  

At the initiative of the Commission, the Union legislator established a legal framework for a 
Pan-European  Pension  Product  (PEPP)  with  Regulation  2019/1238.  This  voluntary  pension 
product  could  be  offered  across  the  EU  Member  States,  complementing  national  pension 
products. The PEPP regulation ensured the standardisation of core features such as transparency 
requirements, investment rules, switching right and type of investment options. PEPP intended 
to  deepen  the  single  market  for  pension  products  by  offering  savers  a  wider  choice  and 
facilitating  the  cross-border  distribution  of  pension  products.  While  the  European  nature  of 
PEPP should support the needs of people that change residence between Member States, it was 
also  expected  that  the  offer  of  the  PEPP  as  alternative  to  national  supplementary  pension 
products  would  stir  competition  towards  more  attractive  national  pension  products  at  lower 
fees. The PEPP regulation entered into force in March 2022. 

60 

 
As it became evident from the Commission’s public consultations, the current PEPP has not yet 
lived up to its potential. Uptake remains anaemic, with only two providers in the whole EU 
offering the PEPP, which is, clearly, far below expectations and therewith PEPP has also failed 
in triggering more competition on national pension markets towards more attractive terms for 
savers.  Most  participants  of  the  public  consultation  mentioned  that  this  outcome  is  due  to 
several factors of the PEPP design. These include the high cost and complexity for providers to 
offer  the  product  due  to  the  embedded  features  such  as  a  mandatory  advice  component, 
providing  an advised offer across multiple countries, a fee cap of 1% and unfavourable and 
varied national tax treatments for different personal pension products in Member States despite 
a recommendation127 to offer a similar tax treatment in 2017 (see Annex 5 on the national tax 
treatment  for  PEPP),    as  well  as    delays  in  the  implementation  of  the  PEPP  Regulation  by 
Member States. Additionally, some consultation reactions indicated that the PEPP is deemed 
as unwelcome competition to incumbent providers of private pensions, that are offered at fees 
that are often very high on account of their use of traditional (physical) distribution channels. 
In  other  words,  offering  PEPP  with  its  low  profit  margin  would  impinge  on  the  high  profit 
margins generated by other products.     

The Commission’s 2025  targeted consultation  on pensions reform  as  well as EIOPA’s 2023 
Technical  Advice  on  PEPP  Market  Development indicate  that  the  main  obstacles  to  PEPP 
uptake are: (i) lack of cross-border scalability; (ii) lack of immediately recognisable product 
features; (iii) and limited retail investor familiarity with the concept of a PEPP. Stakeholders 
agreed  that  PEPP  Regulation  (EU)  2019/1238  pursued  the  goal  of  promoting  cross-border 
personal  pension  saving  through  a  harmonised  product.  However,  they  observed  that  its 
implementation has been hindered by:  low provider uptake largely due to the  complex design 
features prescribed in the PEPP Regulation and its delegated rules, combined with the fee cap 
for the basic PEPP; as well as the lack of interoperability with existing investment product and 
fund structures, while also pointing to fragmented national tax treatment. 

Box: Differences between PEPP and Savings and investment accounts 

To  foster  a  stronger  investment  culture  among  EU  citizens  and  transform  how  they  engage  with 
capital  markets,  the  Commission  has  recently  presented  a  recommendation  to  Member  States  to 
introduce  Savings  and  Investment  Accounts  (SIAs)  as  tools  to  make  investing  simpler,  more 
accessible and more attractive for retail investors. SIAs and PEPP share several commonalities in 
view  of  the  objective  to  improve  how  people  save.  However,  the  SIA  and  the  PEPP  are 
complementary  instruments  that  differ in  how they  support  people and  serve different  investment 
goals. 

The SIA is used to buy and hold investments such as shares, bonds, units of UCITS and other financial 
instruments. With an investment account, the investors decide on their own what investments to hold 
in the account, be it shares, bonds or investment funds. PEPPs on the other hand are prepackaged 
investment products in which the investor can choose the risk profile of the investment but cannot 
choose the underlying assets. The allocation of the savings in assets and their reallocation over time 
(‘glide path’) is done by the provider. People can set up a regular inflow into a PEPP akin a saving 
plan,  which  the  PEPP  providers  invest  in  financial  securities.  In  an  SIA,  the  saver  decides 
discretionarily when, what kind of financial assets and how many they want to buy or sell. They also 
need to decide on re-investing or consuming the inflows onto the SIA from paid interest and dividends 
and maturing bonds. 

127 Commission recommendation of 29 June 2017 on the tax treatment of personal pension products, including the 
pan-European Personal Pension Product, C(2017) 4393 final.  

61 

 
 
In terms of objectives, SIAs are a tool to increase income and personal wealth via capital market 
investment that could support a broad range of investment goals such as saving up for a house or for 
a personal life project. Unlike SIA, PEPP is a specific investment product to save for retirement with 
a time horizon that stretches over decades rather than years. Therefore, PEPP includes specific aspects 
that are not included in the SIA and are typical of pension products such as a restriction on withdrawal 
of funds, , specific risk-management and investment strategies reflecting the long-term nature, such 
as  life-cycling  of  the  underlying  assets  with  automatic  adjustments  of  risks  as  the  retirement 
approaches and a structured decumulation phase once the date of retirement approaches. 

Policy Objectives of the PEPP review 

The  aim  of  the  review  is  to  create  a  framework  for  a  personal  pension  product  that  offers 
opportunities for solid retirement savings and responds to diversified users’ expectations. The 
revision  of  the  framework  should  allow  for  increased  uptake,  choice  and  competition.  To 
achieve this, in addition to the baseline scenario, three options are presented. 

Option 1: Baseline scenario 

Under Option 1, the Commission would not take any immediate action to amend or accelerate 
the review of the PEPP Regulation. Instead, it would follow the original timeline established 
by Article 73 of the PEPP Regulation. The rationale would be that PEPP is still in its early 
stages. 

Option 2: PEPP with flexible design features while keeping the fee cap  

Option 2 is to leave the entire design features and distribution modalities for the Basic PEPP to 
the discretion of the PEPP provider. The dual structure, which allows for offering both a basic 
version and tailored versions of the PEPP, would be removed. The only regulatory constraint is 
that the emerging product can be sold within a modified (ex VAT) fee cap of 1% (128). It is in 
line with the observation that the current 100 basis point fee cap is not impossible to comply 
with and had no hindered the emergence of two cost efficient PEPP providers. 

Option 3: Basic PEPP without fee cap  

Option  3  is  based  on  the  premise  that  the  fee  cap  is  removed  as  it  was  suggested  by  most 
participants in the targeted consultation to be the principal feature that inhibits the more wide-
spread take-up of the basic PEPP (“lack of cross-border scalability”). Unlike for Option 2, the 
dual structure of the PEPP would be maintained with the possibility to offer variants only if the 
basic PEPP is offered. This Option 3 entails a basic PEPP that is designed to remain affordable, 
accessible, and simple for savers across the EU. To ensure cost efficiency, the Basic PEPP may 
not provide any capital guarantees and must be suitable for sales without additional investment 
advice because it is suitable by design, despite the lifting of the fee cap. In the absence of the 
(cruder) tool of a fee cap, Option 3 will have to be more specific in the design features, so that 
the basic PEPP remains affordable accessible and simple for pension savers. Therefore, Option 
3 will introduce additional design features: a basic PEPP needs to contain a simple lifecycle 

62 

 
 
 
 
 
 
 
glidepath to ensure that asset allocation evolves towards more liquid and safer asset classes as 
the  pension  saver  approaches  retirement.  To  remain  cost-efficient,  the  Basic  PEPP  needs  to 
accomplish  its  lifecycle  glidepath  by  investing  in  cost-efficient  underlying,  such  as  listed 
shares, bonds, non-complex UCITS funds or money market instruments. Tailored PEPPs would 
present  additional  features  and  more  sophisticated  investment  strategies,  but  like  the  Basic 
PEPP, they would also be subject to the value-for-money framework and included in EIOPA’s 
register.  

In  the  initial  phases  of  the  glidepath,  a  higher  allocation  could  be  made  to  growth  shares, 
gradually  evolving  towards  more  value  (dividend)  shares  and  increased  allocation  to  fixed 
income assets as retirement and decumulation approach. A small pocket of unlisted assets is 
possible and would suit particularly the initial stages of the lifecycle but must not exceed 5% 
of the asset allocation.. The main features of the basic PEPP in Option 3 would be: no embedded 
capital  guarantees,  no  obligation  to  provide  the  basic  PEPP  with  advice  due  to  its  inbuilt 
features, no fee cap and instead a value for money assessment. The PEPP would be eligible for 
auto-enrolment schemes that benefit from employer contribution and suppliers have the choice 
to  define  the  type  of  pay-out  phase  in  agreement  with  the  client  under  national  law  where 
applicable 

Option 4: Basic PEPP without fee cap complemented by an autonomous tailored PEPP  

This option is also based on the assumption that the fee cap for the Basic PEPP is removed. 
But,  contrary  to  Option  3,  this  option  would  allow  providers  to  offer  PEPP  with  different 
options, without an obligation to also offer the basic PEPP. Option 4 acknowledges that people 
have  different  preferences  and  that  a  more  sophisticated  asset  allocation  (beyond  mere  life 
cycling) can provide additional return for the pension portfolio. This additional tailored PEPP 
option is likely to come at a higher cost and, based on the particular structure chosen, at either 
higher risk due to the asset allocation chosen or a lower risk if guarantees are added.  

Option 4 rests on the premise that more variations in the design of a PEPP would on average 
result  in  better  gross  returns.  It  also  acknowledges  that  people  value  security  and  are  often 
willing to pay for guarantees (129), which this option allows the provider to offer as part of a 
tailored PEPP. More complex variations offered through the tailored PEPP would also require 
at least some basic form of investment advice to ensure that the potential subscribers understand 
the more complex product features and options and, for example, the implications of capital 
guarantees on the expected return for a multi decade product. Option 4 would equally require a 
value-for-money to ensure supervisors can at least with hindsight check that costs stay under a 
reasonable control. Apart from the features embedded in option 3, the main “value-added” of 
the PEPP in Option 4 would be that savers would have a choice that would correspond to their 
preferences – either a simple cost-efficient personal pension products (basic PEPP) or a more 
sophisticated one reflecting their potential preferences (tailored PEPP).  

5.3 Options discarded at an early stage 

Legislation on the use of and good practices in auto-enrolment, the establishment of an EU wide 
pension tracking systems and private pension providers delivery of data for a pension dashboard 
were dismissed early on. Harmonised rules on auto-enrolment and pension tracking systems 

129 In a survey among young people, 82% of 651 young people from 33 European countries surveyed mention that 
they  would  pay  more  for  better  coverage  and  benefits.  see  https://insuranceeurope.eu/news/3351/europe-wide-
survey-young-people-say-buying-insurance-should-be-simpler-and-smarter. 

63 

 
 
look inconsistent with different starting positions of Member States’ pension systems. Since 
participation in occupational pensions is strongly driven by domestic factors, harmonised rules 
would  undermine  their  effectiveness  in  fostering  supplementary  pension  savings.  Most 
information  from  pension  tracking  systems  would  be  for  domestic  use,  the  ETS  is  the 
instrument to ensure inter-operability of national tracking systems across Member States. The 
imposition of harmonised reporting obligations to feed pension dashboards be less effective and 
probably burdensome in the current context of widely diversified pension systems. Already the 
report  of  the  CMU  High  Level  Forum  advocated  that  the  EU  encourages  and  supports 
developments in the Member States and discussions with the Member States and consultation 
with stakeholders revealed that binding legal instruments are no feasible policy instruments in 
this area.  

The option of dismissing the legislative framework for PEPP in view of its  low take up was 
also  discarded. Discussions with  existing  and potential providers helped  identify parameters 
that could make PEPP an attractive pension product. 

6. 

WHAT ARE THE IMPACTS OF THE POLICY OPTIONS? 

6.1 Recommendation on pension tracking, pension dashboards and auto-enrolment 

The impact of a recommendation will depend on how Member States make use of them. The 
effect will be different across Member States depending on whether they take an enabling or a 
promoting  approach,  how  they  use  the  elements  incorporated  in  the  promotion  approach. 
Furthermore,  differences  in  starting  positions  and  need  to  adjust  to  country-specific 
circumstances  will  make  the  impact  different  across  Member  States.  In  this  context,  a 
recommendation will not have an effect if the aspects in scope are already covered and well 
developed in a Member State. 

While  the  primary  objective  of  the  measures  discussed  below  is  an  increase  in  the  rates  of 
participation  and  saving  in  supplementary  pensions,  the  social  effect  depends  on  whether 
vulnerable population groups can also benefit from its introduction. Vulnerable groups would 
benefit at least indirectly since a stronger supplementary sector creates room for manoeuvre for 
public pensions  to  fulfil its broad obligations, including  its redistributive role and providing 
adequate  support  for  those  requiring  non-contributory  benefits.  The  direct  effect  depends 
primarily on the design of the eligibility conditions and incentives provided, which will be at 
the discretion of the Member States rather than on the different options presented in the previous 
chapter. Despite this limitation to quantify the social effects, the more people, including lower-
income groups, participate in supplementary pensions, the more favourable the effects. Such 
effects can however not be taken as given but will depend on the design of the measures (see 
Annex 2 for a more detailed discussion). 

6.1.1 Pension tracking 

Since information and transparency are a precondition for saving decisions, pension tracking 
systems have a strong enabling character to support retail savers in identifying their pension 
claims and possible gaps and act upon them. The analysis in Annex 3.2 summarises the main 
transmission chains and their empirical support that underpins the comparison of the different 
option’s impact in this section. 

With regard to the first, the status quo option without further supportive EU action, it can be 
expected that the developments of national pension tracking services will remain relatively slow 
and sporadic, with a high probability of non-compatible solutions, hindering access to pension 

64 

 
information,  pension  transparency  and  financial  planning  both  at  national  and  cross-border 
level, and thus undermining pension adequacy for individuals . 

The  second  option  consists  of  a  recommendation  addressed  to  Member  States  to  develop 
national  pension  tracking  services,  also  outlining  recommended  design  features  of  such 
services, building on the technical advice prepared by EIOPA. Such a recommendation would 
provide a clear political signal at EU level on the importance of pension tracking, reinforcing 
the demand for tracking services. At the same time, it will provide guidance with regard to the 
design and set-up of tracking services, thus contributing to the quality and compatibility of the 
services put in place, including compatibility with the ETS to foster the development of cross-
border pension tracking in the EU. Beyond inviting Member States to develop new tracking 
services, it will also guide them to increase the coverage and improve the design of existing 
services,  while  leaving  room  for  necessary  flexibility  in  the  view  of  diversity  of  national 
pension landscapes.  

Somewhat encouragingly, at least in the area of social protection, there is a strong track record 
of  recommendations  backed  up  by  support  and  monitoring  mechanisms  shaping  policies  at 
national  level.  E.g., within three years of the adoption of the Recommendation on access  to 
social protection, 15 Member States had taken steps to improve participation to social protection 
schemes for specific categories of workers and the self-employed (130); following the adoption 
of the Recommendation on long-term care in 2022, all Member States have appointed national 
coordinators  and  submitted  implementation  plans  that  show  ambitious  policy  measures  and 
investments (131).  

In consequence, a recommendation has the potential to boost the development of high-quality 
and  comprehensive  national  pension  tracking  services,  in  particular  if  social  partners  and 
stakeholders  are  duly  involved,  and  financial  and  technical  support  is  available  from  EU 
programmes (e.g. the German pension tracking service was developed with RRF support (132)).   

The third option, imposing a legal obligation on pension institutions to offer pension tracking 
services, would allow pension savers receiving information on their supplementary pensions in 
aggregated format and in a more harmonised format than in the currently varying formats of 
pension benefit statements. Some standardisation of the information may even foster IORPs 
and PEPPs delivering pension benefit statements to their members more efficiently. It, however, 
appears problematic both from legal and policy perspective to apply it to other types of pension 
providers.  A  comprehensive  pension  tracking  system,  which  provides  individuals  with  a 
complete  overview  of  their  pension  rights,  by  definition  covers  both  statutory  and 
supplementary (occupational and personal) pension schemes, which are subject to different EU 
legal frameworks. Statutory pension schemes are considered part of statutory social security in 
the  understanding  of  the  Regulation  883/2004  (133),  whereas  some  occupational  pension 

130 Report from the Commission to the Council on the implementation of the Council Recommendation on access 
to social protection for workers and the self-employed, COM/2023/43 final. 
131 
inclusion/social-protection/long-term-care_en . 
132 https://commission.europa.eu/projects/digitalisation-administration-implementation-online-access-act_en. 
133  Regulation  (EC)  No  883/2004  of  the  European  Parliament  and  of  the  Council  of  29  April  2004  on  the 
coordination of social security systems. 

https://employment-social-affairs.ec.europa.eu/policies-and-activities/social-protection-social-

65 

 
 
schemes  are  covered  by  the  Directive  (EU)  2016/234  (134)  and  some  personal  schemes  by 
Regulation (EU) 2019/1238 (135).  

6.1.2 Pension dashboards  

The creation of a pension dashboard as monitoring tool would not have a direct impact on the 
performance of national pension systems. The intended direct effect would be to incentivise 
Member States to undertake pension reforms, which will ultimately lead to a better performance 
in terms of fulfilling the adequacy and sustainability objectives.  

In Option 1, Member States would continue to base policy decisions on pension reform on the 
currently  available statistical  information  and ad hoc analysis.  They  can  use the data that is 
already compiled for all EU Member States for the Ageing Report and the Pension Adequacy 
report  and  the  various  OECD  pension  monitors  to  assess  the  performance  of  their  pension 
system relative to peers. These data sets are very detailed and granular, therefore more useful 
for policy analysis than as a tool to inform  about aggregate pension gaps and to create peer 
pressure on Member States to act.  

Option 2 could entice them to cater for a regular and forward-looking approach that gives due 
prominence  to  supplementary  pensions.  It  could  also  initiate  the  development  of  evaluation 
tools at national level (136). The national dashboard would support the design of appropriate 
policy  measures.  The  enhanced  transparency  could  also  lead  to  greater  awareness  in  the 
population  about  the  need  to  cater  for  their  retirement  income,  i.e.  a  tool  reinforcing  the 
effectiveness of pension tracking.  

A recommendation to create a national pension dashboard that includes supplementary pensions 
could  particularly  entice  those  Member  States  that  do  not  provide  projections  about 
supplementary pensions to the Ageing Report. Eleven Member States already delivered such 
data for the Ageing Report (137), which suggests that political recognition of the importance of 
supplementary pensions is an essential driver for their statistical coverage. It also suggests that 
it  is  not  impossible  to  do  so.  Among  those  that  have  not  projected  supplementary  pension 
expenditure, seven linked it to data and six to resource issues in their input to the EIOPA advice. 
Further four referred to  complexity and three that  it was not  necessary to do projections on 
supplementary pensions since these do not endanger the sustainability and adequacy of public 
pensions.  

National  pension  dashboards  under  Option  2  would  be  tailored  to  Member  States’  starting 
positions in terms of data availability and policy objectives. They could stimulate public debate 
about pension reform and in conjunction with pension tracking systems incentivise individuals 

134 Directive (EU) 2016/2341 of the European Parliament and of the Council of 14 December 2016 on the activities 
and supervision of institutions for occupational retirement provision (IORPs). 
135 Regulation (EU) 2019/1238 of the European Parliament and of the Council of 20 June 2019 on a pan-European 
Personal Pension Product (PEPP). 
136 A Commission feasibility study on micro simulation models dates back to 2008, since then the Commission 
developed  tools  in  this  area.  See  Tarki  Social  Research  Institute  (2008),  PENMICRO  -  Monitoring  pension 
developments through micro socio-economic instruments based on individual data sources: feasibility study- Final 
Report for The European Commission. https://www.tarki.hu/eng/penmicro-2008 and d’Andria, D. et al.  (2020) 
‘EDGE-M3:  A  Dynamic  General  Equilibrium  Micro-Macro  Model  for  the  EU  Member  States,  JRC  Working 
Papers on Taxation and Structural Reforms No 03/2020.  
137 A number of Member States already provide a breakdown of theoretical replacement rates for public, mandatory 
and voluntary pension schemes to the OECD, broadly the same that deliver data on supplementary pensions to the 
Ageing report. 

66 

 
 
to care about their retirement savings. However, they would not allow comparisons of pension 
systems’ performance across Member States.  

Since this option gives discretion to Member States in which and how they compile data and 
undertake  the  projections,  the  data  will  not  be  comparable  across  Member  States.  The  non-
comparability effect could be reduced if Member States were transparent about which pension 
schemes are included and excluded and if they agreed for the purpose of the projections on a 
set of common definitions and macroeconomic assumptions. 

Option 3 would accomplish comparability of pension indicators across Member States and a 
dashboard could become a tool for discussion among Member States about good practices and 
relevant experiences. The pension index compiled by Mercer, comes close to a tool that can 
deliver  pointed  messages  via  a  consistent  ranking  across  the  three  dimensions  of  adequacy, 
sustainability  and integrity covered in  the index  (see Table 9 in  Section 3.2).  However, this 
index is not entirely data driven as it combines statistical data with the assessment of national 
pension experts (138). 

This option would impose on the Commission to establish a tool for pension monitoring. The 
recommendation would invite Member States to submit data for that purpose (139). Involvement 
of Member States appears crucial as they are best placed to identify relevant data sources. They 
could  thus  be  recommended  to  identify  suitable  statistics  and  indicators  and  to  share  them. 
Mandating  pension  supervisors  and  EIOPA  to  collect  and  centralise  the  data  would  imply 
economies of scope as they already possess a lot of the data on supplementary pensions. They 
may, however, face barriers to receive data (140), which would need to be addressed. 

However, already the first step of establishing a joint classification will be difficult given the 
stark differences in Member States pension systems (141). It will delay the production of such a 
European pension dashboard. This is a major disadvantage of Option 3. In consequence, it will 
also be challenging to define and impose a harmonised approach on pension products and assets 
for which data will need to be collected. 

Respondents to the targeted consultation considered the inclusion of supplementary pensions 
and a forward-looking approach the most important qualities for a dashboard. They attributed 
less priority to other qualities such as a granular breakdown or cross-country comparability. In 
relation  to  the  importance  of  dimensions  to  be  covered,  pension  adequacy,  i.e.  income 
replacement  was  quoted  as  the  most  important  dimension  that  dashboards  should  cover, 
followed  by  sustainability.  Other  dimensions  were  reported  of  less  importance  (see  Table 
below).  Submissions  by  public  institutions  attributed  a  high  priority  to  cross-country 
consistency, unlike other stakeholder groups. 

Table 131: Consultation replies about pension dashboards (ranking with 1 the most important dimension and 5 the least 
important one) 

138 3 out of 11 questions on pension adequacy are sourced from data, 5 out of 9 on pension sustainability and 1 out 
of 13 on integrity. 
139 The High-level forum on the Capital Markets Union recommended that the first step of a pension dashboard 
consist in the Commission developing a reporting template to be used by all providers of occupational and personal 
pensions to submit data to their national authorities. Member States would then be requested to aggregate the data 
and send to a centralised point where indicators on sustainability and adequacy would be calculated. 
140 For example, concerning data that is not covered by their mandate. 
141 On the difficulties of creating such a taxonomy, see Lanoo, K. et al. (2014), ‘Pension Schemes’, Study for the 
European Parliament. IP/A/EMPL/ST/2013-07, August 2014. 

67 

 
 
Qualities of a dashboard 

Coverage (1) 

Breakdown (2) 

Forward-looking 
(3) 

Consistency 
across Member 
States (4) 

Other elements 
(5) 

of 

Number 
responses 
Average 
ranking 

71 

1.9 

67 

2.9 

72 

2.3 

68 

3.2 

18 

3.0 

The importance of dimensions to be covered 

Income 
replacement (6) 

Pension 
sustainability 
(7) 

Contribution to 
poverty 
reduction and 
equality 

Fiscal costs 
now and in the 
future 

Other (8) 

of 

69 

71 

59 

1.7 

Number 
responses 
Average 
ranking 
Notes (1) Detailed data about occupational and personal pensions, in addition to statutory pension, (2) pension 
data by different cohorts of the population (e.g. by gender, age, type of employment, economic sector, income, 
etc.),  (3)  projection  of  pension  adequacy  and  sustainability,  based  on  transparent  and  robust  assumptions,(4) 
consistent data and methodology across Member States to allow for comparisons the level of retirement income 
relative to work income now or in the future (5) other included avoidance of reporting burden, (6) the level of 
retirement income relative to work income now or in the future, (7) measured by its capacity to deliver a decent 
level of retirement income in the next decades in face of a declining working age population, ( 8) others mentioned 
were tax treatment, contributions and that the ranking would depend on the target audience. 

2.0 

3.4 

3.2 

2.8 

62 

17 

6.1.3 The possible impact of auto-enrolment 

The  concept  of  auto-enrolment  in  pension  schemes  is  designed  to  help  people  save  for 
retirement  by  automatically  signing  them  up  unless  they  choose  to  opt  out.  This  approach 
addresses a widespread tendency to delay saving, which often leads to inadequate retirement 
funds. Countries that introduced auto-enrolment have seen increases in participation rates and 
the more detailed analysis in Annex 3.1 details good practices and suggests the magnitude of 
the increase in  the participation  rate depends importantly on the design features. The use of 
good practices would therewith be a key parameter of the impact. 

The replies to the targeted consultation revealed that stakeholders consider the creation of a 
legal framework the most important role for the public sector (see table below). Tax incentives 
or public subsidies for the population  follow at  second place. Respondents  ranked the other 
asked public tasks at a comparable level, with somewhat less priority allocated to tax incentives 
for employers and with administrative support (Option 4) ranking at lowest priority. 

The status quo - Option 1 implies that Member States that consider auto-enrolment as part of 
pension reform will do so. They can make use of the good practices identified in the AE study 
and complement it with experiences made in the meantime in other Member States, for example 
Ireland.  The  observation  that  the  release  of  the  AE  study  did  not  trigger  debates  on  auto-
enrolment in most Member States suggests that not many other Member States will use this tool 
to increase the participation in supplementary pensions. The Commission’s use of soft tools 
such as speeches, participation in conferences, interaction with civil society is unlikely to create 
sufficient political momentum.  

The  recommendation  on  auto-enrolment  aims  to  create  political  momentum  to  support  its 
introduction and create the appropriate preconditions. The enabling approach in Option 2 can 
foster public debate and facilitate the introduction of an auto-enrolment system. In particular, it 
will raise awareness on the need to promote supplementary pensions and create the relevant 

68 

 
 
 
preconditions  for  that  purpose.  Sufficiently  strong  supervision  as  economic  preconditions 
should already exist in most Member States and the other parts of the pension package analysed 
in  this  document  aim  to  ensure  that  auto-enrolled  savers  earn  a  decent  return  on  their 
contributions.  Access  to  IORPs,  as  well-regulated  financial  vehicles  for  pension  saving,  is 
accomplished  through  the  IORP  II  Directive.  Its  review  and  the  clarification  of  the  prudent 
person principle will improve IORPs’ capacity to generate decent returns for retirement savers. 
The PEPP review has also the objective of allowing access to profitable investment possibilities, 
either  via  the  use  of  PEPPs  themselves  or  via  the  competitive  pressure  they  will  exert  on 
underperforming national pension products. 

The  comparison  of  experiences  with  auto-enrolment  from  other  countries  suggest  that  the 
impact on participation rates is limited if Member States do not accompany them with a good 
design of the measure. A further disadvantage is that even in the simplest approach employers 
are concerned about the possible administrative burden and costs, as well as risks to established 
occupational pension practices – especially those organised by social partners. These concerns 
were  frequently  raised  in  the  responses  by  business  associations  to  the  Commission’s 
consultation activities in preparing this pensions package. The replies to the consultation also 
suggest  that many other stakeholders value and advocate the use of existing  good practices. 
Such stakeholders may be disappointed if these good practices do not feature prominently in 
either the Commission recommendation or in public debates in the Member States. 

The advantage of a recommendation that includes good practices, which is Option 3, would be 
a  higher  participation  rate  compared  to  the  enabling  approach.  Apart  from  best  practices 
improving the effectiveness of auto-enrolment and reducing the opt-out rate, the inclusion of 
good practices in a recommendation would be a richer public debate that might lead to a higher 
likelihood that Member States use those practices that make auto-enrolment most effective.  

The specific use of good practices would however still depend on the conditions in the Member 
States, which are very different. The recommendation could therefore provide principles for the 
good practices to guide Member States to adjust them to national needs. Thus, the nature of a 
recommendation ensures that Member States would still have a choice whether and which good 
practices they want to apply. The table below summarises the responses of stakeholders of what 
they consider the prioritisation of good practices. To the extent the inclusion of good practices 
translates into a more granular discussion, awareness in the population about the importance of 
supplementary pensions will increase and individuals will be more likely to understand and take 
action. 

Table 142: Hierarchy of best practices along their importance, stakeholder replies to the targeted consultation 

Average  Number 

Set the relevant legal framework 
Tax incentives or public subsidies to the target population 
Detailed guidance to employers and other bodies 
Comprehensive and impartial information to the target population 
Others * 
Tax incentives or compensation for employers or other bodies that administer enrolment, 
contributions and pay-outs 
Administrative support 

1.3 
3.0 
3.6 
3.8 
3.9 

4.1 
4.9 

69 
64 
59 
54 
15 

58 
50 

Note:  Average  measured  as  priority  on  a  scale  1  to  7  with  one  the  most  and  8  the  least  important,  frequency 
measured as how often referred to in the 112 responses to the consultation. * Under “others”, some stakeholders 
referred to the design of default options. 

69 

 
 
 
As possible disadvantage of Option 3, the inclusion of good practices, is likely to lead to public 
debates in Member States about the introduction of auto-enrolment becoming complex. With a 
view  of  the  tendency  of  political  debates  increasingly  carried  out  via  social  media,  the 
complexity  of  good  practices  implies  a  risk  of  overburdening  stakeholders  and  the  use  of 
simplified messaging. This can, for example, be the case around the question of employers’ 
contributions, their administrative burden and the magnitude of countervailing tax deductions. 
Employers co-financing is a good practice that translates into tax shortfalls for the public budget 
(142). It can be anticipated that the role of tax incentives, highlighted by many stakeholders in 
the  consultation  as  key  to  the  take  up  of  supplementary  pensions,  will  dominate  the  public 
debate and that fiscal costs will have a key influence on Member States’ willingness to follow 
the recommendation. 

The use of a public body in Option 4 to administer pension savings and organise the investment, 
either directly or in form of a master trust, would reduce administrative costs and enable greater 
control  over  the  fees  charged  by  financial  intermediaries.  A  recent  survey  documents  that 
reducing administrative costs in the management of occupational pensions is a key concern of 
employers (143). It would also provide a solution to the portability issue that arises if individuals 
change their employer. These features would be most beneficial in Member States with many 
small firms and without a role of social partners in organising occupational pension schemes. 
Examples of asset-backed (defined benefits) public pension funds indicate that state-sponsored 
pensions asset management may not only be efficient but also effective in providing long-term 
value and defuse sustainability pressures (see box below).  

Making it mandatory for employers to auto-enrol their employees would boost the participation 
rate.  It  could  also  reduce  the  need  for  the  public  sector  to  create  complementing  fiscal 
incentives. Depending on the role of employers’ co-financing that is part of the good practices 
in  Option  3  in  a  mandatory  regime,  tax  losses  for  the  public  might  be  larger  or  lower.  An 
obligation to offer occupational pensions may however undermine the interest of employers to 
make  this  offer  voluntarily  as  a  means  to  attract,  maintain  and  engage  their  workforce.  In 
Member States where terms on occupational pensions are part of collective wage agreements 
between social partners, an obligation to offer occupational pensions could interfere with the 
institutional set up for wage bargaining. 

BOX: The Canadian Pension Plan and the Swedish AP funds: two examples of asset-backed 
public pensions 

Most of public pensions are structured as PAYG systems. However, there are several cases where 
public pensions are partially asset-backed.  

Among the latter ones, the Canadian Pension Plan (CPP) and the Swedish AP funds are two successful 
examples that delivered above average returns over the last years compared to average pension funds 
in OECD countries (4.9% and 1.3% the average nominal and real returns) (144). 

142 Employers’ contributions are costs that reduce their taxable income. See the Table 49 about the tax treatment 
of employers’ contributions in the EU Member States. 
143 WTW Towers Watson (2025), ‘Rethinking retirement plans in Europe – 2025 West European Retirement Plan 
Survey’ reports responses from employers in 10 Member States, concluding that streamlining administration and 
plan management is a key focus of employers. 
144 
https://www.oecd.org/content/dam/oecd/en/publications/reports/2024/11/pension-markets-in-focus-
2024_54fb4783/b11473d3-en.pdf.   

Markets 

Pension 

OECD, 

Focus, 

2024, 

in 

70 

 
 
The CPP (145) is a defined-benefit, asset-backed, income-related pension scheme, mandatory virtually 
to all people that work as employee or self-employed. It is financed via employees and employers’ 
contributions so that the CPP pension income would cover up to 33% of the average work income. 
The CPP is managed by CPP Investments, an independent Crown Corporation established in 1997, 
and its AuM were approximately euro 440 billion at the end of March 2025, of which Euro 404 billion 
pertaining to the base CPP and Euro 36 billion to the additional CPP 146. The CPP is complemented 
by the Old Age Security Program (147) (paid to all those who resided in Canada longer than 10 years 
and whose income is below a certain level) and by occupational and personal pension plans.  

The  Swedish  AP  funds  (148),  also  known  as  “buffer”  funds,  manage  the  mismatch  between 
contributions and pension payments of the income-related public pension pillar, which is a defined-
benefit pension plan (149). Established at a time when contributions exceeded pension payments (150), 
at the beginning of 2025 they were managing the equivalent of Euro 176 billion approximately. Any 
year in which pension contributions are higher than pension payments, the excess is allocated to the 
relevant AP funds. On the contrary, when pension contributions are lower than pension payments, the 
AP  funds  sell  assets  and  cover  the  gap.  Differently  from  the  other  AP  funds,  AP7  manages  the 
contributions to premium pension income of those citizens with income above a certain amount (151), 
which is the defined-contribution component of the public income pension. Contributions of citizens 
that do not make any choice as regards the asset allocation, are invested in the AP7 Såfa, whose assets 
are allocated between the equity and fixed income according to the individual pension savers’ ages 
in  a  lifecycle  approach,  which  reduces  the  assets  allocated  to  equity  as  pension  savers  approach 
retirement. 

The CPP and the AP funds have in common a quite diversified asset allocation across a broad range 
of asset classes and international exposure, with limited domestic assets (152). The exposures to equity, 
including  to  private  equity,  and  real  estate  assets  are  significantly  above  the  average  of  similar 
investments  by  occupational  funds  in  the  EU.  This  evidence  also  chimes  with  the  larger  market 
capitalisation of Canadian and Swedish stock markets in terms of GDP, compared to the EU average 
(153).  

145 https://www.canada.ca/en/services/benefits/publicpensions/cpp.html  
146 The additional CPP is the second tier of the CPP that is funded with additional contributions over the base rate 
for higher-income earners. 
147  Service  Canada,  The  Old  Age  Security  Program  Toolkit.  https://www.canada.ca/content/dam/esdc-
edsc/documents/programs/old-age-security/reports/oas-toolkit/OAS_Toolkit-EN-Static.pdf 
148 There are four buffer funds (AP1-AP4) which differ from each for the allocation strategy, but they share the 
same objective. They are complemented by the AP6, which has the mandate to invest solely in private equity. A 
recent reform will reduce the number AP buffer funds from 5 to 3 with a view to increase efficiency, by merging 
AP1 and AP6 in the others. 
149 The income pension is complemented by the public “guarantee” pension, similar to the OAS in Canada, and by 
occupational and private pension plans. 
150 The first AP fund (AP4) was established in 1974. 
151 Total contributions to public pensions are 18.5% of pensionable income, of which 16% are for the pension 
income and 2.5% for the premium pension income.  
152 At the end of March 2025, the CPP invested about 88% of its total assets outside Canada. The AP funds equity 
investments outside Sweden were about 70% of the total at the end of 2024.  
153 The latest available data for the European Union (2018) indicate a market capitalisation/GPD ratio of 54%. 
This compares to 118% in Canada, and 1245 in Sweden (source CEIC).  

71 

 
 
Base CPP asset allocation                                                              AP buffer funds asset allocation 

The diversified asset allocation and the professionally managed positive investments allowed these 
funds to deliver positive net real returns consistently over the last ten years: the CPP registered an 
annualised nominal return of 8.3% and of 5.6% in real terms (154), while the AP funds delivered an 
average net real return of 7.6%, exceeding the 3% annual growth of the pension income index over 
the same period (155).  

Both the CPP and AP funds also exhibited low operational costs, respectively lower than 30 basis 
points and 7 basis points on average in terms of net assets. 

While  the  pension  benefits  of  the  Canadian  and  Swedish  participants  are  not  related  to  the 
performance of the assets managed by the respective funds, the profitability of the funds have been 
contributing to the overall health and sustainability of the public pension systems in these countries. 

A possible downside of Option 4 could be that the establishment of a public body competes and 
potentially crowds out the activity of private entities. Incumbent IORPs could see their market 
share  challenged.  Moreover,  the  costs  for  the  public  sector  in  organising  supplementary 
pensions will be an additional factor in the public discussion, discouraging Member States with 
limited budgetary room for manoeuvre (Annex 2.1). It could also interfere in Member States 
where  social  partners  or  other  private  entities  already  organise  supplementary  pensions, 
depending on design. A key disadvantage is the risk that many households will understand the 
introduction of auto-enrolment as an enlargement of the scope of the public pension sector. If 
they do so, they may not discriminate between their mandatory contributions to public pensions 
as  “forced  savings”  and  their  contributions  to  supplementary  pensions  as  “optimising  their 
returns  on  savings”.  This  may  have  an  adverse  impact  on  their  perception  of  their  own  tax 
burden, their expectation that their supplementary pensions will be invested in their interest and 
on  their  supply  of  labour.  This  risk  may  be  highest  in  Member  States  where  trust  in  public 
institutions of providing a clear separation between public and private activity is low. 

6.2 IORP Review 

The IORP options ultimately aim to increase the benefits savers can draw from occupational 
pension  schemes  in  terms  of  enabling  IORPs  to  generate  higher  returns.  The  options  differ 

CPP 

Investments, 

154 
content/uploads/attachments/CPP-Investments-F2025-Annual-Report-English.pdf. 
155 
2024.php.  

Report, 

Annual 

2025 

https://www.europeanpensions.net/ep/Swedens-AP-Funds-achieve-combined-result-of-SEK-182bn-in-

https://www.cppinvestments.com/wp-

72 

 
 
 
 
 
between an indirect approach of fostering scale economies through a supervisory environment 
that is more conducive to consolidation and asset pooling (options 2 and3) or through enabling 
IORPs to implement more return-oriented investment strategies. 

The main advantage of Option 1, which involves no policy change, is that it avoids regulatory 
disruption and preserves the current balance between EU and national competences. It imposes 
no new compliance burdens on IORPs or supervisors. However, leaving the current framework 
unchanged  would  likely  perpetuate  inefficiencies,  and  uneven  levels  of  member  protection 
across  Member  States.  This  inaction  would  limit  the  sector’s  contribution  to  financing 
investment  needs  and  hamper  meaningful  progress  toward  a  more  integrated  and  efficient 
European pension landscape. 

The  guidance  on  the  prudent  person  principle  of  Option  2  should  inspire  pension  assets 
investment management, contributing to foster virtuous practices that pursue long-term value 
and return for schemes participants while effectively managing the risks according to the stated 
risk appetite. Since the prudent person principle significantly influences asset management and 
investment strategies for IORPs, encouraging IORPs to avoid excessive reliance on any single 
asset,  issuer,  or  sector  would  impact  investment  diversification.  Additional  guidance  on  the 
principle would mitigate risk and enhance portfolio stability, thereby allowing pension schemes 
to  allocate  resources  more  effectively  across  various  asset  classes,  including  equities  and 
alternative investments. Consequently, there is potential for higher returns within robust risk 
parameters (156). Thus, the risk of significant financial losses is reduced, while the long-term 
sustainability of pension schemes is enhanced. 

Reiterating  that  the  duty  of  care  of  the  IORPs’  boards  towards  members  and  participants 
envisaged by the prudent person principle is not limited to the preservation of the capital but 
also to providing adequate net returns on pension savings would nudge small and inefficient 
IORPs to pool assets or consolidate in larger funds that would be able to access to and diversify 
across a wider range of asset classes, including those with lower liquidity and longer investment 
horizons that can enhance return, spread costs more efficiently, and leverage on more robust 
risk management. The guidance on the principle would thus foster greater accountability and 
transparency, oversight, monitoring, and conflict management, ensuring alignment with stated 
objectives  and  regulatory  standards.  It  provides  stakeholders  with  clearer  insights  into 
investment  strategies,  thereby  fostering  trust  and  confidence  in  the  management  of  pension 
funds.  Overall,  strengthening  the  use  of  the  prudent  person  principle  as  fiduciary  standard 
would enhance diversification, improve risk management, and promote accountability within 
IORPs. It would ensure pension schemes are better equipped to serve the long-term interests of 
savers by balancing the need for security with opportunities for growth. 

Option  3  would  enhance  the  IORP  framework  through  supervisory  improvements,  soft 
regulatory nudges and targeted amendments. The coverage of the prudent person principle in 
supervisory  dialogues  would  increase  its  impact  compared  to  an  unsupervised  guidance. 
Linking the discussion of the prudent person principle with scale and other possible causes of 
underperformance  could  make  the  principle  more  meaningful.  Managers  of  pension  funds 
might be more inclined to seek for asset pooling or consolidation if they understand that scale 

156 Additionally, the principle strengthens risk management frameworks within IORPs by integrating ESG factors 
and mandating robust risk management systems. Managers are required to demonstrate expertise in identifying, 
measuring, and controlling risks, ensuring investments align with the scheme's risk tolerance and liquidity needs. 

73 

 
 
is an important determinant of their capacity to generate higher returns for their members and 
to manage the associated risks.  

The  introduction  of  thematic  reviews  would  encourage  better  risk  management,  investment 
alignment, and governance practices without imposing rigid new obligations. It  would align 
with  the  “social  partnership”  approach  that  underpins  the  successful  occupational  pension 
schemes in many Member States. This option would also make the framework more accessible, 
particularly in Member States where IORPs are underdeveloped, and would also allow Member 
States  to  extend  the  application  of  the  Directive,  on  a  voluntary  basis,  to  other  funded 
institutions operating pension schemes at their own risk. By implementing most of EIOPA’s 
recommendations,  this  option  would  promote  greater  consistency  across  national  systems. 
Regulatory dialogue would further enhance governance, ensuring that investment decisions are 
made by qualified professionals in line with the interests of members and beneficiaries.  

However, because it relies primarily on voluntary improvements and supervisory pressure, the 
impact on achieving economies of scale might take more time and persuasion when compared 
to the more incisive tools deployed in Option 4. Fragmentation and the persistence of small, 
subscale schemes may remain a structural  issue for a somewhat  longer period, especially  in 
markets lacking strong political or economic incentives to expand occupational pensions. 

Option 4 would force a more decisive structural reform, albeit at the price of a more “top down” 
approach involving binding regulatory tools and supervisory powers aimed at achieving critical 
scale  and  improving  governance.  Requiring  a  minimum  efficient  scale  could  promote 
consolidation  where needed, helping to  reduce inefficiencies, lower  costs per members,  and 
allow greater diversification across risks and asset classes, thereby improving the return-risk 
profile of occupational pension schemes. 

On the other hand, binding regulatory requirements and specific supervisory interventions to 
address persistent structural inefficiencies necessitates that these inefficiencies can be identified 
upfront and translated in clear legal requirements. It also requires a sound justification for the 
events and threshold that initiate supervisory action. Given the variety of possible situations 
and  country-specific  environments,  this  is  a  challenging  task.  The  specific  dimension  of 
consolidation as means to address structural inefficiencies is also likely to create tensions with 
the  objective  of  securing  competition,  which  often  means  the  avoidance  of  market 
concentration. Option 4 could face strong stakeholder resistance in its implementation and there 
is a non-negligeable risk that the immediate benefits of a more incisive option would be more 
than neutralized by resistance. 

6.3 PEPP Regulation review 

Since consumers have only been offered PEPP for a short time and in very few Member States, 
there  is  little  information  about  their  interest  in  the  product.  Consumer  association  Better 
Finance  highlighted  the  relatively  high  returns  the  first  PEPP  on  the  market  has  generated, 
which suggests that PEPP has a potential to become a pension product that savers find attractive.   

The  discussion  of  the  impact  of  the  options  below  is  therefore  based  on  discussions  and 
consultations with all stakeholders and Commission staff analysis of possible effects. 

Option 1 would be to maintain the PEPP Regulation unchanged. This scenario would only be 
viable if early signs had shown clear, organic growth. However, the current 1% fee cap, when 
combined with  the other mandatory features, has rendered  the product  unattractive for most 
providers. While the Commission could still modify the amount of the cap or adjust the risk-

74 

 
mitigation techniques through technical standards (level 2 measures), other fundamental issues 
would remain and would require amendments of the PEPP regulation (level 1). Keeping the 
current  framework  unchanged  would  likely  mean  that  the  PEPP  remains  a  niche,  symbolic 
product, rather than a meaningful contribution to closing the EU’s pension savings gap. 

Option 2 would grant PEPP providers greater freedom in their design and distribution strategies 
for the basic PEPP. The choice between life-cycling or other risk-mitigation strategies, such as 
guarantees  will  appeal  to  different  types  of  providers.  Providers  could  differentiate  their 
offerings, potentially resulting in a wider array of innovative and cost-effective products. Such 
diversity in product offerings enhances consumer choice, catering to the varied retirement needs 
and preferences of EU citizens. As the policy retains a fee cap for the basic PEPP, it offers a 
level  of  consumer  protection  against  excessive  charges,  reinforcing  trust  within  the  PEPP 
market. By maintaining the 100-basis point fee cap and removing mandatory product features, 
such as the advice requirement for the Basic PEPP, Option 2 would most likely address the 
above issue of avoiding complex design features.  

However, as the consultation has shown, the 100-basis point fee cap is seen as a major blocking 
factor  to  many  stakeholders.  Many  stakeholders  perceive  the  fee  cap  as  excluding  many 
additional potential PEPP providers, such as the insurance and asset management sectors. In 
practice, the fee-capped Basic PEPP would become an online product offered by neo-brokers 
that  assemble  a  simple,  off-the-shelf  lifecycle  strategy  at  very  low  cost.  Option  2  might 
therefore not sufficiently address the identified problem of low provider uptake. At the same 
time, for such a simple product the current 1% fee cap, in particular if its composition would 
be further adjusted , would also not necessarily lead to better outcomes for savers, nor would it 
ensure a proportional relationship between benefits and returns to savers and expenses borne.  

As  a  result,  stakeholders  advocate  for  the  removal  of  the  fee  cap  for  the  Basic  PEPP  as  an 
impediment to the emergence of more scalable pathways to a personal pension product. The 
rationale  behind  this  preference  lies  in  its  potential  to  be  more  inclusive,  accommodating  a 
broader range of prospective suppliers and investment strategies that underpin the PEPP. Option 
2 would therefore also not address the problem of limited consumer recognition.   

The removal of the fee cap is also portrayed as enhancing consumer choice and accessibility to 
personal pension products across Europe. More inclusivity in terms of providers and investment 
strategies  to  underpin  a  personal  pension  product  are  perceived  as  a  vital  component  in 
achieving  the  overarching  goals  of  the  PEPP  initiative,  which  include  promoting  retirement 
savings  and  ensuring  financial  security  for  individuals  throughout  the  European  Union.  By 
designing a basic PEPP that is essentially cost-constrained to be distributed online-only, Option 
2 would also not address the issue of lack of interoperability with existing product and fund 
infrastructures. Overall, therefore, it is not likely that this option would significantly address 
the pension gap.   

Option 3 therefore proposes the removal of the fee cap for the basic PEPP, which has been a 
request  by  market  participants  and  is  also  acceptable  to  consumer  organisations  if  it  is 
accompanied with sufficient other cost controlling features. It therefore has the potential to alter 
the competitive dynamics in  the market.  Without the constraint of  a fee cap, providers may 
innovate more freely and optimise their cost structures from various angles. This is expected to 
result  in  increased  competition  as  providers  strive  to  deliver  quality,  potentially  resulting  in 
improved features for consumers. The cost of physical distribution is known to be a major cost 
driver for any retail product. To keep costs under control, the basic PEPP would embrace digital 
innovation by favouring distribution via online channels under IDD or as an execution-only 

75 

 
(retirement-suitable) product sold online under MiFID. The tailored PEPP also under option 3 
keeps the advice requirement. 

Furthermore,  PEPP  savers  should  receive  clear  information  on  the  pay-out  options  prior  to 
retirement (lump sum, organised withdrawals or annuities or a combination).  

Option 3 for the basic PEPP would leverage life-cycling investment strategies targeting mainly 
“execution-only investment products, as described in the MiFID framework. The basic PEPP 
would be also allowed to invest a limited amount (maximum 5% of its portfolio) into unlisted 
assets to take advantage of the possibility of better returns. By mimicking the “execution-only” 
investment propositions, Option 3 introduces an execution-only basic PEPP which would have 
instant brand recognition. The basic PEPP aims to merge the “pension suitability” features of 
the PEPP Regulation with the operational success of non-complex products that are currently 
sold on an execution-only basis under MiFID, Article 24. These design features would avoid 
the above issue of overly complex design features.  

Option 3 would therefore be designed to cover a broad scale of investable instruments, efficient 
portfolio management, depositary oversight, and cross-border distribution while maintaining 
the pension purpose and consumer protections of the existing PEPP Regulation. By doing so, 
Option 3 seeks to encourage additional potential providers of a PEPP to enter the PEPP market 
using existing investment products or investment fund ranges. They can embrace existing and 
successful life cycle strategies as investments underpinning the PEPP. This would address the 
above issues of low provider uptake and lack of interoperability with existing product and fund 
infrastructures.  

The basic PEPP is designed as an execution-only product. While it is frequently argued that the 
elderly need in-person advice, the PEPP is a product catering to the population under ca 45 
years. This group of investors is generally digitally savvy and able to navigate e.g. comparison 
website or to purchase products online. The life cycling glide path towards the decumulation 
phase allows the consumer to first profit from multi-decade gains in the capital markets with 
broad diversification, before reducing capital market exposure in a controlled manner.  

On  the  other  hand,  the  basic  PEPP  under  Option  3  cannot  include  guarantees,  as  well  as 
deviations from the most basic form of lifecycle glidepath or invest no more than 5% of unlisted 
assets in its portfolio. However, its features that may appeal to a large part of savers.  

The alternative Option 4 maintains the duality of the PEPP but disconnects the provision of 
tailored PEPP with options from an obligation to offer the basic PEPP. This option comes with 
the advantage that a certain share of private market exposure can be added to the portfolio, even 
beyond  the  early  “growth  face”  of  the  product’s  lifecycle.  It  also  allows  for  other  risk-
management strategies beyond life-cycling, such as guarantees or other strategies adequate for 
retirement savings. This fosters innovation and broadens diversification but also introduces less 
familiar asset classes (and less predictable risk portfolios) into the accumulation portfolio.  

The choice of the preferred option would therefore hinge on whether more consumer acceptance 
would be achieved by relying on a trusted retail brand or by pointing out the diversification 
effects that can be achieved for instance (i) with a portfolio that contains less liquid asset classes 
in  the  initial  stages  of  the”  lifecycle”  or  (ii)  a  more  complex  investment  strategy  that  uses 
derivatives to stabilise or even guarantee investment outcomes.  

The  tailored  alternative  PEPP  allowed  along  the  basic  PEPP  under  Option  4  would  be 
characterised by more sophisticated options (investment and/or risk management) and likely by 

76 

 
higher costs. In other words, while the design features of the Basic PEPP are driven by the aim 
to reconcile per se suitability for retirement savings with choosing the lowest cost alternative 
on  all  the  salient  design  features,  the  tailored  PEPP  is  more  permissive  in  terms  of  product 
features that engender higher cost (in the hope that more complex investment strategies achieve 
either higher return or stable returns with lower volatility). Value for money assessments would 
need to be ensured for both types of PEPP, which are expected to compete. 

In  consequence,  Option  4  would  allow  competition  between  a  basic  PEPP  with  a  simple 
lifecycle glide path and a tailored PEPP with the option for more exposure to illiquid (riskier) 
assets for a longer period in a lifecycle or stabilized return profiles by means of guarantees or 
derivatives used as tools to manage the portfolio more efficiently. While these latter investment 
strategies might enhance return or reduce risk (volatility of performance), they invariably come 
at a cost.  

7. HOW DO THE OPTIONS COMPARE? 

This section compares the options analysed above against three key criteria: (1) effectiveness 
in  accomplishing  the  objective,  (2) efficiency  in  accomplishing  them  at  low  costs  and 
(3) cohesion defined as covering spill over to other policy objectives. 

7.1 Pension Tracking Systems (PTS) 

With  regards  to  pension  tracking,  an  assessment  of  PTS  Option  1  –  status  quo/baseline 
scenario- relying strictly on uncoordinated national initiatives may be insufficient to achieve 
the desired policy objective. The current fragmented landscape and the limited and sporadic 
progress to date in terms of pension tracking underscores the need for a clear EU-level impetus 
to close the existing pension information gaps for individuals. Conversely, while PTS Option 
3 - a binding legal instrument for pension institutions - would provide the highest guarantee of 
achieving legal certainty and a harmonised EU-level action, it does not appear feasible to apply 
it to all types of pension institutions, given their different legal frameworks in the EU.  

Since  the  status  quo/baseline  scenario  (PTS  Option  1)  relies  on  uncoordinated  national 
initiatives, it is not very effective in achieving the desired policy objectives of ensuring adequate 
retirement income through higher participation and savings in supplementary pension schemes 
or products. Member States would neither face an increased incentive nor guidance through 
good practices to prepare pension tracking systems. The current fragmented landscape and the 
limited  and  sporadic  progress  to  date  in  terms  of  pension  tracking  suggests  that  EU-level 
impetus (PTS Option 2) would be more effective to close the existing pension information gaps 
for individuals. A binding legal instrument (PTS Option 3) is the most effective option since it 
provides the highest guarantee of achieving legal certainty and a harmonised EU-level action. 

The nature of a recommendation leaves Member States discretion on how they follow up. A 
recommendation would not increase the costs Member States that would create a PTS without 
a recommendation (PTS Option 1), nor would be expected that the use of good practices reduces 
the efficiency of the measure. Those Member States that do not consider creating a PTS would 
face  higher  costs  if  they  follow  a  recommendation  compared  to  keeping  the  status  quo. 
However, inaction will not yield benefits, so that the option of a recommendation (PTS Option 
2) is more efficient than the status quo (PTS Option 1). The legal instrument (PTS Option 3) 
implies reporting obligations for pension providers, which would need to match the existing 
obligations for IORPs and PEPPs to avoid creating an additional burden. The reporting costs 
would be hard to justify if pension funds are under the legal obligation but there is no pension 

77 

 
tracking system in a Member State that will aggregate the information and make it available to 
pension savers. 

Keeping  the status  quo  on pension information (PTS Option  1) will not  help  strengthen the 
pension  sectors’  contribution  to  the  EU  objectives,  especially  the  objective  to  make  the  EU 
economy more productive and competitive. A recommendation that Member States introduce 
PTS using the good practices (PTS Option 2) would be therefore more coherent with the EU 
objectives.  While  the  legal  instrument  (PTS  Option  3)  might  also  be  more  effective  in 
supporting other EU objectives, it could not be applied to all pension providers. Member States’ 
pension  systems,  often  comprising  statutory,  occupational  and  personal  pillars  are  deeply 
embedded in national social, labour and fiscal regulatory traditions. PTS Option 3 may raise 
significant  concerns  regarding  proportionality  and  subsidiarity,  if  applied  to  all  pension 
providers. 

Table 153: PTS policy options 

Ranking of policy options (1 = best to 3 = worst) 

PTS Option 1 
PTS Option 2 
PTS Option 3 

Effectiveness 
3 
2 
1 

Efficiency 
3 
1 
2 

Coherence 
3 
1 
2 

Against these considerations of effectiveness efficiency and coherence, combining PTS Option 
2, a Commission Recommendation, and PTS Option 3, legal obligation to some categories of 
pension providers, emerges as the most proportionate course of action. Building on the technical 
advice prepared by EIOPA, this approach would provide the necessary political momentum, by 
outlining a common set of guiding principles and best practices in terms of design features to 
foster the development of national tracking systems, combined with the obligation for some 
categories of pension providers, namely IORPs and PEPPs, to report to such systems. It would 
also ensure greater compatibility of these national tracking systems with the European Tracking 
Service (ETS), enhancing the development of cross-border pension tracking.  

A Recommendation would be more appropriate than a Commission Communication as it strikes 
the right balance between effectiveness and proportionality, by catalysing action for developing 
new  tracking  services,  while  also  guiding  Member  States  to  improve  the  design  of  existing 
services. In the area of social protection and within the overall framework of the social Open 
Method of Coordination (OMC), there is a strong track record for tangible implementation of 
recommendations backed up by mutual learning, exchange of best practices, peer reviews, as 
well  as  support  and  monitoring  mechanisms  shaping  policies  at  national  level,  especially  if 
social partners and other stakeholders are duly involved and if financial and technical support 
is  available  from  EU  programmes  (see  section  6.1.1.2).  Accordingly,  this  option  would 
stimulate progress towards the specific objective of increasing information for individuals about 
their future pension levels  and pension products available to  them, without  imposing a one-
size-fits-all solution in an already fragmented situation. 

7.2 Pension Dashboards 

The status quo (PM Option 1) would not entice Member States to create pension dashboards 
and is therefore the least effective in terms of facilitating pension reforms leading to adequate 
retirement income through higher savings in supplementary pension schemes or products. The 
cross-country comparability accomplished through a European dashboard (PM Option 3) will 
make it more effective than the creation of national pension dashboards (PM Option 2) albeit 

78 

 
 
 
the advantage of comparability would need to be based against the national dashboards better 
tailored to Member States needs. Since the existence of a European dashboard does not prevent 
Member  States  from  creating  own  national  dashboards,  this  disadvantage  should  not  be 
significant. By contrast, there is a certain likelihood that the creation of national dashboards 
would benefit from the peer pressure of a European counterpart with data from other Member 
States with wider coverage, more granularity or higher accuracy. 

The efficiency dimension considers the costs of the various options against their benefits. Costs 
of collecting data, making projections and creating dashboards increase with the sophistication 
and granularity of the approach. Costs would be highest for PM Option 3 and lowest for the 
status quo (PM Option 1). The additional costs of moving from national pension dashboards to 
a  European  pension  monitor  depend  on  data  becoming  sufficiently  harmonised.  Creating  a 
classification and mapping all existing pension products already looks challenging against the 
diversity of schemes used in Member States (see Table 50 in Annex 4). These extra costs need 
to be balanced against the benefits of cross-country comparability. Both are difficult to quantify. 
The net benefits attributed to peer pressure at the EU level in fostering domestic pension debates 
and in the preparedness to learn from experiences in other Member States seems impossible to 
quantify. On balance and since the costs are more certain than the benefits, the cost element is 
considered more important for the net benefits than the potential benefits. Therefore, the table 
below allocates a superior ranking for the criterion efficiency to PD Option 2 over PD Option 
3. 

Regarding coherence, the value of better information on smarter policy decision making seems 
undisputed, though it is also evident that good information is not the only critical determinant 
of policy decisions. The coherence of the policy options would still be correlated with their 
efficiency. Since PD Option 1 cements the status quo it would be incoherent with the objective 
to foster transformational change in the EU. It is therefore assessed as the least coherent option.  

Table 164: PD policy options 

Ranking of policy options (1 = best to 3 = worst) 

PD Option 1 
PD Option 2 
PD Option 3 

Effectiveness 
3 
2 
1 

Efficiency 
3 
1 
2 

Coherence 
3 
1 
2 

7.3 Auto-Enrolment (AE) 

The options on  auto-enrolment  vary in  their effectiveness  in  accomplishing the objective of 
higher participation in supplementary pensions. This economic effect can be measured through 
the expected increase in the participation rates if Member States follow the recommendation. 
Social  impacts  will  depend  in  practice  on  how  Member  States  design  their  auto-enrolment 
system with respect to participation of vulnerable parts of the population and allowing sponsors 
to  invest  retirement savings in  projects  delivering on political  priorities, such as innovation, 
competitiveness, the digital and green transition, defence.  

An  enabling  recommendation  (AE  Option  2)  is  likely  to  lead  to  a  higher  economic  impact 
defined as higher participation in supplementary pensions than the status quo (AE Option 1). 
The higher increase in participation rates accomplished in countries that applied good practices 
suggests that the recommended use of good practices (AE Option 3) will lead to an even higher 
participation in supplementary pensions and therewith amplify the effectiveness of introducing 
auto-enrolment.  The  active support through creation  of a public body (AE Option  4) would 

79 

 
 
 
reduce the administrative burden to employers of offering occupational pensions; an obligation 
for  employers  to  offer  auto-enrolment  to  their  employees  would  foster  participation.  Both 
effects would boost the impact of auto-enrolment on the participation rate, making this option 
the most effective.  

However, as all impacts depend on how Member States will make use of the recommendation, 
the diversity of Member States starting positions and pension systems prevents a one-size fits 
all  calculation  of  benefits  and  costs.  To  judge  efficiency,  the  criteria  suggested  consists  in 
anticipating  to  what  extent Member States do not make use of the recommendation or even 
choose  a  more  ambitious  design  than  recommended.  The  latter  would  be  welcome  and  the 
recommendation should be formulated in a way that does not discourage them from doing so. 
Nevertheless, this uncertainty, which is in the nature of a recommendation, makes is impossible 
to undertake a cost-benefit analysis.  

Since few Member States have considered auto-enrolment since the release of the EA study 
that showcased good practices, the status quo (AE Option 1) is likely to lead to no significant 
number of additional Member States following them. The enabling  approach (AE Option 2) 
bears  a likelihood that some Member States will keep the status  quo. This  is  balanced by  a 
significant likelihood that when a Member State designs enabling measures, it also makes use 
of some good practices. The enabling approach would therefore be more efficient than the status 
quo.  If  the  recommendation  suggests  the  use  of  good  practices  (AE  Option  3),  it  appears 
unlikely that Member States do not make use of them. The downside would not be larger than 
under the enabling approach. It is also possible that some Member States create a public body 
(akin Option 4), implying a superior efficiency of AE Option 3 relative to AE Option 2. AE 
Option  4 does  not  allow for overshooting  but  carries a possibility that some Member States 
consider the costs of setting up a public body as too expensive for their budget.  

Coherence  is  assessed  as  the  fulfilment  of  other  policy  objectives.  AE  options  2  to  4  are 
consistent with the objectives of the Savings and Investment Union and the competitiveness 
compass. They support the European Pillar of Social Rights. Differences in the coherence of 
the different policy options will ultimately depend on how Member States implement them. As 
general  direction,  their  degree  of  coherence  is  likely  positively  correlated  with  their 
effectiveness. Given that the status quo option implies very little change, it appears as the least 
coherent. The creation of a public body (AE Option 4) implies that public money is not available 
for other purposes all other things equal. Conflicting priorities on how to spend public money 
means  that  the  coherence  of  this  option  would  be  judged  as  under-proportional  to  its 
effectiveness.  The  use  of  a  public  body  in  the  design  of  investment  policies  could  disturb 
competition among private IORPs (157). An obligation for employers could interfere in wage 
bargaining processes, further reducing the coherence of this option. The use of good practices 
(AE Option 3) would allow designing the measure in a way that fulfils other objectives, most 
trivially the good practice of accompanying financial literacy initiatives, making it the most 
coherent.  

Table 175: AE policy options 

Ranking of policy options (1 = best to 4 = worst) 

AE Option 1 

Effectiveness 
4 

Efficiency 
4 

Coherence 
4 

157 Ireland has therefore tendered asset management services to private players. While this initiates competition 
during  the  tendering  processes,  it  also  endows  a  competitive  advantage  to  those  firms  that  were  awarded  the 
contract in future years.  

80 

 
 
 
AE Option 2 
AE Option 3 
AE Option 4 

3 
2 
1 

2 
1 
3 

2 
1 
3 

7.4 IORP review 

IORPs are important vehicles to enhance pension adequacy by complementing public statutory 
pensions  in  workplace  environments.  Their  development  and  growth  can  also  contribute  to 
channel more long-term capital in the EU capital markets, and via these to the general economy, 
at  a  juncture  where  the  EU  economy  urgently  needs  to  deploy  investments  to  shore  up  its 
competitiveness. A greater role of funded occupational pension funds in the capital markets can 
benefit market liquidity and contribute to the overall financial stability.  

Option  1  envisages  no  EU  action  compared  to  the  status  quo.  In  several  countries,  IORPs 
remain marginal or entirely absent, and the existing framework does not appear well adapted to 
support the development of occupational pensions in these contexts. Scale is currently building 
at  a very slow pace, mainly  driven by supervisory pressure, which is  not uniformly applied 
across Member States. While preserving regulatory stability and social partners’ prerogatives 
on  how  to  organise  their  occupational  pension  schemes,  Option  1  risks  reinforcing 
fragmentation and limiting the role IORPs can play in addressing pension adequacy and long-
term investment objectives at EU level. 

Option 2 could be effective in enabling pension funds to generate higher return for members 
and since larger pension funds are likely to benefit more from this potential, it could equally 
foster market-driven consolidation.  

Option 3 offers the most credible and immediately operational pathway for strengthening the 
EU’s  occupational  pensions  landscape.  By  tackling  structural  inefficiencies  directly  and 
enabling  the  emergence  of  scale  and  professional  governance,  Option  3  supports  long-term 
value creation, while respecting the prerogative of social partners in organising occupational 
pension schemes in a bottom-up approach, therefore ensuring coherence with general policy 
objectives. It fosters more accountability of IORPs boards towards their members as regards 
not only capital preservation but also long-term returns. Eventually, this can contribute to more 
diversified and resilient asset allocations while channelling a larger share of retirement savings 
towards  productive  investments  and  infrastructures,  including  in  the  areas  identified  as  EU 
priorities. This is the most coherent and efficient option, although impact on scale and related 
advantages would take longer to materialise than with Option 4. Like Option 4, it can entail 
higher costs of supervision compared to the status quo.  

Option  4  is  the  most  effective  one  in  achieving  more  scale  on  a  shorter-term  basis.  By 
introducing harmonised metrics and triggers across the EU and effective supervisory powers in 
case  of  non-compliance,  this  option  would  allow  more  rapid  convergence  towards  scale, 
performance,  and  governance  policy  goals.  It  would  also  foster  more  equal  treatment  and 
protection of IORPs members’ rights across the EU. However, this approach is demanding on 
supervisors’ capabilities to processes and subjects them to liability risks if concerned pension 
providers ask  for  a judicial review.  In addition,  the establishment of  a mandatory minimum 
efficient scale for IORPs would require significant time and resources and could still vary from 
one IORP to another. This option is therefore less efficient than Option 2. Moreover, it would 
contravene a market-driven approach by mandating consolidation in a “top-down” manner that 
is not compatible with the current governance of occupational pension schemes. Establishing 
legal pathways to consolidate to address structural inefficiencies also risks incoherence with 

81 

 
 
the objective of competition policy to keep market concentration at bay. Even if such a top-
down approach were possible, the mandatory consolidation could still be subject to the approval 
of the national competition authority whose decision would not be bound by the rules of this 
proposal. It is therefore not coherent with the paradigm of consolidation being market-driven. 

Table 18: IORP policy options 

Ranking of policy options (1 = best to 4 = worst) 

IORP Option 1 
IORP Option 2 
IORP Option 3 
IORP Option 4 

Effectiveness 
4 
3 
2 
1 

Efficiency 
4 
2 
1 
3 

Coherence 
3 
2 
1 
4 

7.5 PEPP review 

Keeping  the  current  framework  unchanged  in  Option  1  would  likely  mean  that  the  PEPP 
remains a niche, symbolic product, rather than a meaningful contribution to closing the EU’s 
pension savings gap. This option would hardly be effective with respect to fostering a larger 
uptake and thus would not address the problem of the pension gap.  

Option  2  avoids  complex  design  features.  Ensuring  cost-efficiency  through  a  fee  cap  could 
make it attractive for online providers to offer PEPP as complement to other execution-only 
products. This increase in the supplier basis would need to be balanced against a high likelihood 
that the fee cap will continue to discourage the insurance sector, and potentially even the asset 
management  industry,  from  offering  the  basic  PEPP.  Consumer  recognition  is  expected  to 
remain limited. 

Option 3 would appear to make the basic PEPP more attractive to a wider range of suppliers 
that are currently dissuaded from entering the private pensions market due to the fee cap. In 
terms of immediate consumer and provider uptake, there is the expectation of increased uptake 
with Option 3, as it manages to merge the pension suitability features of the PEPP Regulation 
with the operational features of the execution-only rules in existing EU bodies of law in this 
field.  

Option 4 caters to more specific client needs regarding both the portfolio design and choices or 
risk management. This option will also appeal to traditional suppliers of savings and investment 
products  who  supply  more  diversified  portfolios,  while  applying  a  broad  range  of  risk 
management tools. Option 4 has its own merits in terms of product design and diversification 
into a broader set of asset classes. 

The criterion for the effectiveness of the PEPP options in the table below is their potential to 
improve the attractiveness of pension products- the objective of this measure. This relies on the 
extent the different options can boost consumer recognition and ultimately savers’ interest in 
making use of PEPP. This is related to the argument that a larger take up of PEPP will increase 
competition and lead providers of national pension products to offer better terms to retail savers. 
Efficiency is  judged against the likelihood that the option accomplishes sufficient  supply of 
PEPPs. This depends on incentivises for providers to enter the market and offer PEPP. Cohesion 
is  assessed  as  synergies  with  the  savings  and  investment  account,  which  is  an  alternative 
measure to foster retail investment, though not with the purpose of retirement savings.  

82 

 
 
 
The prospects of the PEPP to become an effective retirement saving product depends on the 
potential of the different options to incentivise providers entering the market and offering PEPP. 
The  removal  of  the  fee  cap  in  PEPP  Option  3  is  likely  to  generate  the  largest  interest  by 
providers as many flagged it as discouraging element. The possibility to offer either the basic 
PEPP, the tailored PEPP or both (Option 4) will be more inviting than the possibility to offer a 
basic PEPP with a fee cap (Option 3) and is therefore more effective than the latter. Efficiency 
is judged against consumers recognition, which determines savers’ interest in making use of 
such offer. The ranking of the options therefore depends on whether more consumer acceptance 
would  be  achieved  by  relying  on  a  trusted  retail  brand  or  by  pointing  out  the  benefits  of 
diversification  effects.  Maintaining  the  fee  cap  in  Option  2  is  likely  to  generate  the  highest 
consumer acceptance, the combination of two types of PEPPs in Option 4 gives consumers a 
broader choice, which is appropriate for a long-term pension product serving PEPP savers with 
different  retirement  needs.  Both  demand  and  supply  for  PEPP  determine  the  criterion  for 
coherence, for which a relevant dimension is in this case the potential of PEPP to challenge 
incumbent providers on national supplementary pension markets. In addition, PEPP can be seen 
as  a  complement  to  savings  and  investment  accounts (158),  which  are  meant  as  vehicles  for 
investing with a medium-term horizon as opposed to the long-term nature of the PEPP (see Box 
in chapter 5). Over all three criteria, Option 4 is the superior solution. 

Table 19: PEPP policy options 

Ranking of policy options (1 = best to 4 = worst) 

PEPP Option 1 
PEPP Option 2 
PEPP Option 3 
PEPP Option 4 

Effectiveness 
4 
3 
2 
1 

Efficiency 
4 
3 
2 
1 

Coherence 
4 
2 
1 
3 

8. PREFERRED OPTION 

The above comparison of policy options revealed that a recommendation for good practices on 
auto-enrolment (AE Option 3) and pension tracking systems (PTS Option 2) and for national 
pension  dashboards  to  be  developed  (PD  Option  2)  are  the  best  options  based  on  their 
effectiveness,  efficiency  and  coherence  for  increasing  the  likelihood  of  achieving  higher 
supplementary  pension  savings  and  thereby  also  higher  retirement  incomes  for  future 
pensioners.  Following  an  analysis  of  the  options  for  revising  the  EU  legislative  framework 
yielded a preference for an approach that scales up pension funds by intensifying  supervisory 
reviews in support of more efficiency (IORP option 3) together with an approach that removes 
the fee cap and allows more choice between a basic simple and tailored PEPP, allowing also 
for either more exposure to illiquid assets or guarantees or potentially a combination of both  
(PEPP Option 4) to foster competition for attractive personal pension products. This section 
details how the policy options could be operationalised. It continues with a discussion on their 
interactions  and  closes  with  an  analysis  of  the  quantitative  impact  of  such  a  supplementary 
pension package. 

158 Commission Recommendation of 30.9.2025 on Increasing the Availability of Savings and Investment Accounts 
with Simplified and Advantageous Tax Treatment, C(2025) 6800 final. 

83 

 
 
 
 
 
8.1 The preferred policy measures 

A Commission recommendation can promote Pensions tracking systems to enable individuals 
to make informed choices about their pension savings. Member States will be recommended to 
develop pension tracking systems and will be provided guidance with regard to the design and 
set-up  of  tracking  services,  building  on  the  EIOPA  advice  and  good  practices  identified  in 
Member States (PTS Option 2). The Recommendation would promote the establishment of new 
pension tracking services as well as expansion and upgrade of existing ones, to maximise their 
coverage,  quality  and  compatibility,  including  compatibility  with  the  ETS  to  foster  the 
development of cross-border pension tracking in the EU. The recommendation could be backed 
by  financial  and  technical  support  available  from  EU  programmes,  such  as  the  Technical 
Support Instrument. 

The  Commission’s  recommendation  is  that  Member  States  establish  national  pension 
dashboards  with  aggregated  forward-looking  data  that  covers  public  and  supplementary 
pensions in order to (PD Option 2) help them assess their multi-pillar pension systems, creating 
transparency on the effectiveness of their pension policy. The use of common definitions when 
creating  national  pension  dashboards  would  allow  aggregating  them  at  a  later  stage  into  a 
European  Pension  dashboard  that  establishes  benchmarks  for  comparison  with  the  pension 
performance  in  other  Member  States  and  consequently  allowing  for  an  informed  public 
discussions and learn from good practices in other Member States.  

The design of the pension dashboard should follow up on the EIOPA advice, and employ data 
and statistics already used by the Commission or available to Member States. From the outset, 
it should use data on public pensions compiled in the ageing report and the pension adequacy 
report. This option would involve the Commission recommending to Member States that they 
engage  in  identifying  data  that  is  relevant  for  their  pension  system  and  developing 
methodologies that allow transforming statistics into forward-looking projections. The agreed 
definitions,  assumptions  and  practices  for  the  Ageing  report  and  Pension  Adequacy  Report 
provide a framework to start such an exercise. Accuracy can be improved through coverage of 
new data sources and learning from practices used in other Member States over time.  

A Commission recommendation could encourage Member States to adopt auto-enrolment in 
supplementary pension schemes to enhance retirement savings while preserving flexibility in 
national implementations and the role and autonomy of social partners when applicable. Auto-
enrolment  requires  a  legal  framework  defining  eligibility  of  persons,  default  options,  and 
investment vehicles, but these details cannot be standardised and must be kept at Member States 
discretion. To avoid prescriptive designs, the recommendation lists principles for good practices 
to  prevent  features  that  undermine  effectiveness  (AE  Option  3).  This  would  allow  Member 
States  to  align  auto-enrolment  with  their  public  pension  systems’  redistributive  and  poverty 
reduction  goals.  Although  existing  investment  regulations  (e.g.,  IORP  II,  Solvency  II  and 
PEPP) already address oversight, the need for effective supervision appears so important that it 
would be part of the recommendation. 

To make the use of auto-enrolment effective, the recommendation could ask Member States to 
apply  good  practices.  These  include  careful  preparation  with  stakeholder  engagement, 
information  campaigns  to  build  public  trust,  and  phased  implementation  starting  with  small 
contributions and limited participants. For example, the targeted consultation revealed a split 
picture of whether the legislator or employers and social partners should establish the pension 

84 

 
scheme available and if no choice is taken – the default option (159). It also emerged as important 
to establish a limited set of default parameters, while still allowing participants to customise 
choices. The specific parameters for contributions, investment vehicles, and payout modalities 
would need to depend on political choices and preferences in the Member States,  Synergies 
with financial education initiatives and gradual expansion of participation would help ensure 
understanding of long-term investment risks and benefits. 

Most design features must be country-specific, balancing objectives like early savings accrual 
and support for older workers. Member States may vary in approaches to eligibility for low-
wage earners, contribution rates (e.g., low rates to maximize participation vs. higher rates for 
significant savings), and fiscal incentives. Inclusive access is prioritised, with suggestions such 
as public subsidies for low-income earners, flexible participation for caregivers, and voluntary 
top-up  options  for  irregular  income  groups.  These  measures  aim  to  reduce  inequalities  and 
address the needs of disadvantaged populations. 

Employers and social partners play a central role in employment-based auto-enrolment, though 
making  the  offer  of  occupational  pension  schemes  mandatory  for  employers  seems  not  a 
feasible policy option in many Member States. It may, however, play a role in Member States 
where country specific conditions allow, for example where they do not interfere with collective 
wage bargaining processes. The use of auto-enrolment in collective bargaining agreements or 
the public provision of administrative support for small employers could  facilitate adoption. 
Public bodies or reformed products like IORP and PEPP might serve as alternatives in countries 
with fragmented employer participation. Coverage gaps for self-employed workers and those 
changing  jobs  require  country-specific  solutions,  such  as  transferable  schemes  or  hardship 
criteria for early pension access. 

The preferred policy choice for the review of the IORP II Directive is the support of greater 
scale  and  cross-border  efficiencies  in  the  supplementary  pensions  sector  through  enhanced 
supervisory scrutiny and targeted adjustments to the current framework (IORP Option 3). The 
provision  of  clearer  guidance  on  the  Prudent  Person  Principle  to  the  entire  supplementary 
pension  sector  will  nudge  IORPs,  PEPP  providers,  as  well  as  providers  of  other  retirement 
saving products nationally regulated towards investment policies that efficiently and effectively 
combine  risk  mitigation  with  long-term  return  objectives.  The  combination  of  tackling 
structural  inefficiencies,  enhancing  professional  governance  and  conducting  thematic 
supervisory reviews should result in larger scale and providers more focused on the long-term 
value creation for schemes participants. The guidance on the prudent person principle will not 
only help improve pension adequacy but also foster diversified asset allocation. The latter one 
would eventually enhance pension funds’ resilience and support capital markets and long-term 
investment.  While  some  stakeholders  may  face  short-term  adjustment  costs  to  align  with 
clarified  or  revised  requirements,  these  transitional  costs  are  expected  to  be  limited  and 
outweighed over time by the anticipated efficiency gains.  

The preferred policy choice for the review of the IORP II Directive is the support of greater 
scale  and  cross-border  efficiencies  in  the  supplementary  pensions  sector  through  enhanced 
supervisory scrutiny and targeted adjustments to the current framework (IORP option 3). The 
provision  of  clearer  guidance  on  the  Prudent  Person  Principle  to  the  entire  supplementary 
pension  sector  will  nudge  IORPs,  as  well  as  providers  of  other  retirement  saving  products 
nationally regulated towards investment policies that efficiently and effectively combine risk 

159 Some submissions explicitly request this be a joint effort of public and social partners, others highlight that this 
choice would need to be country-specific. Very few allocate this role to financial intermediaries. 

85 

 
 
mitigation  with  long-term  return  objectives.  The  combination  of  tackling  structural 
inefficiencies,  enhancing  professional  governance  and  conducting  thematic  supervisory 
reviews should result in larger scale and providers more focused on the long-term value creation 
for  schemes  participants.  The  guidance  on  the  prudent  person  principle  will  not  only  help 
improve  pension  adequacy  but  also  foster  diversified  asset  allocation.  The  latter  one  would 
eventually  enhance  pension  funds’  resilience  and  support  capital  markets  and  long-term 
investment.  While  some  stakeholders  may  face  short-term  adjustment  costs  to  align  with 
clarified  or  revised  requirements,  these  transitional  costs  are  expected  to  be  limited  and 
outweighed over time by the anticipated efficiency gains.  

The preferred policy choice is to differentiate between a framed basic PEPP and a PEPP with 
options that would allow for an unlimited number of more sophisticated tailored PEPPs (PEPP 
Option  4).  Targeted  changes  to  the  PEPP  regulation  aim  at  creating  a  framework  in  which 
providers find it attractive to offer “Basic PEPP” that builds on other design features than a fee 
cap to ensure a cost-efficient offer. Next to the basic PEPP there will be the tailored PEPP with 
options that offset potentially higher costs or risk by potentially higher returns from a broader 
set of investment opportunities or guarantees. This will require that providers of the alternative 
PEPPs offer at least basic investment advice to customers to understand the complexity of the 
product features. 

8.2 Interactions between the different policy measures 

A mix of policy measures is proposed comprising recommendations calling on Member States 
to take action in their area of competence and improvements to EU legislation where necessary. 
Recommendations would specify the general policy direction, while allowing Member States 
to  apply  discretion  in  adjusting  the  general  direction  to  national  circumstances.  The  policy 
measures at EU level aim to make national policy measures compatible with the functioning of 
the  single  market.  This  compatibility  is  important  because  a  stronger  use  of  supplementary 
pensions in individual Member States may create spill-over to capital market conditions in other 
Member States, for example via investment of pension providers in other Member States or the 
common goods of financial stability and market integrity. 

Since the preferred policy options in each area would address different root causes, they would 
be largely complementary. For example, it seems highly unlikely that the creation of pension 
dashboards would lead to Member States deeming pension adequacy to be sufficiently high that 
governments backtrack on reforming the supplementary pension sector, i.e. they do not create 
pension tracking systems or no longer consider increasing participation through, for example, 
auto-enrolment. 

Although the aim of both auto-enrolment and pension tracking is to achieve higher participation 
rates,  auto-enrolment  targets  procrastination,  while  pension  tracking  information  problems. 
Moreover, the former will primarily cover employees, whereas participation of self-employed 
depends on specific design elements such as voluntary participation that Member States may 
want to allow for. Access to pension tracking would be beneficial also for workers already auto-
enrolled.  Apart  from  reassuring  them  about  the  benefits  of  their  occupational  pension 
contributions, it could entice them to save more in personal retirement products, or – if this is a 
feature that Member States allow for- to top up their contributions. 

Higher transparency on pension entitlements, availability of PEPP and effective supervision of 
providers  of  pension  saving  vehicles  could  increase  confidence  and  initiate  an  increase  in 
voluntary saving for retirement purposes in the population. Higher competition for attractive 

86 

 
pension  products  via  PEPP  could  reduce  fees,  enticing  private  households  to  save  more  in 
retirement products. These incentives would be increased if pension funds gain scale and access 
to investment opportunities that allow further diversification and higher returns. The suitability 
of PEPP for workplace situations can be an asset in Member States or industries where social 
partners have no significant role as simple alternative product to life-insurance products. They 
may also play a role as default investment option for smaller firms to auto-enrol their employees 
or for self-employed to build up personal pension wealth.  

Greater competition in supplementary pension products and more intense supervisory scrutiny 
towards  the  profitability  of  occupational  pension  schemes  will  likely  improve  assets  risk 
management  and  align  asset  allocation  with  long-term  objectives  of  pension  schemes’ 
members. Faced with more intense competition, smaller schemes may find compelling reasons 
to  pursue mergers or otherwise pool  assets together to  take advantage of cost  synergies and 
greater  diversification  opportunities  professionally  managed,  which  could  ultimately  benefit 
their members via higher returns on their pension savings. Consolidation in the pension fund 
sector could lead to lower fees. The prospects of both lower fees and higher returns could boost 
households’ appetite in shifting parts of their financial assets from liquid instruments into long-
term retirement savings. 

A  shift  of  part  of  pension  funds’  asset  allocation  towards  long-term  investments  will  help 
increase the supply of long-term  patient  capital,  including  equity funding, the depth  of both 
public and private EU capital markets, as well as the capital available for infrastructure projects. 
The  combination  of  higher  take  up,  more  transparency  on  pension  entitlements  and  saving 
needs,  higher returns after fees for savers and  a sound supervisory framework can instil the 
confidence required to allow for material effects. 

The  intended  higher  contribution  of  supplementary  pensions  to  retirement  income  aims  to 
reduce the pension gap as important social challenge. The benefits would unlikely spread evenly 
over the population. Since wealthy people have a higher potential to save, they could benefit 
much more than less well-off people. The creation of pension tracking systems could reinforce 
this effect. Auto-enrolment will benefit primarily wage earners, the extent low-wage earners, 
employees with atypical contracts or with care obligations receive fair benefits will depend on 
the design and specifically the design of fiscal incentives. Supplementary pensions do typically 
not incorporate a redistributive component and could cement the income inequality during work 
life into retirement. If retirement savings yield a good return, wealthier people would benefit 
over-proportionally  from  this  effect.  The  pension  dashboard  can  help  detecting  trends  in 
pension inequality and enable corrective measures, for example in the statutory pension system. 

8.3 Expected effects of the pension package 

Since the pension package analysed in this document is of enabling character, its effect will 
strongly depend on how Member States, households, employers and financial intermediaries 
make use of them. The potential benefits of a larger and more efficient supplementary pension 
sector  for  individuals,  as  well  as  for  the  EU  capital  markets  and  economy  will  depend  on 
Member States’ uptake and implementation, and on market integration and development. The 
following  estimates  should  therefore  be  interpreted  as  illustrative.  They  present  possible 
outcomes under specific assumptions; the underlying calculations and assumptions are detailed 
in Annex 2. 

The benchmark for the following analysis is the quantification of the long-term savings need to 
offset the decline in the public benefit ratio presented in chapter 2.1 it shows that this objective 

87 

 
 
can be accomplished through a combination of more savings in long-term retirement schemes 
or  products  and  a  higher  return  on  these  savings.  A  higher  return  will  allow  for  lower 
contributions to the pension scheme and vice versa. 

The variation in countries’ experiences with auto-enrolment can be used to set assumption about 
its impact on the participation rate. The increase was relatively small at about 10% in IT and 
PL, which implemented auto-enrolment rather quickly. The increase was above 20%pts or is 
expected to be that high in the UK and IE. The different scenarios presented in Annex 2.4 yield 
an increase in the participation rate for the EU from 21 to a range of 33 to 38%, which seems 
to be a realistic value for the use of good practices.  

Amounts spent to support wage earners differ substantially between Poland and Ireland. Being 
enrolled in a pension scheme yielded higher returns than savings compared to bank deposits. 
This spread has historically been higher than 1 percentage point. This additional capital income 
would need to be accumulated over the length of the saving period. Assuming a regular saving 
over 20 years, a 1% return advantage would increase the accumulated saved amounts by 22% 
after 20 years. 

The return could be even higher if the other measures in the pension package led to lower fees 
and more profitable investments. The EIOPA cost comparison shows that IORPs costs are at 
about 0.5% in some Member States compared to 1% or higher in others, suggesting that a 25 
basis points reduction in fees is feasible outcome of higher competition and more consolidation.  

Pension funds’ returns on investment are volatile over time. For example, using the average 
returns over the last 20 years of sovereign bonds, private bonds and public equity investments 
and  assuming  that  the  investment  share  of  equity  will  increase  from  30%  to  35%  of  the 
investment portfolio would boost returns by 20 basis points. A shift within the equity portfolio 
from  listed to  private equity might further  boost the return on pension savings by another 5 
basis points. Adding these two elements to the 1% return advantage over bank deposit gives 
1.5% additional returns, which would increase savings by 15% after 30 years (160).  

The more detailed scenarios and calculations in Annex 2 show that the combination of higher 
participation  in  supplementary  pensions  and  higher  returns  on  these  pension  savings  would 
allow young individuals to close their pension gap. However, the assumptions spelled out in 
Annex 2 are numerous and cannot be linked to specific policy measures. 

The assumptions  of auto-enrolment  into occupational  pensions with  contributions  paid  from 
employees’  current  income  means  a  gradual  increase  in  the  savings  that  pension  funds  can 
invest  in  the  economy.  The  assumed  contribution  rate  of  4%  of  wages  and  salaries  implies 
limited scope to boost the size of the pension sector, at least in the short-term. The impact could 
be much larger if employees top up their contribution to occupational pensions if they saved 
more,  which,  however,  seems  not  the  most  promising  avenue  in  view  of  continuing 
contributions  to  statutory  pensions  and  other  social  security.  The  Irish  analysis  of  the 
macroeconomic effects of the introduction of auto-enrolment quoted in Annex 2.1 assumes a 
small temporary decline in GDP growth if the saving rate increases. If the households’ saving 
rate  is  assumed  to  remain  constant,  there  is  scope  for  higher  pension  savings  if  households 
redirect their accumulated financial wealth into pension products. For example, EU households 
kept about EUR 10 trillion in bank deposits in 2024 of which almost 5 trillion in term deposits. 

160 The returns are calculated on a theoretical portfolio assuming constant annual saving inflows and reinvestment 
of the income. 

88 

 
 
The pension sector would also grow if self-employed increased their voluntary pension savings 
or  participated  in  occupational  pensions.  For  this  to  happen  will  require  that  individuals 
recognise that they can earn higher returns on pension products than on more liquid financial 
assets and have confidence that their investment  in pension products is sufficiently safe and 
higher returns will materialise. 

The enhanced supervisory mandates in the IORP II Directive aim to foster consolidation in the 
IORP sector and to incentivise smaller funds to pool assets with larger asset managers or funds. 
The clarification of the prudent person principle aims to enable a larger share of pension fund 
investments in less liquid but potentially more profitable asset classes such as private equity. 
The scenarios in  Annex  2.4 quantify these measures came up with  additional private equity 
investment of EUR 25 billion, corresponding to a fourth of IORPs EUR 100.4 billion holdings 
in private equity in 2024 (3.7% of total assets). The largest impact would be from the largest 
pension funds increasing their investment, contributing half of the estimated increase. Market 
consolidation could contribute a sixth to this increase, asset pooling of smaller IORPs could 
mobilise an additional sixth. Convergence of the still nascent French IORPs to the average PE 
share  could  add  another  sixth  under  the  assumption  that  50%  of  these  IORPs  delegate  the 
management of their assets in a way that they accomplish the same ratio of private equity as 
large IORPs.  

The potential fiscal impact on Member States’s budget will depend on the design of the specific 
policies. Among the possible measures that will be proposed, auto-enrolment can be expected 
to have the largest consequences for public budgets, as Member States may find it useful to 
introduce incentives and subsidies to set up the schemes and incentivise uptake (161). However, 
in the medium-to-long term those costs or loss of revenues will possibly be mitigated by higher 
tax revenues on pension income and general economic activity, both expected to be higher than 
the as-is situation thanks to the positive effect of larger and more efficient pension sector to 
enhance pension income and finance productive investments.  

It should be noted that the increase in participation rates is much higher if these are defined 
relative to the eligible population. Setting the eligibility criteria is therefore a central element. 
Making auto-enrolment affordable for low-wage earners to expand the eligible population may 
necessitate  public  subsidies.  Poland  spends  less  than  0.05%  of  GDP  in  contributions  to 
members. Irelands’ estimate of contributing 0.4% of GDP as public contributions may present 
a maximum for many Member States. The impact of fiscal support will depend on whether they 
are  paid  as  a  subsidy  or  a  tax  deduction.  A  subsidy  leads  to  public  expenses,  i.e.  a  1% 
contribution on the wage bill would cost a Member State about 0.4% of GDP. If the contribution 
is instead tax deductible, the government can recoup the lower tax revenues on the contribution 
from  the  taxation  of  the  pay  outs  over  the  medium  to  longer  term.  The  burden  for  the 
government would consist in the need to  refinance the tax shortfall until the pay-out  can be 
taxed. This can be approximated by the interest rate on sovereign debt. In addition to the level 
of the interest rate, factors that impact on the costs for the public sector are the length of time 
until  the payout  will  be taxed and possible shortfalls from  individuals falling  into lower tax 
brackets when in retirement. The section on the fiscal impact of auto-enrolment in Annex 2.1 
provides a more detailed analysis. 

161 If these tax incentives for employers were to be designed in a selective manner, there could be a state aid angle. 

89 

 
 
 
9. HOW WILL ACTUAL IMPACTS BE MONITORED AND EVALUATED? 

The proposed policy option of developing pension dashboards would offer a tool to track the 
impact  of  the  measures.  Other  than  this  tool,  the  pension  statistics  compiled  by  EIOPA, 
Eurostat, the ECB and the OECD would also allow the effect of the measures to be assessed. 
Changes to the number, size and asset exposures of IORPs would become visible in the existing 
EIOPA data bases. EIOPA data would also allow monitoring the uptake of PEPP and its regular 
reports on the consumer perspective can inform about changes to market conditions for personal 
pension  products.  As  part  of  the  European  Semester  exercise,  the  Commission  has  already 
reinforced its monitoring of Member State performance including in the area of supplementary 
pensions.  This  exercise  will  therefore  also  offer  a  way  of    tracking  Member  States  policy 
progress.  

An  acceleration  of  reform  progress  should  also  be  visible  in  the  national  measures  on 
supplementary pensions reported to the Eurogroup as part of its annual monitoring of progress 
with national measures towards the Capital Markets Union (Savings and Investments Union) 
(162).  This  monitoring  process  includes  supplementary  pensions  and  is  carried  out  by  the 
Financial Service Committee with support by the European Commission. Member States have 
reported  on  their  position  with  respect  to  the  items  covered  by  the  recommendation  on 
autoenrollment, pension tracking and dashboards in summer 2024. In the follow-up exercises 
they  informed  about  policy  measures  at  national  level  with  respect  to  the  reforms  of 
supplementary pensions and the creation of pension tracking.  

Outside  the  EU  reporting  framework,  the  Mercer  pension  index  would  likely  record  faster 
convergence of laggards to best performers. Progress should ultimately be reflected in upward 
revisions of detailed performance indicators such as replacement rates, risks of old age poverty, 
public age-related expenditures. 

Member States can also be requested to report as part of their contributions to the ageing and 
pension adequacy reports about key parameters as for example: 

1.  Number of Member States with auto-enrolment schemes; participation rates versus opt-
out rates; participation rates among different income groups/male versus female/education 
level; value of assets under auto-enrolment schemes. 
Implementation  of  national  pension  tracking  systems;  coordination  of  national  systems 
into an EU system. 

2. 

3.  Projections  on  expenditure  and  contribution  to  replacement  rates  of  supplementary 

pensions for the ageing report and the pension dashboards. 

Given  the  political  nature  of  the  recommendations  and  the  lead  time  required  for  pension 
reforms, an evaluation of the policy measures undertaken could be envisaged after 5 years and 
a comprehensive evaluation of their impact after 10 years. 

90 

 
 
 
 
 
 
ANNEX 1: STAKEHOLDER CONSULTATION 

The Commission has formally consulted stakeholders to collect their views on the upcoming 
legislative and non-legislative initiatives detailed in this Staff Working Document. In particular, 
it has launched a public targeted consultation (163) running from 13 June 2025 until 29 August 
2025,  seeking  feedback  on  the  use  of  automatic  enrolment  to  increase  participation  in 
supplementary pensions, on the development of pension tracking systems, allowing individuals 
to  get  an  overview  of  their  future  retirement  income,  on  dashboards,  providing  public 
authorities with a better view on their pension system adequacy for clearer personal information 
and stronger policy data, and on policy options for possible reviews to the PEPP Regulation 
and the IORP II Directive. It has also launched a Call for Evidence (164) on 23 June 2025, with 
deadline on 21 July 2025, with the aim of collecting general comments, opinions and views on 
how to improve the current framework for supplementary pensions, as well as sharing evidence 
on best practices. It has also organised a dedicated hearing with social partners at European and 
national level. 

Regarding  the  public  targeted  consultation,  the  Commission  has  received  a  total  of  112 
submissions  They  include  1  academic/research  institution,  42  business  associations,  23 
company/businesses, 4 consumer organisations, 4 NGOs, 3 EU citizens, 15 public authorities, 
6  Trade  Unions  and  14  contributions  qualified  as  others.  Responses  came  from  Austria  (3), 
Belgium  (24),  Bulgaria  (2),  Croatia  (1),  Cyprus  (2),  Finland  (4),  France  (6),  Germany  (24), 
Greece  (1),  Ireland  (6),  Italy  (9),  Latvia  (1),  Lithuania  (1),  Luxembourg  (3),  Malta  (1),  the 
Netherlands  (8),  Poland  (3),  Portugal  (3),  Slovakia  (1),  Spain  (2),  Sweden  (5)  the  United 
Kingdom (1), the United States of America (1). 

Regarding the Call for Evidence, the Commission has received 47 total  submissions which 
amount to 37 unique responses (165). They include 1 academic/research institution, 18 business 
associations, 2 employers’ associations, 5 companies/businesses, 2 consumer organisations, 1 
NGO, 7 EU citizens and 1 non-EU citizen. Responses came from Italy (4), Luxembourg (1), 
Belgium (8), the United Kingdom (2), Czechia (1), Poland (1), Sweden (1), Spain (2), Germany 
(9), France (1), the United States (2), Romania (1), Portugal (1), Mexico (1), Switzerland (1) 
and Bulgaria (1). Responses covered topics spanning from general considerations and the role 
that supplementary pensions can play in supporting the EU economy, to specific policy issues 
such as autoenrollment, pension tracking systems and dashboards, PEPP, IORPs, the prudent 
person principle and the role of tax incentives.  

General comments 

The great majority of respondents was in favour of the Commission’s efforts on supplementary 
pensions, while underscoring that the latter should complement and not compromise first pillar 
pensions.  There  was  broad-based  recognition  of  the  role  that  pension  funds  can  play  in 
supporting the economy as well as the depth of capital markets, and of the double objectives 

https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/14732-Supplementary-pensions-

163  https://finance.ec.europa.eu/regulation-and-supervision/consultations-0/targeted-consultation-supplementary-
pensions-2025_en. 
164 
review-of-the-regulatory-framework-and-other-measures-to-strengthen-the-sector_en. 
165 Some respondents have submitted multiple responses and therefore appear multiple times in the response table. 
Multiple responses have been collapsed to single responses for the purpose of eliminating this overrepresentation 
bias.  

91 

 
 
 
(social  and  economic)  that  characterises  pension  policies.  Overall,  the  vast  majority  of 
respondents supported the overarching SIU goals under which pension policy reforms would 
be  designed,  and  agreed  in  this  light  that  improvements  to  supplementary  pensions  are 
warranted to unlock their full potential for Europe’s citizens and economy.  

Among  business  associations  there  was  strong  consensus  on  the  urgent  need  to  expand  and 
strengthen second pillar pensions across the EU, framed as a response to the pressures on the 
first  pillar,  demographic  ageing,  and  the  low  adequacy  of  current  retirement  systems. 
Respondents  generally  recognised  the  complexity  and  diversity  of  pension  systems  across 
Member States. On this, there were diverging opinions on whether reforms should be led at EU 
versus national level. Nevertheless, there was consensus that any EU-level action should respect 
national differences and avoid a one-size-fits-all approach. Respondents also emphasised the 
need  to  enhance  supplementary  pension  schemes,  particularly  through  auto-enrolment  and 
financial incentives, and to increase participation in funded pension schemes as well as shift 
investments towards long-term, productive assets (like public and private equities) to improve 
returns  and  their  sustainability  over  time.  Another  diverging  point  was  the  role  of  financial 
intermediaries, with some respondents affirming the key role of financial advisors and others 
underlining that despite available tools, citizens still lack motivation to invest in their pension 
and need nudging tools.  

One  employer  association  strongly  emphasised  the  need  to  respect  subsidiarity  in  pension 
system design, advocating for EU-level involvement to be limited to broad frameworks rather 
than  prescriptive  rules,  as  well  as  the  need  to  reduce  regulatory  burden.  Another  employer 
organisation and two public authorities stressed the importance of principle 18 of the European 
Charter of Social Rights which states that workers and the self-employed in retirement have the 
right  to  a  pension  ensuring  an  adequate  income  commensurate  with  their  contributions  and 
guaranteeing  a  dignified  existence,  with  equal  opportunities  for  men  and  women  to  acquire 
pension rights.  

Companies/businesses  supported  the  overall  objective  of  developing  the  supplementary 
pensions sector to boost EU capital markets. They vouched for well-structured supplementary 
pension plans as well as engagement and choice management to make pension systems work 
well, with emphasis on default options, plan consolidation, and digital tools to support savers.  

The input of consumer organisations focused on the poor performance and often high costs of 
pension products, which puts citizens’ financial security at risk, as well as on the need to tackle 
issues with financial advice, inducements as a cost driver as well as due to their inherent conflict 
of interest, and lack of transparency.  

The NGO questioned the use of pension funds to promote stock market investments given the 
low-risk investment nature of these funds and the vulnerability of elderly people.  

Citizens’  opinions  on  the  need  for  EU  action  were  mixed  yet  underlined  that  better  market 
structure and broader reforms than just financial ones are needed to improve the EU’s pensions 
landscape. These include tax incentives, transparency obligations, and one response suggested 
that citizens could be able to set their own retirement date to motivate saving and investing in 
higher-growth options.   

Finally, although outside of the scope of this exercise – concerning first pillar pensions, the one 
business  association  that  shared  feedback  on  the  issue  recognised  that  the  role  of  public 
pensions remains foundational. It underlined that greater transparency in first pillar would be 
useful, such as through mandatory disclosure of estimated benefits (even based on EU-wide 

92 

 
guidance on forecast methodology) to all citizens. The response emphasised the importance of 
financial  education  and  informed  decision-making  and  did  not  advocate  for  a  structural 
overhaul  of  the  first  pillar  itself,  but  for  making  it  more  predictable,  understandable,  and 
realistic, as that can be expected to prompt more individuals to save through second and third 
pillar schemes.  

Auto-enrolment 

While the Call for Evidence asked for general feedback on auto-enrolment (AE), the targeted 
consultation  zoomed  in  on  specific  design  elements  and  good  practices.  The  replies  to  the 
specific  questions  in  the  targeted  consultation  revealed  some  differences  in  views  across 
stakeholder  types  beyond  the  traditional  breakdown  of  stakeholder  types.  Responses  from 
financial sector representatives turned out to be relatively uniform compared to stark differences 
from non-financial stakeholders. Therefore, the replies on auto-enrolment were re-filtered with 
a more granular breakdown across non-financial stakeholder types. 

Among business  associations, there was broad support  for AE as an  effective policy tool to 
increase occupational pension coverage across the EU. However, there was strong recognition 
that its design and implementation need to be adapted to national contexts, respecting existing 
pension systems, social partners, and labour laws. The prevailing view was that AE should be 
part of a coordinated, multi-measure approach to address retirement savings challenges rather 
than  be  seen  as  the  silver  bullet,  or  a  standalone  solution.  Diverging  opinions  emerged  on: 
mandatory  AE  backed  by  legislation  and  social  partner  involvement  for  legitimacy  versus 
voluntary and flexible AE tailored by Member States, allowing employees to opt in/out; the 
role of social partners as key to success versus a possible barrier; and the role of governments 
in providing administrative support and establishing default plans versus leaving the initiative 
to market competition, limiting state control. Business associations generally supported the role 
of public authorities as regards the provision of incentives and subsidies to both employers and 
employees, and communication campaigns. However, several business associations from the 
financial sector warned that auto-enrolment and the establishment of default funds by public 
authorities could undermine competition, and introduce entry barriers to the market. Moreover, 
they warned against any dirigiste intervention by the State in the pension funds’ asset allocation. 
On the preferred allocation strategy for the default pension plan, there was general consensus 
on life-cycle strategies, particularly for default contribution plans. 

Employers’ associations’ feedback was more uniform as both responses voiced their opposition 
to mandatory or EU-imposed AE, taking the example of Member States like Germany where 
occupational pensions are deeply rooted in voluntary systems and social partner agreements. 
Support  came  instead  for  national  autonomy,  subsidiarity,  and  the  preservation  of  existing 
effective models.  

Among  companies/businesses,  there  was  strong  support  for  broad-based  AE  as  a  means  to 
maximize  participation  in  second-pillar  pension  schemes,  with  a  focus  on  learning  from 
international  success  stories  (e.g.,  US,  UK,  Australia),  and  the  goal  of  expanding  coverage 
efficiently  and  cost-effectively.  Some  employers  noted  that  employers  shall  be  given  the 
flexibility to set up their own pension schemes, without the necessary intermediation by social 
partners. 

For consumer organisations, there was conditional support for AE into occupational pension 
schemes, based on ensuring that pension plans provide real value to their members, as well as 
an emphasis on consumer protection, performance, and flexibility within occupational schemes. 

93 

 
There was also opposition for AE in third-pillar pensions, which should remain an individual 
choice.  

Among citizens, the main view was that nudging mechanisms and default settings should be 
retained to improve participation, but at the same time there should be an introduction of greater 
individual control, modern investment design, and decoupling from rigid employment-based 
structures. 

Concerning  the  relevant  design  features  that  determine  the  success  of  auto-enrolment,  most 
responses  attribute  the  highest  priority  to  state  incentives.  Possibilities  to  withdraw  early 
emerged as the least relevant practice. The ranking of the other elements is shown in the table 
below.  Differences  in  the  average  prioritisation  of  these  other  elements  turned  out 
comparatively small. 

Table 620: Hierarchy of best practices along their importance, stakeholder replies to the targeted consultation  

Average  Frequency 

State incentives (e.g. tax or subsidies), with calibration based on income categories 
Preservation of statutory pension benefits and sustainability 
Provision of auto-enrolment administration facilities by the State 
Starting with low contribution rates for participants with their gradual escalation over time 
Involvement of social partners in its design 
Duration and recurrence of opt-out windows and options for re-enrolment 
Other 
Full or partial early withdrawal of pension benefits (subject to penalty, where relevant) 

2.9 
3.5 
3.7 
3.9 
4.0 
4.3 
5.0 
5.6 

60 
57 
62 
55 
67 
58 
15 
51 

Note:  Average  measured  as  priority  on  a  scale  1  to  7  with  one  the  most  and  8  the  least  important,  frequency 
measured as how often referred to in the 112 responses to the consultation. 

The  breakdown  by  stakeholder  group  revealed  that  the  high  prioritisation  attached  to  state 
incentives  is  not  shared  by  consumer  organisations  and  employers  respectively  their 
associations. Consumer organisations and trade unions consider other dimensions than those 
pre-selected  as  most  meaningful.  Those  that  detailed  their  reply  highlighted  the  presence  of 
well-performing  default  pension  schemes.  Non-financial  corporations  and  consumer 
organisations  attributed  a  high  priority  to  administration  facilities  offered  by  the  State. 
Employers also attach a much higher importance to the design of the opt-out window than other 
stakeholders.  Public  authorities,  together  with  consumer  organisations  and  trade  unions, 
consider the preservation of statutory pensions of very high importance. Supervisors attributed 
the lowest priority to this objective 

Table 721: Differences in the ranking of good practices across non-financial stakeholders. 

Total* 

Trade unions 

Employers 
and NFCs 

Supervisors 

other 
public 
authorities 

consumer 
organisations 

State incentives (e.g. tax or 
subsidies) 
Preservation of statutory pension 
benefits 
Administration facilities by the 
State 
Low contribution rates gradually 
escalated 

1 

2 

3 

4 

2 

6 

4 

94 

5 

4 

1 

7 

1 

8 

4 

3 

3 

1 

7 

5 

6 

3 

2 

7 

 
 
 
 
 
 
Other 

Involvement of social partners 

Design opt-out windows 

early withdrawal 

memo: number of respondents  

5 

6 

7 

8 

67 

1 

3 

5 

5 

4 

2 

6 

10 

3 

5 

6 

7 

9 

2 

5 

6 

5 

1 

5 

5 

8 

5 

*) ranking attributed by financial and non-financial stakeholders. 

The importance that consumer associations attribute to the features of the default investment 
plans was subject to a further question in the targeted consultation. Stakeholder allocated the 
highest importance to flexibility to adjust at later stages and capital safeguard. They attached 
the lowest importance to life-cycle investment strategies and minimum contributions. 

Table 822: Hierarchy of priorities for the design of the default investment scheme, stakeholder replies to the targeted 
consultation 

Average  Frequency 

Option to shift pension plan and risk profile at a later stage (in addition to opt out) 
Capital guarantee, despite expected lower return compared to solutions without that guarantee 
 Sufficient scope of target population, to ensure cost effectiveness and investment 
diversification capability of the default fund(s) 
Other 
Life-cycle asset allocation (more prudent as the retirement date approaches) 
Minimum contribution, with the option to increase it at later stage 

2.5 
2.5 

2.8 
3.0 
3.7 
4.0 

22 
24 

6 
1 
21 
23 

Note:  Average  measured  as  priority  on  a  scale  1  to  6  with  one  the  most  and  6  the  least  important,  frequency 
measured as how often referred to in the 112 responses to the consultation. 

The ranking in the previous table is determined by responses from financial stakeholders. Non-
financial  stakeholders  had  a  different  perspective.  Employers,  public  bodies  and  consumer 
associations  ranked  life-cycle  investment  strategies  as  top  priority.  Consumer  organisations, 
supervisors  and other public bodies consider  capital guarantees as low priority, unlike trade 
unions. These four stakeholder groups also rank minimum contributions that can be increased 
later as much more important than the total sample 

Table 23: Differences in the ranking of good practices across non-financial stakeholders. 

Total* 

Trade unions 

Employers 
and NFCs 

Supervisors 

other 
public 
authorities 

consumer 
organisations 

Option to shift pension plan and 
risk profile at a later stage (in 
addition to opt out) 
Capital guarantee, despite 
expected lower return compared to 
solutions without that guarantee 
Sufficient scope of target 
population, to ensure cost 
effectiveness and investment 
diversification capability of the 
default fund(s) 

Other 
Life-cycle asset allocation (more 
prudent as the retirement date 
approaches) 

1 

1 

2 

3 

4 

5 

1 

4 

3 

95 

2 

4 

3 

1 

4 

5 

2 

3 

4 

5 

3 

1 

3 

5 

4 

1 

 
 
 
 
 
 
 
 
 
 
 
 
 
Minimum contribution, with the 
option to increase it at later stage 

5 

3 

5 

2 

3 

3 

*) ranking attributed by financial and non-financial stakeholders. 

Stakeholders are split on the question who should be responsible to establish the default pension 
plan that eligible participants should enrol in. About half of the reply refer to employers and 
social partners, the other half to the legislator. Financial sector responses show the same split. 
Non-financial private stakeholders predominantly see a role for employers and social partners, 
public bodies for the legislator. 

When asked about what public actions are required to make auto-enrolment work, stakeholders 
allocated the highest priority to the creation of a legal framework, followed by tax incentives. 
The provision of administrative support emerged as the task that stakeholders considered the 
least  important  one.  This  contrasts  to  the  relatively  high  rank  attributed  to  administration 
facilities by the State in the previous question. 

Regarding  provisions  that  support  equal  opportunities  for  self‑employed  and  employees  not 
covered by auto‑enrolment, views are split across stakeholders. 40% of them did not reply or 
indicated they did not know. Among those that provided a reply, tax incentives or subsidies to 
save in personal pension plans was the most frequent option (25%). Comparable incentives to 
participate in default occupational pension schemes (14%) or other options (18%) were less 
frequent.  

Table9 24: Hierarchy of enabling actions along their importance, stakeholder replies to the targeted consultation 

Average  Frequency 

Set the relevant legal framework 
Tax incentives or public subsidies to the target population 
Detailed guidance to employers and other bodies 
Comprehensive and impartial information to the target population 
Others 
Tax incentives or compensation for employers or other bodies that administer enrolment, 
contributions and pay-outs 
Administrative support 

1.3 
3.0 
3.6 
3.8 
3.9 

4.1 
4.9 

69 
64 
59 
54 
15 

58 
50 

Note:  Average  measured  as  priority  on  a  scale  1  to  7  with  one  the  most  and  8  the  least  important,  frequency 
measured as how often referred to in the 112 responses to the c0nsultation.  

Non-financial stakeholders do not differ in the importance they attribute to the legal framework. 
Supervisors give a higher rank to other dimensions than those pre-selected. This high rank is 
due to two respondents,  which refer to the importance to take heterogeneity across Member 
States into account. The low priority attached to public administrative support is shared by all 
non-financial stakeholders except consumer organisations. 

Table 25: Differences in the ranking of good practices across non-financial stakeholders. 

Total* 

Trade unions 

Employers 
and NFCs 

Supervisors 

other 
public 
authorities 

consumer 
organisations 

To set the relevant legal 
framework 
To provide tax incentives or public 
subsidies to the target population 

1 

2 

1 

4 

2 

3 

1 

2 

1 

6 

1 

4 

96 

 
 
 
 
 
 
To provide detailed guidance to 
employers and other bodies 
To provide comprehensive and 
impartial information to the target 
population 

Others 
To provide tax incentives or 
compensation for employers or 
other bodies that administer 
enrolment, contributions and 
pay-outs 

To provide administrative support 

memo: number of respondents  

3 

4 

5 

6 

7 

67 

2 

4 

5 

5 

2 

5 

4 

6 

10 

4 

6 

1 

5 

7 

9 

5 

6 

3 

5 

5 

5 

4 

4 

7 

2 

5 

*) ranking attributed by financial and non-financial stakeholders 

Pension Tracking Systems  

Regarding the current state of pension tracking, there are divided views on the effectiveness of 
current pension tracking systems  (PTS). Out of  96 respondents to  the question,  42.7% (41) 
consider  their  national  system  to  function  well.  However,  a  combined  49%  see  a  need  for 
significant change, with 31.3% (30) stating their system should be improved and 17.7% (17) 
reporting  their  country  has  no  tracking  system  at  all.  The  replies  came  from  the  above-
mentioned  Member  States  and  third  countries  with  very  diverse  national  situations,  ranging 
from countries with a comprehensive PTS covering all pillars (for instance FR, SE) to those 
that do not have a tracking system in place at the moment (for instance PL, BG, IE, MT).  

A  primary  limitation  identified  is  the  narrow  scope  of  existing  schemes.  Most  participants 
reported that pension tracking is very limited, often providing data on only the public pensions 
and lacking information on occupational and personal pensions. Despite this, in member States 
where systems  exist, a majority of respondents  mentioned that their functioning  is  regularly 
evaluated to identify potential improvements. 

Respondents  highlighted  several  core  functionalities  that  an  effective  PTS  must  include  to 
empower citizens with their retirement planning: 

1.  Comprehensive coverage of pillars: the most critical feature is complete coverage of 
all pension entitlements. A majority of respondents emphasized the importance of a 
system  that  includes  all  three  pillars  (statutory,  occupational  and  personal)  to  give 
citizens a full overview. 

2.  Core information: the system’s main purpose should be to provide clear and essential 

data 

1.  Accrued  pension  rights:  The  majority  of  respondents  emphasized  that 
information  on  past  contributions  and  accrued  entitlements  is  the  essential 
foundation on which a PTS should be built. 

2.  Future  projections:  Approximately  half  of  the  respondents  reported  that 
projections  of  future  pension  benefits  are  crucial  for  enabling  individuals  to 
assess the retirement income and make informed decisions. 

3.  Simulations:  A  majority  of  respondents  stated  that  it  is  important  for  any 
simulation of pension benefits to provide both the gross amount and the amount 
net of taxes.  

97 

 
 
 
 
 
 
3.  Usability and accessibility: a successful system must be user-friendly and accessible 

to everyone: 

1.  Simple access: Most respondents reported that a PTS should have a simple and 
secure access, with a focus on ensuring accessibility for less-digitally-proficient 
users. Some mentioned the need for both digital and non-digital access options 
to avoid excluding some vulnerable groups.  

2.  Avoiding  information  overload:  The  majority  of  respondents  indicated  a 
preference  for  the  system  to  provide  only  basic  information,  with  links  to 
external websites, in order to maintain clear focus. 

4.  Phased rollout of advanced features: More complex tools are considered a secondary 
priority.  Some  respondents  mentioned  that  simulation  tools  for  exploring  different 
scenarios  should  be  implemented  at  a  later  stage.  Similarly,  a  few  respondents 
suggested  that  information  on  early  withdrawal  options  should  also  be  implemented 
later and be presented with appropriate warnings. 

In  terms  of  stakeholders  breakdown,  business  associations  conveyed  their  strong  overall 
support for PTS across the EU to improve transparency, raise awareness of retirement income, 
and empower individuals for better retirement planning. They also believed that PTS should be 
voluntary in terms of design at EU level, with national flexibility prioritised. A majority agreed 
that PTS should be user-friendly and accessible and cover all three pillars of pensions, while a 
few stressed the importance of excluding non-pension financial products to avoid confusion. 
The one company/business that shared its position highlighted the value of existing  national 
PTS  infrastructure  and  stresses  the  need  for  flexible,  cost-efficient  interoperability  between 
systems  to  support  mobile  workers,  while  warning  against  regulatory  overreach  that  might 
complicate  or  hinder  effective  implementation.  One  consumer  organisation  voiced  strong 
support for developing comprehensive national PTS interconnected at the EU level,  with an 
emphasis on transparency, user empowerment, and standardisation across all pension-related 
long-term investment products. Among citizens, suggestions included expanding PTS beyond 
traditional pension information  to  reflects  a holistic approach linking  pension planning with 
work-life factors, and filling transparency gaps in current pension statements, especially around 
investment, leading to difficulty for retail investors to access detailed information – an issue 
which should be addressed through technological and governmental solutions.  

Regarding  challenges  perceived  in  setting  up  a  PTS,  respondents  state  that  setting  up  a 
comprehensive PTS involves political, technical and logistical challenges: 

A fundamental aspect is the lack of political drive. A majority of respondents reported that 
there  are  challenges  in  achieving  the  political  consensus  needed  for  the  establishment  of  a 
comprehensive  PTS.  Data  management  and  security  seem  to  be  one  of  the  most  difficult 
technical hurdles. Ensuring the accuracy and comparability of data from various providers 
is  a  challenge,  with  the  majority  of  respondents  emphasising  the  need  for  transparency, 
standardisation, and quality control. Almost all respondents acknowledged data protection 
as a priority and a legal requirement, particularly in relation to compliance with the GDPR. 

The long-term management of a PTS has been highlighted. The majority of respondents 
underscored  the  complexity  and  long-term  nature  of  maintaining  and  governing  the  system, 
which  requires  strong  institutional  support,  stable  funding,  and  effective  public-private 
partnership. Approximately half of the respondents mentioned the importance of ensuring 
broad and easy access to the platform and delivering information in a clear, understandable 
and  user-friendly  way.  Regarding  cross-border  interoperability,  some  respondents 

98 

 
considered it to be a challenging task that should be addressed at a later stage, as the immediate 
priority is for each Member States to first establish its own well-functioning national system. 

Table 26: Consultation replies about pension tracking systems (ranking with 1 the most important dimension and 5 the least 
important one) 

Question 

What makes a pension tracker a useful tool? 

What elements should a pension tracking system 
cover? 

What are the most difficult challenges in setting 
up a system? 

the 

the 

system  and 

Survey Option 
Access 
to 
information 
The system covers all pillars 
Availability of projections 
Other 
Information  from  all  schemes  about 
accumulated rights 
Projected pension benefits 
Simulation  of  the  effect  of  certain  life 
events 
Other 
Information on investment strategies 

Accuracy & impartiality of information 
Other 
Access to data from different providers 
Data protection 
Maintenance  &  sustainability  of  the 
system 
Inter-operability 

Average 
Rank 

Frequency 

2 
2.3 
2.4 
3.5 

1.8 
2 

2.9 
3.4 
3.5 

1.8 
2.5 
3 
3.2 

3.6 
4.1 

78 
73 
79 
68 

78 
81 

73 
19 
70 

66 
20 
70 
65 

68 
67 

Note: Options are ranked according to their importance or difficulty. For the 'Average Rank', 1 represents the highest rank 
(most important/most difficult), while a higher number represents a lower rank. Frequency measured as how often referred 
to in the 112 responses to the consultation 

Pension Dashboard 

On  pension  dashboards,  mainly  business  associations  conveyed  an  opinion  in  the  Call  for 
Evidence and strongly supported the development of pension dashboards at EU level as a key 
tool  to  monitor  pension  adequacy,  sustainability,  and  coverage  across  Member  States.  The 
consensus was that dashboards could significantly improve transparency, policy analysis, and 
benchmarking to close pension savings gaps. At the same time, respondents emphasised the 
importance of avoiding additional reporting burdens on pension providers (especially IORPs) 
and the need to build on existing data and systems. 

The  targeted  consultation  accomplished  more  responses  and  a  wider  coverage  across 
stakeholder  groups.  The  table  below  summarises  the  average  responses  on  the  qualities  a 
dashboard should provide and the dimensions it should cover. Respondents gave the highest 
priority to the coverage and the forward-looking character of a dashboard. They assessed cross-
country consistency as  the least  important  quality.  Regarding the dimensions to  be covered, 
pension adequacy and sustainability emerged as the most important ones.  

Table 27: Consultation replies about pension dashboards (ranking with 1 the most important dimension and 5 the least 
important one) 

Qualities of a dashboard 

Coverage (1) 

Breakdown (2) 

Forward-
looking (3) 

Consistency 
across Member 
States (4) 

Other elements 
(5) 

99 

 
 
 
 
 
 
 
  
 
 
 
  
  
  
  
  
of 

Number 
responses 
Average 
ranking 

71 

1.9 

67 

2.9 

72 

2.3 

68 

3.2 

18 

3.0 

The importance of dimensions to be covered 

Income 
replacement (6) 

Pension 
sustainability 
(7) 

Contribution to 
poverty 
reduction and 
equality 

Fiscal costs 
now and in the 
future 

Other (8) 

of 

69 

71 

59 

1.7 

Number 
responses 
Average 
ranking 
Notes (1) Detailed data about occupational and personal pensions, in addition to statutory pension, (2) pension 
data by different cohorts of the population (e.g. by gender, age, type of employment, economic sector, income, 
etc.),  (3)  projection  of  pension  adequacy  and  sustainability,  based  on  transparent  and  robust  assumptions,(4) 
consistent data and methodology across Member States to allow for comparisons the level of retirement income 
relative to work income now or in the future (5) other included avoidance of reporting burden, (6) the level of 
retirement income relative to work income now or in the future, (7) measured by its capacity to deliver a decent 
level of retirement income in the next decades in face of a declining working age population, ( 8) others mentioned 
were tax treatment, contributions and that the ranking would depend on the target audience. 

2.0 

3.2 

2.8 

3.4 

62 

17 

Responses by financial sector respondents are in line with the total shares. Notable differences 
have become evident for some non-financial stakeholders. Trade unions assessed the detailed 
coverage  as  among  the  least  important  qualities,  and  supervisors  that  of  a  forward-looking 
approach.  Trade  unions,  supervisors  and  other  public  bodies  highlighted  cross-country 
consistency  as  important  quality.  Regarding  the  importance  of  dimensions,  the  only  notable 
difference between non-financial respondents and the total sample is that responses from trade 
unions assessed fiscal costs as the most important dimension to be covered. 

IORPs  

Among  business  associations  there  was  general  consensus  that  the  IORP  II  Directive’s 
minimum  harmonisation  approach  remains  appropriate  and  should  generally  be  preserved. 
Many  emphasised  that  NCAs  should  retain  flexibility  to  supervise  based  on  national  legal, 
labour,  and  tax  frameworks,  and  that  future  amendments  should  respect  subsidiarity  and 
proportionality principles. Several respondents also highlighted the importance of recognising 
national diversity (e.g. in countries with few defined contribution plans). The prudent person 
principle  was generally considered to provide an adequate framework for guiding investments. 
Some,  however,  saw  room  for  stronger  incentives  to  diversify  portfolios,  including  through 
access to alternative assets, while others cautioned against prescribing investment strategies at 
EU level.  Concerns were also raised that restrictive national investment limits (e.g. on private 
equity)  may  reduce  returns  and  diversification.  On  consolidation,  most  respondents  did  not 
identify an immediate need for further action, though some acknowledged that greater scale 
could  be  beneficial  over  time.  Finally,  reducing  administrative  burden  was  also  seen  as  a 
practical way to encourage participation.  

Employers’  associations  supported  maintaining  the  IORP  II  Directive  as  a  “minimum 
harmonisation”  framework,  noting  that  occupational  pension  systems  are  deeply  rooted  in 
national  traditions  and  labour  laws,  and  that  excessive  EU-level  standardisation  would  be 
inappropriate and potentially harmful, as it could compromise flexibility or efficiency, and one 
respondent explicitly warned against applying Solvency II-style capital requirements to IORPs. 

100 

 
 
The two business/companies’ responses that were submitted showed diverging views, with one 
advising against introducing excessive obligations, and the other backing efforts to expand scale 
and cross-border activities including facilitating cross-border occupational pension operations.  

The  consumer  organisations  that  provided  input  argued  that  the  current  IORP  practices 
underperform and that a smarter, more participant-focused and flexible regulatory environment 
is needed to safeguard retirement outcomes across the EU. It also advocated for reforming IORP 
investment governance and strategies to improve long-term returns and protect real value, better 
align portfolios with demographics via life-cycle approaches, enhance transparency, oversight, 
and  consumer  protection,  and  enable  cross-border  market  development  under  a  balanced 
regulatory framework.  

The single citizen response, finally, observed that in Germany IORPs are small and controlled 
by entities subject to Solvency II requirements,  which may limit equity investment. 

Prudent person principle 

Business  associations  were  generally  supportive  of  maintaining  and  reinforcing  the  prudent 
person principle as a core framework for pension fund investment, particularly under the IORP 
II Directive. They stressed the importance of flexibility, diversification, and the need for local 
adaptation, rather than rigid investment rules or quantitative limits imposed at the EU level. 
There  was  also  a  consistent  recognition  of  the  principle’s  value  in  long-term  investment 
strategies,  especially  when  equity  and  alternative  assets  are  involved.  Some  respondents 
criticised  restrictive  national  rules  that  limit  diversification,  undermine  performance  and 
pension  adequacy,  and  called  for  recalibrating  such  restrictions  to  align  with  international 
standards and EU goals. One respondent also pointed to a plan to further develop discussions 
on  incorporating  alternative  assets  (besides  equity)  under  the  PPP  while  still  observing 
prudence, risk management, and suitability.  

Employers’ associations advocated for balancing risk management with return opportunities, 
encouraging 
in  equity  and  alternative  assets  without  excessive  capital 
requirements, and for allowing a global reach of investment that is not limited to the EU, as 
geographical restrictions could negatively impact returns.  

investments 

The only company/business that expressed an opinion on the matter had a similar position, that 
excessive obligations and restrictions should not be imposed. Finally, the one citizen that had 
feedback on the topic stated that prudential rules should not hamper pension funds’ ability to 
build their own diversification.  

PEPP 

Business associations widely stated that the current PEPP framework has failed to meet its goals 
due to structural flaws in the regulatory design which makes it not possible to commercialise 
the  product  compared  to  other  products  in  the  market.  Most  of  them  supported  a  thorough 
reform, simplification and a more pragmatic approach to meet the broader goal of improving 
access to adequate and sustainable pension provision in Europe. There were diverging views 
on using the PEPP as a second pillar product, as some expressed caution against expanding the 
scope before core issues are fixed, while others supported its use into occupational pensions to 
increase coverage. There was near-universal criticism of the 1% cost cap, viewed as unrealistic, 
stifling innovation and incompatible with investing in alternative assets (e.g. private equity). 
Some  defended  the  concept  of  a  cap  to  ensure  affordability,  but  not  in  its  current  form. 
Suggestions  included  removing  or  revising  the  cap,  or  rather  focusing  on  value  for  money. 

101 

 
Responses also expressed concerns on the prescriptiveness of investment strategies and risk-
mitigation rules. On distribution, there were mixed views as many opposed mandatory financial 
advice  for  the  basic  PEPP,  whilst  others  highlighted  the  value  of  financial  intermediaries, 
especially  given  the  complexity  of  pensions.  In  any  case  there  was  broad  agreement  that 
distribution should reflect market reality (digital + human factor). On tax incentives, there was 
very strong consensus that varied tax treatment across Member States is a critical issue and that 
without  national  tax  incentives,  PEPPs  cannot  compete  with  existing  products.  However, 
harmonizing  tax  treatment  was  seen  as  politically  and  technically  difficult.  There  were  also 
repeated concerns on the possibility that the PEPP could disrupt national pension systems, and 
that it should be kept as a third-pillar product. Finally, several responses supported the idea of 
transforming the PEPP into a label or voluntary standard, rather  than a rigid product, which 
could also allow existing products to transition into PEPP.  

The one employers’ association that responded on the issue strongly supported the core aim of 
the  PEPP,  but  expressed  significant  reservations  about  extending  PEPP  into  occupational 
pensions,  particularly  in  the  German  context,  stating  that  the  use  of  PEPP  should  remain 
complementary to national pension products.  

The one company/business that responded voiced strong support for regulatory simplification 
and flexibility in order to broaden the reach of the PEPP, including removing or easing cost 
caps to enable innovative pension solutions.  

According  to  one  consumer  association,  which  expressed  strong  support  for  the  PEPP,  the 
product  can  be  seen  as  an  opportunity  to  improve  competition  in  personal  pensions,  which 
currently  suffer  from  high  fees  and  poor  performance.  Despite  the  performance  issues  of 
personal  pensions,  PEPP  in  its  current  state  is  not  competitive.  However,  the  organisation 
emphasised that substantial simplification and consumer focus are essential in the review, that 
the PEPP should focus on delivering value for money, transparency, and accessibility, it should 
maintain the cross-border aspect and its tax treatment should be aligned with national regimes 
to level the playing field. PEPPs could also be seen as having an occupational pension role. 
According to both consumer organisations moreover there should be greater flexibility in fee 
caps.  

Finally,  citizens’  responses  highlighted  two  major  challenges  limiting  the  PEPP’s  success: 
inconsistent national tax treatments that undermine competitiveness and uptake, and a structural 
design flaw in the PEPP model, particularly the inflation capital guarantee, which makes the 
product financially unfeasible. 

Tax incentives  

Business associations showed strong and widespread support for attractive and well-structured 
tax incentives to encourage retirement savings, particularly in supplementary pensions (both 
occupational  and  individual).  Tax  policy  was  recognized  as  a  critical  lever  for  increasing 
participation,  especially in  auto-enrolment  and life-cycle pension models. At the same time, 
there was an acknowledgment of the complexity of harmonising tax treatment across Member 
States, due to national competence and differing economic and social goals. Some differences 
in opinions existed insofar some respondents supported more consistency across Member States 
(e.g., equal treatment for PEPPs), while others emphasised the limits of EU-level harmonisation 
due to national control over taxation. One response also highlighted that national reforms that 
favour  occupational  schemes  at  the  expense  of  individual  ones  are  seen  as  problematic, 
especially without adequate transitional support.  

102 

 
A similar trend could  be observed among  companies/businesses, which also  showed overall 
consensus  is  in  favour  of  expanding  public  incentives  including  tax-based,  especially  for 
currently  under-covered  groups  such  as  the  self-employed  and  those  working  in  small 
companies, and particularly to increase participation in retirement plans.  

Among other stakeholders, the only one that shared feedback on the issue, a citizen, was in 
favour of supporting EU mutual recognition of pension tax relief, promoting tax best practices 
among  Member  States,  and  granting  equal  tax  treatment  for  PEPPs  and  national  pension 
products.  

103 

 
 
 
ANNEX 2: WHO IS AFFECTED AND HOW? 

The  following  table  attributes  the  main  benefits  and  costs  of  the  preferred  options  to  four 
categories  of  stakeholders:  citizens  and  employers,  non-financial  corporations  and  financial 
firms as well as the financial sector and the public sector. The subsequent sections zoom in on 
the  evidence  of  both  qualitative  and  quantitative  effects.  Since  the  quantitative  impact  will 
depend  strongly  on  how  Member  States  and  the  financial  industry  make  use  of  the  new 
opportunities  offered  by  the  policy  measures,  it  is  not  possible  to  quantify  the  effects  with 
confidence.  Despite  these  limitations,  a  further  section  presents  scenarios  for  such 
quantification. A final table assesses the main costs and benefits across the different options 
discussed in the main text. 

Table 28: Main costs and benefits across different options 

I. Overview of Main Benefits– Preferred Option  

Measures  

Citizens 

Employers/firms 

Financial sector 

Public sector 

Direct benefits  

Pension Tracking  Better  informed  choices 

on saving needs 

Easier  communication  of 
retirement 
benefits  of 
savings 

Informed 
members, 
scope for lower costs in 
providing 
pension 
information 

Informed 
population, scope for 
lower 
in 
providing 
pension 
information 

costs 

Pension Dashboards Better  understanding  of 
reform needs and impact 

Better  understanding  of 
reform needs and impact 

Better  understanding  of 
reform needs and impact 

Improved 
capacity 
to  design  policies 
communicate 
and 
and 
needs 
their 
effects to the public 

Auto-enrolment 

IORP 

PEPP 

Higher  participation  of 
employees, earlier start of 
retirement 
saving  and 
larger  financial  wealth  at 
start of retirement 

Improved 
with work force  

relationship 

Larger 
services from IORPs 

demand 

for 

? 

Higher 
occupational 
savings 

returns 

? 

on 
pension 

Enlarged 
opportunities 

investment 

share 

Lower 
of 
population  exposed 
to 
risk 
poverty 
through 
higher 
occupational 
pension coverage 

Additional 
for 
personal pension savings 

choice 

Opportunities  to  offer 
PEPP 

choice 

for 
Additional 
pension 
work-related 
schemes 
(specifically 
when no sectoral schemes 
are available) 

Indirect benefits  

Pension Tracking  More 

confidence 

financial situation 

in 

More 
from 
funding 
pension  funds  as  a  result 
of more savings in pension 

Opportunities  to  grow 
investment 
and  more 

Additional  demand 
for  sovereign  bonds 

104 

 
 
Pension Dashboards Higher 

acceptance  of 

policy measures 

Auto-enrolment  More 

confidence 

pension adequacy 

realise 

funds, better opportunities 
to 
from 
pension  fund  investment 
in firms’ equity 

scale 

opportunities 
larger scale 

from 

from  larger  pension 
fund sector 

Higher 
policy measures 

acceptance 

of 

Higher  acceptance  of 
policy measures 

Robust  justification 
of policies 

Scale economies lead to 
lower costs 

Lower  pressure  on 
public pensions 

in 

funding 
fund 
on 
involved 

More 
pension 
depending 
entities 
administration: 
administration costs  

from 
sector, 
public 
in 
lower 

IORP 

PEPP 

Direct costs 

Auto-enrolment 

Higher 
occupational 
savings 

returns 

on 
pension 

Financial  well-being  of 
workforce 

Enlarged 
opportunities 

investment 

Higher  tax  revenues 
from  higher  growth 
due  to  investments 
and 
on 
returns 
saving 

Lower  fees  of  pension 
products 
from  more 
intense  competition  on 
national markets 

Lower  entry  barriers  for 
firms  which  have  not  yet 
occupational 
offered 
pensions 

Business  opportunities 
from higher demand for 
pension products 

on 
fiscal 
Depending 
incentives, 
low  wage-
earners  may  encounter 
lower  disposable  income 
if they do not opt out 

firms 

paying 
More 
to 
contributions 
occupational 
pensions, 
costs  to  adjust  pay-roll 
systems 

involved 

Depending  on  public 
in 
entities 
lower 
investment: 
for 
market 
incumbent 
pension 
funds 

share 

Lower 
revenues 
from  tax  incentives 
for  employers  and 
possibly  employees; 
possible  additional 
expenditures  in  the 
form  of  subsidies  to 
low-income  earners 
and  costs  to  provide 
administrative 
support 

Pension Tracking  Depending 

on 
implementation: concerns 
about data protection 

reduction  on 
Possible 
pension returns due to the 
costs incurred by pension 
providers 

on 
Depending 
implementation:  costs  to 
feed 
into 
information 
tracking systems (can also 
be a source of net savings) 

feed 
Costs 
information 
into 
tracking  systems  (can 
also  be  a  source  of  net 
savings) 

to 

feed 
to 
Costs 
into 
information 
tracking 
systems 
(can also be a source 
of net savings) 

Pension Dashboards  

IORP 

to  establish 

Costs 
data and tools 

Possibly,  costs  for  more 
intense  monitoring  of 
pension providers (can be 
a source of net benefits) 

intense 
More 
for 
competition 
occupational 
pension 
providers,  consolidation 

Costs  to  cater  for 
effective supervision 

105 

 
 
 
 
 
PEPP 

pressure  (can  also  be  a 
source of net benefits) 

More 
intense 
competition  on  market 
for pension products 

1.  EVIDENCE ON THE IMPACT OF INTRODUCING PENSION TRACKING SYSTEMS 

Financial literacy in the EU is not high, on average. A Eurobarometer survey from July 2023 
showed that 82% of EU citizens lack a high level of financial literacy. This varies greatly across 
Member States and demographic groups, with women, young people, and older adults generally 
having lower literacy levels. In particular, some individuals across the EU have low engagement 
with financial planning for retirement, which can be explained by cognitive and behavioural 
biases.  These  include  a  focus  on  the  present  (preference  for  consuming  today  over  saving), 
inertia (people know they should save for old age but are reluctant to engage with a future and 
complex  subject),  projection  bias  (people  overestimate  the  degree  to  which  their  future 
preferences  remain  the  same  as  in  the  present  and  make  short-sighted  decisions),  reference 
dependence (people make decisions involving loss and risk in relation to particular reference 
point) and the complexity and constraints of pension products.  

Member States committed to undertake measures to improve financial education and developed 
financial literacy strategies, also under the impulse and coordination of the Commission (166). 
To help financially literate savers, these measures would need to be complemented by effective 
informative tools and facilities to support them.  

The actual use of pension tracking systems, where they exist, suggests that there is demand for 
them. Three Member States that already have comprehensive platforms reported about their use 
in a survey to the Commission in 2024. One of them reported that one adult out of three visited 
the website of the pension tracking system in 2023. The second Member State reported that it 
has been visited by 60% of the population aged between 16 and 80 and by 90% regarding the 
population aged 65 to 69 in 2024. A third Member State reported an equivalent to 6% of the 
active and retired population in the first nine months of 2023. 

Ideally¸  pension  tracking  systems  (PTS)  should  aim  to  transform  a  complex,  fragmented 
pension landscape into a single, understandable overview of pension entitlements. Although 
not quantifiable, more transparency leads to increased trust in pensions and welfare systems, 
more accountability of pension providers and altogether better service for individuals. Several 
studies found that trust is an important determinant of participation in pension schemes and a 
recent research paper was able to establish that there is a causal link from trust to participation 
(167). 

166  COM/2025/681  final,  Communication  from  the  Commission  to  the  European  Parliament,  the  Council,  the 
European Economic and Social Committee and the Committee of the Regions on a financial literacy strategy for 
the EU.  
167 See Goodkoep, F. et al. (2023), ‘Trust in the financial performance of pension funds, public perception, and its 
effect on participation in voluntary pension saving plans’, DNB Working Paper No 783, June 2023 and the papers 
quoted therein. 

106 

 
 
 
 
 
 
 
 
 
 
The empirical analysis of the introduction of a digital pension app in Germany found evidence 
of beneficiary effects: the compilation of data from all pension pillars and their aggregation into 
a  digital  tool  significantly  reduced  individuals’  self-reported  uncertainty  about  their  future 
retirement income (168). Users gain pension knowledge and self-efficacy, which are essential 
foundations for making  sound financial decisions, even if they do not  immediately  alter the 
allocation of savings. In addition, various business stakeholders stress pension tracking as an 
important awareness tool for improved financial planning (169). In terms of practical gains, PTS 
could help individuals locate and recover “lost” pension pots from previous schemes, which 
might otherwise go unclaimed. 

Access  to  pension  tracking  systems  is  expected  to  yield  a  positive  behavioural  change.  The 
provision  of  information  on  pension  claims  at  a  time  when  people  are  interested  in  their 
consequences can help them overcome the behavioural biases of procrastination that lead to 
suboptimal retirement savings. The large-scale experiment in Germany quoted above found that 
access to a digital tracker led to a measurable increase in savings balance for participants (170). 
Conversely,  a  randomized survey experiment  with Dutch data tested the  effectiveness  of an 
online interactive pension tracker but was not able to detect significant impact on the immediate 
willingness to act or change savings behaviour for savers with a pension gap (171). Although 
the  current  academic  research  led  to  mixed  outcomes,  it  could  be  argued  that  by  fostering 
greater  pension  awareness  and  encouraging  more  active  financial  planning,  the  creation  of 
pension  tracking  systems  may  contribute  to  an  aggregate  increase  in  individual  retirement 
savings, which in turn may boost the savings pool available for long-term investment projects. 

The positive impact on financial engagement and planning and, in some cases, eventual savings 
behaviour  seems  to  be  most  pronounced  among  financially  less  literate  individuals.  In  the 
previously  mentioned  large-scale  experiment  in  Germany,  the  increased  savings  effect  was 
almost  entirely  driven  by  participants  with  low  financial  literacy.  This  study  concluded  that 
simplifying  pension  information  disproportionately  benefits  the  most  vulnerable  groups, 
thereby potentially reducing disparities in pension planning and savings behaviour. By nudging 
individuals to provide more for their own retirement (notably by saving more on occupational 
and  personal  pensions),  pension  tracking  systems  could  reduce  future  dependency  on  social 
assistance and state-funded minimum pension provisions over the long-term. Furthermore, by 
highlighting  projected  pension  gaps,  they  may  encourage  delayed  retirement  or  continued 
labour force participation, affecting old-age dependency ratios. 

to 

for 

the 

No. 

Paper 

Centre 

Research 

recognise 

European 

Economic 

Discussion 

financial  skills 

importance  of  personal 

168 Bucher-Koenen, T. et al. (2022), ‘Disparities in Financial Literacy, Pension Planning, and Saving Behaviour’, 
ZEW- 
22-037 
(https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4251552) . 
169 The European Banking Federation (EBF) notes that “from a very early stage, citizens must be equipped with 
sound 
finance  and  pension  planning” 
(https://www.ebf.eu/ebf-media-centre/european-associations-set-out-recommendations-to-ensure-pension-
adequacy-for-all/#:~:text=The%20European%20Banking%20Federation%20,proof%20society).  PensionEurope 
highlights that tracking systems “make people aware of their financial situation for the old age and can help them 
to 
(https://pensionseurope.eu/policy-priorities/eu-pension-
policy/#:~:text=PensionsEuropAmdie%20%C2%A0support%20the%20development%20of,of%20pension%20e
ntitlements%20throughout%20Europe) . 
170 Bucher-Koenen, T. et al. (2022), ‘Disparities in Financial Literacy, Pension Planning, and Saving Behaviour’, 
ZEW- 
22-037 
(https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4251552) . 
171 Kramer, M. et al (2024, ‘Do online pension dashboards affect pension knowledge and expectations? Evidence 
from a randomized survey experiment’, Journal of Pension Economics and Finance, Vol. 23, pp. 504-527. 

Discussion 

decisions” 

Economic 

European 

Research 

financial 

Centre 

Paper 

right 

take 

No. 

the 

for 

107 

 
 
A pan-European network of interconnected national pension tracking systems, as envisioned 
by the European Tracking Service (ETS) project (172), could be an enabler of EU cross-border 
mobility.  A  research  project  warned  that  lack  of  cross-border  pension  overviews  “could 
possibly  impede  the  mobility  of  labour”  (173).  When  pensions  are  portable  and  transparent, 
workers have less an incentive to stay idle to preserve pension rights and can optimize career 
choices. By undoing an important obstacle for employees’ move into better-fitting jobs, better 
portability  of  pension  rights  can  make  the  labour  market  more  efficient,  potentially  raising 
productivity.  

The entity operating the PTS, whether a public agency or a public-private partnership, carries 
responsibility. It must ensure the technical functioning of the system, coordinate data standards 
across  providers,  and  guarantee  both  independence  and  user  trust.  EIOPA  considers 
transparency, accountability and non-profit operation to be central conditions for legitimacy. 
Annual reports and clear service standards are recommended as safeguards.  

Building  and  running  a  pension  tracking  system  involves  multi-faceted  costs.  The  most 
significant  cost  drivers  are  start-up  costs.  They  concern  the  initial  IT  development  of  the 
infrastructure,  system  testing,  and  the  complex  technical  integration  of  data  from  different 
pension  providers,  each  with  their  own  legacy  systems.  After  the  launch,  operational  costs 
pertain  to  hosting,  maintenance,  cybersecurity,  data  management,  user  support  as  well  as 
governance expenses. Administrative costs include coordination and compliance costs. Systems 
need strong data protection (GDPR compliance), user authentication, and interfaces in multiple 
languages. 

In particular, an operational impact falls on pension providers and data holders. These include 
statutory  pension  institutions,  occupational  funds,  insurers  and  other  personal  pension 
providers. They are responsible for transmitting accurate and standardised data to the PTS. This 
obligation  can  be  demanding  for  small  or  non-digital  providers,  who  may  need  to  develop 
entirely  new  IT  capabilities  to  comply.  Ultimately,  these  costs  would  affect  the  returns  on 
retirement savings. To limit the burden, EIOPA (174) advises that the system should initially 
rely on a very small core dataset, including basic identifiers of the citizen and provider, accrued 
entitlements,  projected  retirement  income  and  expected  retirement  age,  before  expanding  to 
more detailed filed at later stage.  

A design choice in this context is the way in which data is exchanged between providers and 
the PTS. Two main models exist. In the so-called live access model, the PTS does not store data 
centrally.  Instead, when  a citizen logs  in,  the system  connects  in  real  time to  the provider’s 
database, retrieves  the relevant  information  and displays it on screen. The advantage of this 
model is that providers remain in full control of their data and citizens see the most up-to-date 
information. The drawback is that it requires providers to guarantee constant connectivity, rapid 
response times and robust IT systems, as users will not tolerate long delays. By contrast, in the 
central database model, providers transmit their data periodically to a repository managed by 
the PTS. The citizen then accesses this central system directly, without the need to query each 
provider in real time. This model provides faster service for users and places less demand on 
providers during each login, but it introduces some challenges. The operator becomes at least 

https://www.maastrichtuniversity.nl/news/start-research-cross-border-pension-tracking-service-regarding-

172 https://www.findyourpension.eu/about-ets.  
173 
netherlands-belgium-and-germany#:~:text=taxes,impede%20the%20mobility%20of%20labor.  
174 Technical advice on the development of pension tracking systems, 01 December 2021. 

108 

 
 
partly  responsible  for  the  quality  of  the  consolidated  information.  The  centralised  storage 
increases the need for strong security and governance arrangements. 

Supervisory authorities must ensure that the PTS is embedded within a robust legal framework. 
They  must  clarify  the  allocation  of  responsibilities  between  providers  and  operators, 
particularly in relation to liability for projections. Finally, the establishment of a national PTS 
could have a European dimension. Mobile workers often accumulate pension entitlements in 
more than one Member States. Without cross-border compatibility, information would remain 
fragmented.  For this  reason, national  PTS should be designed with  interoperability in  mind, 
ensuring  eventual  connection  to  the  ETS.  This  may  require  additional  legal  and  technical 
adjustments. 

In summary, the limited evidence on costs shows that these vary widely depending on the scale 
of the national project, national economic circumstances, labour costs and so on. Since access 
must  be  free  for  citizens,  some  degree  of  public  funding  is  necessary.  To  prepare  for  this, 
Member States are encouraged to conduct feasibility studies to estimate the cost per user under 
different design scenarios. EU co-funding via the Recovery and Resilience Facility (RRF), the 
Digital Europe Programme (DIGITAL), the Technical Support Instrument (TSI), the European 
Social Fund Plus (ESF+) or the exchange of best practices via the ETS could contribute to the 
design and roll out of a pension tracking system. 

2.  THE IMPACT OF A PENSION DASHBOARD ON DIFFERENT STAKEHOLDERS 

Regarding  the  impact  of  a  pension  dashboard  on  different  stakeholders,  the  EIOPA  advice 
compares benefits and costs for EU authorities, national authorities, private pension providers, 
citizens. Regarding the preferred option for additional data collections, it lists additional costs 
for national authorities for the collection and validation of additional data. Particularly, those 
authorities that have not been able to make pension projections would need to invest in doing 
so.  

Private  pension  providers  would  incur  one-off  costs  for  reporting  basic  pension  data.  This 
would be limited for IORPs to the breakdown by age and gender since other data is already 
collected. Non-IORPs would face higher reporting costs. Citizens would not incur additional 
costs but could benefit from a transparent view of the contribution of supplementary pensions 
to  pension  adequacy.  This  transparency  could  also  incentivise  additional  private  pension 
savings, which would directly benefit pension providers in terms of higher demand for their 
products, thereby compensating them for the higher reporting costs.  

Ultimately, citizens would benefit from higher growth and employment as the result of a larger 
supply of capital and its better allocation in the economy. 

3.  EVIDENCE ON THE IMPACT OF AUTO-ENROLMENT 

Auto-enrolment intends to overcome people’s behavioural bias of procrastination that causes 
low  and  late  voluntary  private  saving  for  retirement  purposes.  Actual  experiences  from 
countries  that  made  use  of  it  demonstrates  that  it  can  lead  to  a  substantial  increase  in  the 
participation in supplementary pensions. Academic research on auto-enrolment in the US, UK 
and New Zealand suggests that the impact can be in the order of 30 percentage points or higher 

109 

 
increase (175). The review article by Besheab et al (2024) reports that auto-enrolment accounts 
in the US for 40% private sector workers 401(k) or comparable plans; almost 60% of pension 
plans administered by a major provider were with auto-enrolment. Berk et al. (2025) analyse 
an  experiment  where  British  employees  where  either  automatically  enrolled  or  could  enrol, 
finding the participation was 48 %-pt higher for those that were auto-enrolled 9 months later 
and their balances were more than GBP 100 higher. Similar results were obtained in a second 
experiment with new employees (176). The participation rate in New Zealand increased from 
about 15% in 2006 to above 80% in 2022, that in the UK from 17% to 75% (177).  

Actual increases were much smaller for EU Member States that had introduced auto-enrolment. 
They were at about 5 percentage points in Italy since 2006 and 10 percentage points in Poland 
and  Lithuania  (178).  Economic  papers  identified  some  reasons  for  the  different  turnouts. 
Employers’ obligation to offer pensions fostered the take up in the UK; other pension measures 
impaired  trust  in  PL  (179)  and  participation  in  occupational  pensions;  competition  with  an 
established regime that offers severance pay held back participation in Italy (180). 

The  empirical  estimates  undertaken  in  the  AE  study  with  a  panel  approach  that  covers 
experiences in 18 countries and controls for a host of macroeconomic and structural factors, 
yielded a positive impact of auto-enrolment of 16 percentage points on the participation rate. 
The latter was defined as active members relative to working age population. The Irish impact 
assessment on auto-enrolment expects that the coverage could increase by 750,000, which is 
equivalent to 21% of working age population.  

Designing Auto-Enrolment Schemes 

Member States can influence the impact of auto-enrolment through the design of its elements, 
such as eligibility  criteria, the contribution  rate, opt-out  procedures or fiscal  incentives. The 
review of the US experience by a group of academics revealed low opt  -out and withdrawal 
rates; it also suggests that the magnitude of the default contribution rate had no impact on the 
participation decision (181). The salary of employees, however, influences whether people opt 
out  or not.  Low-wage earners tend to  opt-out  more often, suggesting that affordability is  an 
issue for them (182). 75% of low wage earners are enrolled in the UK compared to 88% of all 
eligible workers (183). An analysis of the participation of employees with very low wages in 
Germany, however, found that about 23% of those that earned so little that they genuinely could 

175  See  Benhears,  J.  et  al  (2024),  ‘Influencing  Retirement  Savings  Decisions  with  Automatic  Enrollment  and 
Related Tools’ NBER The Reporter, No. 3, pp 16-24, and AE study. 
176  Bertk,  S.  H.  et  al.  92025,  ‘Automatic  Short-Term  Payroll  Savings:  Evidence  from  Four  Large  U.K. 
Experiments, NBER Working Paper No 32581, April 2025. 
177 Bourquin et al. (2020) report that the participation rate increased stronger among young than old, i.e. from 20 
to 88% compared to from 55 to 93% and that the participation of very low income earners was quite high. 
178 Taking OECD data as yardstick: LT 66.2-76.7 2016-2022, IT 7.2-12.6% 2007-2022, PL 1.4 to 13.1 from 2019 
to 2022. Poland initially expected that 75% of eligible employees would enrol, see AE study. The new PKK has 
accomplished a participation rate of about 53% in 2025 according to the Polish Chamber of Commerce. 
179 Bielaska and Turner (2023) identify an adverse impact of the redirection of pension savings in the open pension 
funds (OFE) regime into government bonds in their analysis of the impact of trust on the success of auto-enrolment.  
180 For an analysis of the Trattamento di Fine Rapporto (TFR), see AE study. 
181 See AE study and Benhears (2024). 
182 See the analysis on the Oregon Saves project reported in Chalmers at al. (2021). 
183 The term low wage earners refers here to those earning between GBP 10,000 and 20,000 per annum. To be 
eligible, a person must earn at least GBP 10,000.  

110 

 
 
not afford to save for retirement enrolled and 15% remained in the scheme (184). This result is 
consistent with research in the UK that a significant number of low-wage earners did not opt 
out, although they cannot afford and would be better placed if they opted out (185). This evidence 
also suggests that incentives could be differentiated for high and low-wage earners, for example 
envisaging  state  participation  to  contributions  (i.e.  subsidies)  for  the  latter  ones,  to  ensure 
greater participation and lower opt-out rates.  

Auto-Enrolment Triggers and Contribution Rates 

Countries using auto-enrolment employed eligibility criteria to exclude people considered not 
able to afford the contribution to supplementary pensions. The UK made eligibility conditional 
on  a  minimum  annual  income  of  GBP  10,000;  Ireland  has  set  the  earnings  threshold  at 
EUR 20,000. There is trade-off in keeping low wage earners outside auto-enrolment. On the 
one hand, it avoids reducing their disposable income; on the other hand, auto-enrolment will 
contribute little to the reduction of their old-age poverty. Research in Ireland showed that the 
planned design of auto-enrolment  will likely  cover too  few households in  the lower income 
bracket  to  have  an  impact  on  the  risk-of-old-age-poverty  rate  (186).  Despite  considered 
successful in the UK, auto-enrolment did not prevent low participation of people that are self-
employed, low-wage earners, those with a migration background (187). 

Good  practices  to  circumvent  unwarranted  effects  could  consist  in  starting  with  a  low 
contribution rate, while announcing its increase over time, like Ireland is planning, or to offer 
the possibility for people below the income threshold to opt in (which is possible in the UK and 
will be in Ireland). This might be beneficial for example for young people with low income and 
support from parents, for women with support from partners, or people with disabilities (188). 
The  creation  of  opt-in  windows  can  also  be  beneficial  for  other  participants  that  wish  to 
participate but are not eligible for specific regimes, for example self-employed excluded from 
occupational  pension  schemes.  Wealthier  participants  may  also  appreciate  possibilities  to 
voluntarily top up their contribution rate. Another good practice would be flexibility in opt-out, 
re-enrol possibilities and flexibility in the contribution rate. This could cater for the needs of 
people  with  atypical  work  contracts  or  career  breaks  (189),  for  example  because  they  are 
caregiver to family members. The impact of auto-enrolment on the gender pension gap seems 
to be ambiguous (190).  

The inactivity bias leads to some stickiness in the initial decision and analysis with US data 
suggests  that  this  is  a  favourable  effect  of  auto-enrolment,  especially  for  people  with  low 

184 Bucher-Koenen, T. et al. (2024)‚ ‘Opt-in or Opt-out? The Effect of Defaults on Public Pension Enrollment’, 
https://www.luisa-wallossek.com/research, accessed 17 October 2025. The term very-low wage earners refers here 
to mini jobbers, i.e. earnings of less than EUR 538 per month. 
185 Bourquin, P. et al., ‘Who leaves the pensions after being automatically enrolled?’ Institute for Fiscal Studies, 
IFS Briefing Note BN 272, March 2020. 
186 Keane, C. et al. (2021), The Distributional Impact of Pension Auto-enrolment’, ESRI Working Paper No 707, 
November 2021. 
187 
retirement-crisis-that-risks-tomorrows-pensioners-being-poorer-than-todays. 
188  The  Irish  impact  assessment  on  auto-enrolment  sees  the  risk  that  the  income  threshold  would  over-
proportionally exclude people with disabilities. 
189 In the UK, the employees’ contribution is based on maternity pay and not on pay during maternity leave while 
the  employer’s  contribution  will  remain  a  share  of  pay,  see  Rights  while  you're  on  maternity  leave  -  Citizens 
Advice. 
190 Keane, C. et al. (2021), The Distributional Impact of Pension Auto-enrolment’, ESRI Working Paper No 707, 
November 2021. 

https://www.gov.uk/government/news/government-revives-landmark-pensions-commission-to-confront-

111 

 
 
financial literacy (191). A survey by the Irish Central Statistics Office, ahead of the introduction 
of auto-enrolment, found that 72% of employees in scope of the scheme (i.e. those without an 
existing occupational pension) intended to remain part of it once enrolled. This is consistent 
with  findings  from  other  countries  that  people  stick  to  the  default  option.  Around  80%  of 
employees of large companies auto-enrolled into 401(k) plans in the USA chose both the default 
contribution rate and the default investment fund and 50% still kept them after 3 years (192). 
Currently,  57%  of  the  savers  use  the  default  option  in  the  Swedish  premium  pension, 
corresponding to 75% of all premium pension savings (193). 

The research on the US and UK experiences shows that the impact of auto-enrolment on the 
saving rate of those enrolled is not easy to cover. The UK expected that auto-enrolment would 
lead  to  GBP  17  billion  in  additional  savings  per  annum  (194),  which  corresponds  to  13%  of 
households’ savings in 2024. Research for the Irish proposal estimates the additional savings 
could boost the replacement rate by 11 %-pts if enrolled for 20 years and 17%-pts for 30 years 
(195). The empirical study in the AE study did not find a positive effect on the contribution per 
member. Analysis with British data suggests that auto-enrolment reduced private savings. The 
effect was, however not 1 to 1, but 1 to 0.2, i.e. about 20% of savings are crowded out. Analysis 
with US data show that the effect on saving behaviour changes over time. The possibility to 
withdraw  pension  savings  before  retirement  significantly  reduces  the  magnitude  of  ultimate 
retirement income. The effect was up to 60% compared to the accumulated contributions. A 
different position is taken by Briere (196), who argued with a view to the experiences in France 
that the absence of early withdrawal possibilities disincentivises younger people to stay enrolled 
if their savings are locked in until retirement (197). In the same vein, analysis produced by a 
French  market  participant  argues  that  withdrawal  possibilities  have  an  important  role  in 
explaining the take up of the PER as voluntary pension product in France.198 

These arguments suggest that design features, and among them early-withdrawal rights, are an 
important determinant of the impact of auto-enrolment on participation decisions and the level 
of retirement savings. Some researchers as well as responses to the consultation furthermore 
highlight access to profitable investment opportunities net of fees as precondition for the impact 
of auto-enrolment on the amount of savings to materialise. 

191 Shah Goda, G. et al. (2021), ‘Who is a passive saver under opt-in and auto-enrolment?’ Journal of Economic 
Behavior and Organization, Vol. 173, pp. 301-321. 
192 See AE study. 
193 A 2004 study about the Swedish premium pension system found that a third of people remained in the default 
fund over the four years since the system became active. The government discouraged active choice after a series 
of  financial  scandals  related  to  providers  competing  intensively  through  marketing  measures  to  draw  pension 
savers into their schemes. See AE study. 
194 Bourquin, P. et al., ‘Who leaves the pensions after being automatically enrolled?’ Institute for Fiscal Studies, 
IFS Briefing Note BN 272, March 2020. 
195 Bercholz, M. et al. (2019), ‘A Micro-Macro Economic Analysis of Pension Auto-Enrolment Options’, ESRI 
Working Paper No. 640, October 2019. 
196  Briere,  M.  (2025)  ‘Overcoming  barriers  to  retirement  savings:  behavioural  factors  and  existing  schemes’, 
SUERF policy brief, No 1142, April. 
197 A citizen suggested in his reply to the Call for Evidence that early withdrawal should be made an explicit feature 
of an auto-enrolment scheme to overcome the younger generation’s reluctance to commit for a long time and to 
entice it to enrol. 
198  Amundi  Investment  Institute  (2025),  ‘Overcoming  barriers  to  retirement  savings:  behavioural  factors  and 
existing  schemes’,  Economy  and  Markets,  Themes  at  a  Glance,  March  2025.  https://research-
center.amundi.com/article/overcoming-barriers-retirement-savings-behavioural-factors-and-existing-schemes 

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While the US research suggests that the size of the contribution rate does not have an impact 
on the decision to participate, it is still important for the accumulation of savings. In Member 
States  with  an  already  relatively  high  participation  in  voluntary  occupational  pensions  like 
Belgium or Germany, occupational pensions contribute modestly to retirement income because 
the  contribution  rate  is  low.  Despite  the  success  of  auto-enrolment  in  the  UK  in  terms  of 
participation,  a  large  share  of  the  British  population  is  still  perceived  as  under-saving  for 
retirement because savers do not voluntarily top up their pension savings (199). Older employers 
do not benefit enough from auto-enrolment because their contribution period is too low. Low 
wage  earners  and  those  with  career  interruptions  do  not  save  enough  via  auto-enrolment  to 
accomplish a significant contribution to their retirement income. Design elements such as top-
up lump-sum public payments for low wage earners instead of tax incentives or special rules 
for care givers could mitigate these effects.  

Overall, supplementary pensions replicate the income differences during work life in retirement 
age.  To  the  extent  that  higher  income  classes  benefit  from  tax  incentives  and  better 
opportunities  to  earn  return  on  their  savings,  it  would  even  amplify  income  inequality. 
Empirical  analysis  of  the  Irish  proposal,  however,  shows  a  more  nuanced  picture.  Higher 
income  classes  can  expect  a  larger  relative  reduction  in  their  disposable  income  than  less 
wealthier ones because of the minimum income eligibility condition (200). 

Auto-Enrolment and the Role of Employers 

The take up of auto-enrolment will also depend on interests of employers offering it. In a survey 
by the Irish statistical office, more than half of the respondents indicated “that their employer 
did not provide an occupational scheme” compared to about 25% that got an offer from their 
employer, but did not to join. Overall, people have a lot of trust in employers in providing an 
adequate retirement income. In a Eurobarometer, 55% said they trust, thereof 11% that they 
trust  a  lot,  which  is  higher  than  the  trust  they  have  in  pension  offers  from  financial 
intermediaries (201). Research on participation in the US 401(k) regime suggests that the effect 
of auto-enrolment was larger than that of employers’ co-financing (202).  

Employers’  traditional  motivation  in  providing  occupational  pensions  was  to  attract  talent, 
strengthen employees’ loyalty and to gain a reputation as responsible entity. This motivation 
has lost in importance in an increasingly mobile work environment whereas the reputational 
gains  are  not  quantifiable.  Employers’  interest  seems  to  be  higher  in  social  partner  models 
because involvement of many employers and a large pool of employees ensure scale effects and 
allows for portability within the industrial sector. When used in collective agreements, the offer 
of occupational pensions also helps attract and keep employees in the sector. There is also an 
indirect beneficial effect of occupational pensions for employers since parts of the contributions 
to occupational funds flow back to the corporate sector via pension funds’ investments203. The 
choice between higher salaries or higher contributions to occupational pensions also offers an 
extra degree of freedom in collective bargaining. This could theoretically lead to the mitigation 
of price-wage spirals in case of external price shocks or the moderation of a sudden increase in 

https://www.gov.uk/government/news/government-revives-landmark-pensions-commission-to-confront-

199 
retirement-crisis-that-risks-tomorrows-pensioners-being-poorer-than-todays.  
200 Keane, C. et al. (2021), The Distributional Impact of Pension Auto-enrolment’, ESRI Working Paper No 707, 
November 2021. 
201 EIOPAs 2024 Flash Eurobarometer: Consumer trends in insurance and pension services. 
202  See  Benhears,  J.  et  al  (2024),  ‘Influencing  Retirement  Savings  Decisions  with  Automatic  Enrollment  and 
Related Tools’ NBER The Reporter, No. 3, pp 16-24. 
203 Article 19 in IOPR II sets limits on investment in the sponsor. 

113 

 
 
capital costs if wage earners agree in times of these shocks that a part of their salary is not paid 
out but be allocated to their pension rights.  

The offer of occupational pensions as a tool to attract talent is largely limited to large firms. 
SMEs have made much less use of this instrument. Since the costs of offering occupational 
pension has a large fix component, SMEs have a natural disadvantage. The organisation of such 
schemes  through  social  partners  supports  SMEs,  the  possibility  to  use  basic  Pan-European-
Pension-Products (PEPPs), could further reduce this disadvantage. Auto-enrolment is likely to 
increase the number of employees that agree to such an offer. The proportionally higher costs 
for SMEs of setting up auto-enrolment has been recognised for example in the UK and IE and 
led them to  phase in  auto-enrolment  gradually. Smaller employers were given more time to 
adjust in the UK, while Ireland will gradually increase contribution rates over 10 years. 

Auto-enrolment  may  have  a  positive  effect  on  employers’  incentives  to  offer  occupational 
pensions because they reduce the likelihood that too few employers voluntarily enrol in them 
to make the offer economical. The expectation of too little take-up may discourage in particular 
smaller employers from  offering occupational  pensions. From the perspective of employers, 
mandatory  enrolment  would  therefore  be  superior  to  automatic  enrolment  with  an  opt  out 
clause. Smaller employers still would have to shoulder larger administrative costs. This is why 
tax  incentives  or  other  compensation  schemes  or  public  support  on  administration  look 
justifiable,  especially  against  the  background  information  from  the  UK  that  employers  pay 
higher  attention  to  the  costs  of  such  systems  than  to  the  returns  for  their  employees.  Few 
Member States provide fiscal incentives for employers beyond the deductibility of employers’ 
contributions from their tax obligations (204). 

An  alternative  approach  can  be  found  in  the  New  Zealand  KiwiSaver  scheme  (205).  In  that 
scheme,  employers  pay  employee  deductions  and  provide  relevant  information  to  the  tax 
authority (Inland Revenue), but the main relationship is between the employee and a KiwiSaver 
provider  (e.g.  banks,  fund  managers).  If  an  employee  does  not  choose  a  specific  scheme  or 
provider, they are automatically enrolled into a default scheme by the Inland Revenue (or the 
employer, if they have a preferred provider). 

When  set  in  an  employment  context,  the  experience  in  the  US  and  the  UK  of  declining 
enrolment rates when people separate from employers are noteworthy. Beshears et al. (2024) 
found that US employees withdraw part of their 401(k) savings when leaving the employer. In 
the UK, employees were enrolled in a new scheme when changing the employer, which led to 
a plethora of small pension pots and small funds investing them, with adverse effects on the 
possibility to use scale effects in the investment process (206). In Lithuania, members have their 
individual  accounts  and  their  access  is  independent  from  the  employer  (207).  Denmark  and 
Sweden  support  flexibilities  by  applying  multi-employer  schemes.  In  German  occupational 
pensions, members that move their job can decide whether they keep their pension account with 

204  For  example,  Spain  and  Germany  allow  extra  deduction,  several  Member  States  exempt  employers’ 
contributions to supplementary pensions from social security contributions (e.g. IE, PT, SK). See OECD ‘Annual 
survey on financial incentives for retirement savings OECD country profiles 2023’. 
205 How KiwiSaver works. 
206  See  Beshears,  J.  et  al  (2024),  ‘Influencing  Retirement  Savings  Decisions  with  Automatic  Enrollment  and 
Related  Tools’  NBER  The  Reporter,  No.  3,  pp  16-24,  Briere,  M.  (2025)  ‘Overcoming  barriers  to  retirement 
savings: behavioural factors and existing schemes’, SUERF policy brief, No 1142, April. 
207 This is similar in New Zealand and the Australian Superannuation scheme. 

114 

 
 
the previous employer or transfer the rights to a new employer. A centralised administrative 
body may circumvent portability issues. 

Auto-Enrolment and Fiscal Incentives 

Tax incentives may boost the interest in occupational pensions and OECD analysis suggests 
that tax incentives can be a very effective instrument to foster voluntary pension savings (208). 
The effects differ, however, between income cohorts. People with high income optimise their 
after-tax returns of different investment opportunities without a large impact on their saving 
rate.  Middle-income  earners  individuals  tend  to  increase  their  savings  in  reaction  to  tax 
incentives, while the impact on low-income earners depends on whether those incentives make 
participation more affordable. Very low-income earners may not benefit at all if their income 
is below tax thresholds so that they cannot deduct tax advantages.  

Moreover, fiscal  incentives for employees to  participate in  occupational  pensions or to  save 
voluntarily or for employers to compensate for their administrative burden result in a loss in tax 
revenue, which, depending on the chosen relief, can be significant in the short to medium term. 
According  to  an  OECD  estimate,  tax-favoured  retirement  savings  can  cost  governments 
between 0.5% and 2% of GDP annually, depending on the country’s structure and take-up rates 
(209). Data on the magnitude of tax breaks on private schemes collected by the OECD shows 
that in countries with high occupational pensions such as the Netherlands, Canada, Australia, 
the government spends around 2% of GDP, in the US and UK about 1% of GDP. This data, 
however, shall not be taken in isolation, but included in the overall government expenditures 
for  pensions,  as  in  some  cases  incentives  for  supplementary  schemes  are  accompanied  by 
reductions in expenditure for statutory pensions. 

Tax incentives often disproportionately benefit higher-income individuals who are more likely 
to participate in private pensions and gain from tax deductions. This can lead to regressive fiscal 
outcomes, where wealthier individuals receive greater public transfers relative to their income, 
reducing the overall progressivity of the Member States’ tax system (210). An analysis of the 
impact of taxes on supplementary pensions by means of a microsimulation model on income 
distribution in the EU Member States yielded that tax treatment has an overall redistributive 
effect. It favours low-wage retirees and put a burden on high wage earners (211). 

Hence, a cost-effective, targeted, and judicious use of tax incentives in combination with other 
forms  of  incentives,  e.g.  subsidies  for  various  income  cohorts  is  a  key  consideration  in  the 
policy design to boost the uptake of supplementary pensions. 

208 See OECD (2018), ‘Financial incentives and retirement savings’, Paris 2018 and the literature quoted therein. 
209 OECD, Pensions at a Glance, 2023. 
210 Biggs et al. (2024) argue that if contributions are exempted and ultimate payouts are taxed, the tax relief depends 
on the deferred payments and therewith on the difference between the future and the present tax rate, which may 
be larger for lower income earners than for large income earners. See Biggs, A.C. et al. (2024), ‘The Case for 
Using Subsidies for Retirement Plans to Fix Social Security’, Centre for Retirement Research at Boston College, 
Working Paper 2024-1. January 2024. 
211 See Barrios, S. et al. (2018), ‘Size and distributional pattern of pension-related tax expenditures in European 
countries’, JRC Working Papers on Taxation and Structural Reforms No 06/2018. 

115 

 
 
Governments may forgo income tax revenue by exempting pension contributions from taxation. 
Many Member States actually do this, albeit most with quantitative limits (212). In addition, by 
exempting investment gains from capital gains or dividend taxes  (Exempt-Exempt-Taxed or 
EET model) and thereby not taxing the investment returns on pension savings, the government 
foregoes another source of potential tax revenues. Most Member States do not totally exclude 
retirement  savings  from  taxation.  Usually,  either  the  contributions  to  retirement  savings  are 
exempted from tax and the final payout in retirement is taxed or contributions are paid after tax 
is  paid  on  income  and  the  payout  from  the  pension  scheme  is  tax  free.  Exemption  of 
contributions provides incentives to save, which is important in systems that allocate a role to 
voluntary savings for retirement, and to take risks (213). Deferring the taxation to the payout 
phase  implies  a  lower  present  value  of  the  tax  revenues  compared  to  the  taxation  of 
contributions if the tax rate were the same, with the magnitude of the tax loss depending on the 
discount rate, the length of the period, and the returns on pension savings. 

Taxation of investment income also differs across Member States and tax codes are complicated 
inter alia because they attempt to  avoid  double taxation. The impact  of tax breaks therefore 
depends on when the tax is paid and the tax rate applicable to the individual in that moment. If 
retirement income is lower than earnings during the work career and tax rates are progressive, 
the government will ultimately forgo tax revenues.  

The detailed analysis of the impact of pension taxation by means of a microsimulation model 
that  covers  the  details  of  Member  States  tax  systems  by  the  Commission’s  Joint  Research 
Centre also draws attention to methodological challenges such as the choice of the appropriate 
benchmark (214). Figure 22 compares the impact of tax on households’ disposable income as 
proxy  for  foregone  revenues  with  the  taxation  that  would  occur  in  a  pure  E(E)T  system, 
including thresholds and limits to the deductibility of pension contributions. Although the costs 
of the actual tax treatment are higher than that of the pure EET system in most Member States, 
the analysis showed a tax gain for several Member States (see Figure 22) (215). High foregone 
tax revenues in some CEEC are caused by tax reliefs on the income of retired persons. 

212 See OECD (2018), ‘Fiscal incentives and retirement savings’ and ‘Annual survey on financial incentives for 
retirement savings OECD country profiles 2023’. 
213 For a more comprehensive discussion, see Barrios, S. et al. (2018), ‘Size and distributional pattern of pension-
related tax expenditures in European countries’,  JRC Working Papers on Taxation and Structural Reforms  No 
06/2018. 
214 See Barrios, S. et al. (2018), ‘Size and distributional pattern of pension-related tax expenditures in European 
countries’, JRC Working Papers on Taxation and Structural Reforms No 06/2018. 
215 The high extra revenues for the government in Greece were due to a solidarity levy introduced after the Greek 
sovereign debt crisis. 

116 

 
 
Figure  22:  Costs  and  revenues  of  pension-related  tax  expenditures  relative  to  the  benchmark  of  an  EET  system  without 
exception and limitations, data for 2017. 

Source: Barrios et al. (2018). 

Governments may also offer fixed subsidies, matching contributions, or kick-start incentives. 
Poland uses lump sum payments to incentivise lower income earners to participate. The AE 
study suggested to use such kind of financial incentives in auto-enrolment schemes to close the 
gender  pension  gap.  Such  lump  sum  payments  should  favour  women  because  they  are 
overrepresented among the low-wage earners. The AE study also quoted two other precedents: 
the fixed contribution Germany pays to the parent, which is usually the mother, as part of its 
promotion of the Riester rent, and the contribution in Chile paid when a child is born. Analysis 
of the distributional effect of the Irish scheme, however, yields a marginal effect on the gender 
pension gap because of the minimum income eligibility condition. The lump sum payment will 
also not undo the lower contribution period of women as cause of the gender wage gap. A study 
identified care credits and other means to address this cause (216). 

Government  contributions  constitute  direct  fiscal  outlays.  For  example,  New  Zealand’s 
KiwiSaver  benefits  from  an  annual  government  matching  contribution,  which  cost  the 
government around NZD 900 million in 2021–22, corresponding to 0.4% of its GDP per year. 
Ireland’s counts with also 0.4% of GDP for public top-up contributions to retirement savings. 
In Poland, the government pays a lump-sum amount of 250 PLN, equivalent 60 EUR, when a 
member joins an employee capital plan (PKK) and contributes a broadly similar amount each 
year. When multiplied by the number of users, this corresponds to about 0.03% of GDP. The 

216 See Natali, D. et al. (2024), ‘Study supporting the monitoring of care credits in occupational pension schemes’, 
Final  Report,  https://employment-social-affairs.ec.europa.eu/document/download/5b3c7f9b-346a-4123-8b4f-
fa7026998b31_en?filename=Pension%20Care%20Credits%20Final%20Report_PDF.pdf. 

117 

 
 
 
costs of such subsidies are more transparent than tax incentives, which accrue and need to be 
budgeted each year. 

If employer contributions are tax-deductible, which is the case in most Member States, albeit 
with quantitative limits in many, these deductions reduce corporate tax revenues. Tax losses 
would be higher the larger the take up of occupational pensions. The same effect on tax revenues 
would materialise if employers pay a higher wage instead of a contribution to their employees’ 
retirement savings. This potential tax loss might however be offset by other effects of higher 
wages such as higher social security contributions, higher taxes on income and consumption. 
To the extent there is a limit on the deductibility of employers’ contribution and none on the 
deductibility of higher salaries, it may disincentive employers to offer occupational pensions. 
The forgone revenue for the government would need to be considered against additional future 
tax  revenues  in  the  event  higher  pension  savings  improve  the  capital  allocation  and  lead  to 
higher economic growth. This macroeconomic effect appears however impossible to quantify. 
The possibility for employers to deduct their contributions for supplementary pensions from 
other  social  security  contributions  implies  a  revenue  shortfall  of  other  social  security 
institutions. 

Cost of Auto-Enrolment Schemes for Governments 

The  fiscal  cost  of  introducing  an  auto-enrolment  pension  scheme  in  a  country  will  vary 
depending on the scheme’s design. Fiscal costs are mainly driven by additional incentives that 
a government chooses to provide, such as tax relief or matching contributions, but also the cost 
of setting  up the necessary administrative infrastructure. Building  an auto-enrolment  system 
from scratch entails establishment costs for various items such as IT infrastructure, regulatory 
framework,  setting  up  a  central  clearing  house.  Ongoing  costs  comprise  compliance, 
supervision, and public education campaigns. Ireland’s auto-enrolment system was projected 
to cost €2.8 billion over 10 years, including €1.3 billion in state contributions and €1.5 billion 
in administrative and system costs (217). The long-term annual cost of the government top-up 
contributions would amount to 0.4% of Irish GDP. 

Costs  for  information  campaigns  that  accompanied  the  introduction  of  auto-enrolment  were 
EUR 19 million in New Zealand, around GBP 25 million in the UK, EUR 17 million in Italy 
(218).  Much  higher  are  the  costs  for  the  public  sector  if  it  centralises  the  administrative 
organisation  of  collection,  registration  and  investment  although  in  the  case  of  the  UK  and 
Ireland the public funding of a body doing this was designed as initial investment and the public 
bodies  should  self-finance  them  from  fees  after  the  initiation  phase.  The  UK  ‘Nest’  was 
financed through public loans initially of about GBP 170 million, growing to GBP 1,200 million 
through  follow  up  loans  and  interest,  which  should  be  paid  back  until  2038  (219).  The  Irish 
Central  Processing  Agency  is  estimated  to  cost  EUR  6.5  million  in  the  first  year  and 
accumulated EUR 250 million over 30 years (220). The Swedish default premium pension A7 
Såfa has financed itself from pension contributions without reliance on public funding since its 
inception in 2010, despite being owned by the state. 

217 Irish Department of Social Protection Impact Assessment, 2022. 
218 See AE study and Atkinson, A. et al. (2012), “Lessons from National Pensions Communication Campaigns”, 
OECD  Working  Papers  on  Finance,  Insurance  and  Private  Pensions,  No.  18,  OECD  Publishing,  Paris, 
https://doi.org/10.1787/5k98xwz5z09v-en.  
219  https://www.gov.uk/government/publications/independent-review-of-the-national-employment-savings-trust-
nest/an-independent-review-of-the-national-employment-savings-trust-nest . 
220 Irish Department of Social Protection Impact Assessment, 2022. 

118 

 
 
Costs of Auto-Enrolment Schemes for Employers 

For employers, auto-enrolment can imply administrative costs, in addition to the contributions 
to the employees’ pension schemes (which may be compensated by partial or full tax relief). In 
Ireland, the employer contributions are set to rise from 1.5% of the annual salary in the first 
year of adoption, to 6% in the tenth year following the introduction of the auto-enrolment. Most 
consultancy reports on the introduction of auto-enrolment focus on the costs of the employers’ 
contribution to the pension plan, which can be derived from the employers’ contribution rate 
and the number of staff covered.  

Other costs that employers face relate to upgrades of the payroll administration systems, staff 
training to manage enrolment, opt outs, track contribution or report compliance, or the costs of 
outsourcing these tasks to external providers. Adjustments to payroll IT systems need to ensure 
that contributions be calculated, withheld and paid, and, if the employees have choices between 
different  funds,  that  the  contributions  are  paid  to  the  right  fund  and  ascribed  to  the  right 
individual. When employees change funds, shifts between funds must be tracked.  

Estimates  for  administrative  costs  rely  mainly  on  the  comparison  with  the  other  countries, 
specifically New Zealand and the UK. In the evaluations for New Zealand and United Kingdom, 
employers  reported  that  costs  were  lower  than  anticipated.  The  survey  revealed  annual 
compliance costs of NZD 770 when autoenrollment was introduced in 2009, declining to about 
NZD 660 in 2013. These numbers concern costs for micro, small and medium-sized firms (221). 
A  comparable  evaluation  in  the  UK  in  2017,  revealed  median  costs  of  GBP  400  (222). 
Consultancy and industry reports for the introduction in Ireland range from EUR 500-2,000 set 
up  costs  for  an  SME,  and  EUR  200-500  per  annum  for  ongoing  administration.  Larger 
employers are estimated to encounter 30-50% lower costs from scale economies. 

A 2025 survey of almost 500 employers about retirement plans for their staff suggests that their 
priorities differ across selected Member States. While the survey did not ask about views on 
auto-enrolment, the replies are indicative of the elements companies consider most relevant. 
Overall, helping employers understand their retirement plans (financial wellbeing) and make 
good decisions (employee experience) through communication and online tools comes high, 
followed by efforts to improve their retirement outcomes and containing management costs. 

Table 29: Employers’ priorities for retirement plans, % of replies in 2025 survey  

Belgium 

Denmark 

France 

Germany 

Ireland 

Netherlands  Portugal 

Spain 

Wider 
health  and 
wellbeing* 
68% 

Employee 
experience  
66% 

Time  spent 
on 
management 
65% 

Reduce costs 
46% 

Employee 
experience  
74% 

Employee 
experience 
52% 

Financial 
wellbeing 
90% 

Financial 
wellbeing 
71% 

https://www.ird.govt.nz/-/media/project/ir/home/documents/about-us/publications/research-and-evaluation-

221 
reports/kiwisaver-evaluation-report/kiwisaver-evaluation-
report.pdf?modified=20200507233913&modified=20200507233913. 
222 Broken down by size class, costs were £200 for micro employers (one to four employees) and £500 for small 
employers with up to 29 employees. Around a third (35 per cent) of micro employers and one fifth (20 per cent) 
See 
of 
https://www.gov.uk/government/publications/automatic-enrolment-evaluation-report-2019/automatic-enrolment-
evaluation-report-2019#employers-implementation-of-reforms. 

enrolment. 

implement 

employers 

automatic 

reported 

small 

zero 

cost 

to 

119 

 
 
Employee 
experience 
46% 

Financial 
wellbeing  
52% 

At-
retirement 
support  
64% 

Employee 
experience 
 58% 

Financial 
wellbeing  
73% 

Improve 
retirement 
outcomes  
39% 

Improve 
retirement 
outcomes  
77% 

Employee 
experience  
70% 

Time  spent 
on 
management  
41% 

Employee 
experience  
50% 

Financial 
wellbeing 
57% 

Improve 
retirement 
outcomes 52 

At-
retirement 
support 67 

Financial 
wellbeing 33 

Employee 
experience 
75 

Improve 
retirement 
outcomes 70 

Improve 
retirement 
outcomes  
34% 

Financial 
wellbeing  
24% 

Improve 
retirement 
outcomes  
50% 

At-
retirement 
support  
46% 

Improve 
retirement 
outcomes  
42% 

At-
retirement 
support  
51% 

Improve 
retirement 
outcomes  
67% 

spent 

Time 
on 
management 
31% 

At-
retirement 
support 
73% 

At-
retirement 
support 
57% 

Reduce 
costs 
36% 

Financial 
wellbeing 
 43% 

Time  spent 
on 
management 
53% 

Reduce  costs 
27% 

on 

Focus 
ESG  
57% 

Time  spent 
on 
management 
55% 

Share of firms indicating top or high priority, *only asked in DK and DE. Not shows are results for Switzerland 
and Italy, the latter due to too few observations. 

Source: WTW Towers Watson, Rethinking retirement plans in Europe, 2025 Western Europe Retirement Plan 
Survey.  

Impact of Auto-Enrolment on the Broader Economy 

Rising participation in supplementary pension schemes via auto-enrolment will provide new 
business  opportunities  for  asset  managers  and  other  financial  intermediaries.  Competition 
among them would need to be adequate so that rising demand for their services does not lead 
to higher profit margins. The Irish auto-enrolment system tries to cater for this by tendering out 
the  management  contracts  via  public  proceedings.  It  will  also  be  important  that  financial 
supervisors are equipped to ensure that financial intermediaries comply with prudential rules 
and other regulation. 

The introduction of auto-enrolment could have a small negative impact on economic activity in 
the  short  run  as  the  result  of  people  not  having  saved  for  retirement  will  be  exposed  to  a 
reduction  in  disposable  income.  The  effect  depends  on  whether  these  people  see  their 
consumption  possibilities  trimmed.  If  they  consider  their  contribution  to  supplementary 
pensions  as  reallocation  of  their  savings  from  one  instrument  to  another,  their  disposable 
income would not be affected. If they anticipate higher capital income in the future from their 
contribution to supplementary pension, the impact on consumption could even be positive.  

Irish  research on the immediate effect  yielded that  the introduction of auto-enrolment  could 
reduce  household  disposable  income  by  0.2  percentage  points  on  average.  The  reduction  is 
highest at above 0.2 percentage points for those in the income bracket of 60-80% (3rd and 4th 
quintile). The minimum income threshold leads to a reduction of below 0.1 percentage points 
for those in the income bracket 0-20% and slightly above 10% for those in the bracket 20-40% 
(223).  

Other  Irish  research  quantifies  the  impact  of  the  employers’  contribution  on  their  costs  and 
diagnoses a decline in labour demand, particularly in labour-intensive industries. Depending on 

223 See Keane, C. et al. (2021), The Distributional Impact of Pension Auto-enrolment’, ESRI Working Paper No 
707, November 2021. 

120 

 
 
the assumptions about  contribution  rates and take up, GDP could  be 0.1  to  0.5% lower  and 
employment 0.1 to 0.7% lower over five years after the introduction of auto-enrolment. The 
authors stress that the simulations cannot incorporate the positive impact of higher retirement 
income and the extent households’ anticipation of higher average life-time income undoes the 
short-term  adverse  effects  on  their  consumption  and  wage  demands,  with  counterbalancing 
impact on GDP and employment (224). 

Conclusions for the design of the Commission recommendation 

A Commission recommendation could encourage and incentivise Member States to use auto-
enrolment  to  nudge  future  pensioners  in  allocating  part  of  their  income  (or  savings)  into  a 
supplementary  pension  scheme.  Enabling  the  use  of  auto-enrolment  still  necessitates  the 
creation of a legal basis, the definition of key characteristics on who is eligible to enrol and to 
be enrolled, conditions attached to the vehicle in which the savings are invested, its supervision 
and enforcement. 

The preferred option includes recommendations on the use of good practices to avoid that auto-
enrolment is introduced with feature that undermine its effectiveness. Given their heterogenous 
starting  conditions,  legal  and  societal  preconditions  and,  not  the  least,  differences  across 
Member States in historical precedents, traditions and habits that determine the acceptability 
and effectiveness of such mechanism, the recommendation would list principles for the use of 
good practices but refrain from suggesting how Member States should organise auto-enrolment. 
This will allow them to safeguard the integrity of their public pension schemes, the inherent 
solidarity, poverty reduction and distributional  objectives. Giving  this discretion to  Member 
States  will  also  allow  them  to  cater  for  interactions  with  other  parts  of  their  supplementary 
pension system, for example not to weaken mandatory rules for members to participate in a 
supplementary pension scheme where they exist or not to disadvantage participants in already 
existing occupational pension schemes. Member States should still be invited to make use of 
good practices applied in other countries and to avoid measures that led to negative experiences 
elsewhere. 

Good practices have emerged with respect to certain design features that are independent from 
national institutional differences.  

The  introduction  of  auto-enrolment  should  not  be  rushed  but  carefully  prepared  with  social 
partners  and  other  stakeholders  and  accompanied  with  information  campaigns  to  create 
understanding  of  individuals  that  their  pension  savings  are  sufficiently  safe  and  will  not  be 
abused by governments to finance political projects.  

Seeking synergies with financial education initiatives so that savers get a better understanding 
of the concepts of risks and volatility in the context of diversified and long-term investment 
horizons can also be considered good practice.  

It could also be recommended to start auto-enrolment with a limited number of participants or 
entities and small contributions, while announcing a broadening of participation and increase 
in contributions over time.  

224  See  Bercholz,  M.  et  al.  (2019),  ‘A  Micro-Macro  Economic  Analysis  of  Pension  Auto-Enrolment  Options’, 
ESRI Working Paper No. 640, October 2019. 

121 

 
 
Since auto-enrolment offers the advantage that members do not need to take decisions to enrol, 
it appears also  advisable that some decision parameters are applied by default, while giving 
participants  options  to  choose  others.  These  parameters  relate  to  the  contribution  rate,  the 
investment vehicle used, pay-out modalities or related costs, of which the features might be 
specific to the Member State. The limited choice of alternative options would be consistent with 
the nature of auto-enrolment to circumvent complex decision-making scenarios. Some design 
features  will  need  to  be  country-specific,  although  most  Member  States  will  share  similar 
objectives.  

For example, auto-enrolment would be more effective in terms of providing retirement income, 
the longer the accrual periods, which requires a design that fosters an early start of the pension 
savings process. The system would still need to provide benefits to older workers enrolling in 
supplementary pension schemes.  

Member States are likely to have different views about making low-wage earners eligible to 
supplementary pensions or spare them with the reduction in their disposable income from their 
contributions and cater for their needs in the public pension system.  

They are also likely to differ in their assessment of the trade-off between a low contribution 
rate to maximise the number of people that find enrolment attractive, particularly among low-
income  earners,  and  setting  the  contribution  rate  sufficiently  high  so  that  members  can 
accumulate a significant claim over their career.  

Options to voluntarily join schemes even if not eligible or to top-up contributions or to change 
contribution  rates  voluntarily  at  later  stages  can  offer  additional  room  for  manoeuvre.  This 
might benefit for example young people, women or self-employed. It would also be advisable 
that possibilities to use pension savings earlier than the retirement age are limited or conditioned 
on  clear  criteria  of  hardship.  Member  States  can  accomplish  these  objectives  through  their 
selection of design features or by setting fiscal incentives. 

The  ultimate  objective  of  ensuring  a  more  adequate  retirement  income  for  the  population 
necessitates  that  the  design  of  auto-enrolment  is  inclusive.  Supplementary  pension  schemes 
tend to cement existing income and societal inequality during work life, so that Member States 
should be recommended to use the available margins to make them attractive for less wealthy 
and otherwise disadvantaged groups of the population. Good practices that target inclusiveness 
cover design principles such as eligibility criteria, fiscal incentives, additional options that cater 
for  specific  needs.  For  example,  a  public  subsidy  in  form  of  a  lump  sum  instead  of  tax 
exemption makes participation more affordable to low-income earners, possibilities to interrupt 
or re-enter accommodate needs of caregivers, therewith making participation more attractive 
for women, and helping to close the gender pension gap, as they tend to interrupt their work 
career  more  often  for  caregiving  activities  and  often  end  with  low  retirement  income,  and 
possibilities to top up voluntarily the default contributions can help boosting retirement income 
for those in non-standard form of work or with irregular income streams. The design of such 
elements would need to be country-specific to keep consistency with comparable elements in 
other parts of national social or labour regimes. 

In  most  existing  practices,  auto-enrolment  is  used  in  an  employment  context,  which  puts 
incentives  for  employers  and  social  partners  into  a  centre  place.  Making  the  offer  of 
occupational pensions with auto-enrolment mandatory for employers may not be acceptable in 
many  EU  Member  States;  combining  them  with  social  partner  agreements  or  collective 
bargaining looks a promising avenue in others.  

122 

 
To  make  auto-enrolment  palatable  for  small  employers,  administrative  and  organisational 
support by public bodies might facilitate the enrolment of their employees. If a Member State 
considers using a public body to collect retirement savings, administer and to invest them, pros 
and cons would need to be carefully analysed.   

Offering  default  investment  products  like  a  reformed  European  personal  pension  product 
(PEPP) might also be beneficial for Member States with many small employers and little role 
of social partners.  

When used in  an employment context, self-employed and atypical workers might not find a 
good  coverage.  Moreover,  people  that  change  their  workplace  should  be  in  the  position  to 
continue their participation in the schemes or to transfer their claims to a new scheme.  

Addressing  these  issues  require  country-specific  solutions  that  are  consistent  with  legal  and 
societal conditions. 

Table 30: A repository of good practices on auto-enrolment 

Good Practice Auto-Enrolment 

Create legal basis 

Objective 
Enabling approach 

Ensure supervisory capacity and that providers 
are supervised 

Legal  certainty  by  defining  who  can  enrol,  who  can  be 
enrolled, what instruments are eligible 
To  prevent  mismanagement  of  savings  and  ensure  decent 
returns, boost confidence 

Implementation phase 

Extensive consultations 

Build agreement among political actors, social partners and 
stakeholders on AE system goals and implementation 
Information campaigns, transparency measures  Understanding and acceptance of the policy measure 
Accompanying financial education measures 

Understanding of the policy measure, reduce number of opt-
outs 
Allow for learning experiences, reduce adjustment burden 

implementation:  start  with  small 
Gradual 
contributions  gradually  increasing  to  desired 
target; more time for small employers 

Design features 

rules, 

Welcoming enrolment environment: clarity on 
opt-out 
re-enrolment  possibilities, 
eligibility criteria 
Simple  default  option:  contribution  rate, 
investment strategy  

Offer  additional  options:  contribution  rates, 
investment risk, etc. 
Offer choice in decumulation phase  

on 

Care 

career 

breaks, 

Provisions 
credits/pension credits 
for  atypical  workers  and  self-
Options 
employed: 
and 
possibility  to  enrol  in  existing  or  default 
schemes 
Top-up 
contributions, voluntary opt-in 

contributions 

interruptions 

possibilities, 

flexible 

of 

Public incentives: tax incentives or lump sum 
subsidy for participants 

To  reduce  the  number  of  opt-outs,  provide  windows  for 
hesitant individuals, avoid delays in enrolment 

To avoid overburden individuals, especially those that do not 
make  active  choices,  ensure  transparency  on  conditions, 
capacity  to  generate  returns  in  long-term  via  life-cycle 
approach, cost attractiveness 
To  cater  for  people  that  find  the  default  option  not 
sufficiently attractive, cost attractiveness 
Flexibility on annuities or lump sums for decision at time of 
retirement. 
Inclusiveness 

Gender equality and attractiveness for young people and care 
givers 
Fairness and equal opportunities 

Attractiveness  for  care  givers,  people  with  non-standard 
work contracts, young people, self-employed. Accommodate 
career breaks to close pension gender gap. 
To  maximise  coverage,  to  support  affordability  of  low-
income earners 

123 

 
Early withdrawal options for specific cases 

Apply  same  tax  treatment  across  all  eligible 
pension products 

Limited to ensure use for retirement purposes, flexibility for 
hardship and other well-defined life events 
Equal tax treatment to ensure competition 

Specific for employment context 

Employers co-financing 
Tax incentives for employers 
Portability of claims 
Social partners organisation 
Administrative  support,  by  the  State  or  low-
cost provider 
Obligations  for  employers  (i.e.  mandatory 
auto-enrolment) 

To increase attractiveness for employees 
To contain their fiscal burden 
To avoid proliferation of small pots 
Ensure acceptance and established procedures 
When feasible through public body 

When feasible and desirable 

4.  QUANTITATIVE IMPLICATIONS OF THE INITIATIVE 

This  section  documents  the  calculations  of  quantitative  estimates.  The  impact  of  the  policy 
initiative will depend on a) how Member States make use of the recommendations and b) how 
pension funds adjust to the changes in the legal framework. Heterogeneity in Member States 
starting positions mean that they will need to adjust very differently, which prevent a one-size-
fits-all approach to the estimation of the economic impact. The changes in the legal framework 
have furthermore an enabling character. How pension funds will adjust to higher competition 
and the higher attention to returns and scale is impossible to predict. The calculations required 
the use of extensive assumption and would best be interpreted as presenting the outcome of 
plausible scenarios. 

•  Young people [18-25] need to save 1 to 4% of their income to offset the projected decline 
in public pensions, with the range determined by the yield they earn on their savings. 

This section describes the pension gap of young individuals and calculated which combination 
of higher pension savings and return on pension savings would help closing this gap. It takes 
data for the EU-27, with calculations for all Member States and differentiated between men and 
women, where possible. The expected decline in public pensions is taken from the 2024 Ageing 
Report’s public benefit ratio, which relates public pension benefits to the average wage. The 
assumption is that a young person wants to accomplish todays benefit ratio when they retire. 
The difference between today’s benefit ratio (44.7% in 2025 for the EU27 in the 2024 Ageing 
report) and that when they turn 67 (~35%) is the first element of their pension shortfall. The 
savings need is this pension shortfall multiplied with the years they expect to live in retirement. 
This time is assumed to stay at the current level of 23.4 years (225). 

The pension gap is the difference between the savings need described in the previous paragraph 
and the financial wealth they acquire if they invest a constant x % share of their income at a 
return of y%. The income follows the median net income by age cohort (226), implying that a 
young  person  expects  their  income  to  change  over  their  life  cycle  as  it  does  for  the  current 
generation. These assumptions yield a saving need of around EUR 40,000 to 45,000 for the 
average EU income-earner.  

225  See  ESTAT/demo_mlexpec,  which  shows  the  life  expectancy  for  different  age  brackets.  The  relevant  age 
bracket taken is the one in which persons retire on average, taken from ETAT/lfso_23pens03. 
226 ESTAT/ilc_di03. 

124 

 
 
 
The chart below plots x / y combinations in which a person would save exactly the amount to 
have  as  much  income  relative  to  the  working  age  population  when  they  retire  compared  to 
current retirees. A higher real return on their savings reduces the share of additional savings. 
The younger they start and the longer they work, the lower the required additional savings. The 
demographic elements become more important, the lower the return on savings. A retirement 
age of 67 is equal to the median retirement age in the EU Member States. It already implies a 
5-years increase in the actual retirement age from now 61.3 (227).  

Table 31: Assumptions about the required contribution 
rate and yield to compensate for the projected decline in 
the public benefit ratio 

Figure  23:  Combinations  of  contribution  rate  and  yield 
required to compensate for the projected decline in the public 
pension benefit ratio, EU-27 

Public benefit 
ratio 
Years 

2025 

44.7 

2050 

37.7 

2070 

35.6 

actual 

statutory 

median  

longest  

67 

18.6 

62 

65 

22.6 

Retirement 
age 
Remaining 
life 
expectancy  
Note: Data for EU-27, median and longest relate to 
current age across Member States without already 
agreed future increases. 
Sources: Ageing Report, Eurostat. 

20.2 

The higher the yield on savings, the less would individuals need to save to finance their pension 
gap. This could also be interpreted in the reverse order: the higher the savings into pensions, 
the lower the returns required to fill the pension gap. A high contribution rate to pension savings 
would allow risk-averse investment strategies. The non-linearity of the lines shown in the chart 
means  that  a  shift  from  0  to  1  percent  yield  allows  for  a  higher  reduction  of  the  saving 
contribution than a shift from 5 to 6 percent yield. In all scenarios, the earlier the persons start, 
the lower the returns respectively the smaller the share of income to be saved to fill the pension 
gap. 

The underlying assumptions are that the income stream over lifetime will remain unchanged, 
that  life  expectancy  will  not  increase,  that  inflation  is  zero  or  would  find  reflection  in  an 
equivalent inflation premium on top of the yield. The calculation of the pension gap takes only 
the projected decline in public pensions into account. Increasing health expenditure and prices 
for long-term care are expected to add to the financial burden of future retirees. 

•  Higher participation in supplementary pensions could offset the income gap from 

declining public pension benefits 

For  scenarios  about  the  possible  increase  in  occupational  pensions,  the  baseline  is  the  21% 
participation rate for the EU in occupational pensions from the EIOPA Eurobarometer shown 
in the Table  (228). It has complete data for all Member States and benefits from a harmonised 
methodology. Alternative sources such as data on the number of members in pension schemes 

227 ESTAT/lfso_23pens03. 
228 Weighted average of Member States with weights derived from the number of employees 2024. Excluding the 
Member States with mandatory participation in occupational pensions, the EU weighted average would be 17%. 

125 

 
 
 
 
 
 
 
 
include  a  double-counting  of  persons  that  have  more  than  one  pension  claim;  the  national 
sources used in the OECD differ in the denominator used. The use of the Eurobarometer replies 
avoids  these  two  issues.  While  the  reliance  on  survey  replies  may  be  considered 
methodologically weaker than on hard statistics, the survey responses reflect the perception of 
those actors that ultimately take decisions on their pension savings. These perceptions can be 
therefore more important than actual entitlement to pension claims when it comes to decide on 
whether to enrol or to shift savings into a pension product. 

Auto-enrolment  aims  to  strengthen  participation  in  workplace  pensions.  Experiences  across 
countries that used this tool varied a lot, suggesting that the design features have an important 
impact. To arrive at quantitative estimates of an “average” impact, three scenarios are used. 
First, the AE study estimated that auto-enrolment increases the participation rate by 16% of 
working-age population, controlling for macro and socio-economic features. The first scenario 
takes 16% addition to current participation rate. Second, convergence to a good performer in 
the EU. The second scenario assumes that half of the difference with the Member State with 
the third highest participation rate in occupational pensions in the EU will be closed. The third 
highest is used to avoid outliers and assumes that 50% of the gap will be closed. Since the MS 
with  the  third  highest  participation  rate  (NL)  and  those  higher  have  forms  of  mandatory 
participation,  the  third  scenario  assumes  100%  convergence  to  the  highest  MS,  in  which 
participation is not mandatory (IE). 

The scenarios include only those Member States where participation in occupational pensions 
is not mandatory. The participation rate is therefore assumed to remain constant in DK, EE, 
LV,  NL,  FI,  SE.  The  result  across  the  scenarios  is  an  increase  of  the  participation  rate  in 
occupational pensions in the EU from 21 to a range of 33 to 38%. Excluding Member States 
that already established AE (IT, PL, LT) has no significant impact on the average EU number 
excluding these Member States. Since participation in IT and PL continued to increase in the 
last years, a further increase is well possible, especially if these Member States make use of 
some of the suggested good practices. IE was not excluded from the calculations because auto-
enrolment  is  not  yet  implemented.  Slovakia  was  not  excluded  because  although  the  auto-
enrolment  system  is  in  place  since  2023,  there  is  not  yet  data  about  its  impact  on  the 
participation rate. 

Table 32: Scenarios of higher participation rates in occupational pension funds 

Baseline 

Eurobarometer 

Plus 16%pts 

Scenarios 

50% of gap to third 
highest 

100% of gap to IE 

Belgium 
Bulgaria 
Czechia 
Denmark 
Germany 
Estonia 
Ireland 
Greece 
Spain 
France 
Croatia 
Italy 
Cyprus 

M 

M 

M 
AE* 

AE 

20 
31 
19 
55 
27 
15 
37 
14 
9 
15 
13 
14 
18 

33 
38.5 
32.5 
55 
36.5 
15 
41.5 
30 
27.5 
30.5 
29.5 
30 
32 

36 
47 
35 
55 
43 
15 
53 
30 
25 
31 
29 
30 
34 

126 

37 
37 
37 
55 
37 
15 
37 
37 
37 
37 
37 
37 
37 

 
 
 
 
 
 
 
 
 
 
 
 
 
Latvia 
Lithuania 
Luxembourg 
Hungary 
Malta 
Netherlands 
Austria 
Poland 
Portugal 
Romania 
Slovenia 
Slovakia 
Finland 
Sweden 

AE+ 

M 

AE 

AE* 
M 
M 

39 
9 
9 
7 
13 
46 
17 
16 
7 
14 
24 
27 
22 
65 

55 
25 
25 
23 
29 
62 
33 
32 
23 
30 
40 
43 
38 
81 

21.1 

35.3 

EU 
EU ex 
mandatory 
EU ex AE 

42.5 
27.5 
27.5 
26.5 
29.5 
46 
31.5 
31 
26.5 
30 
35 
36.5 
34 
55.5 

33.6 

37 
37 
37 
37 
37 
46 
37 
37 
37 
37 
37 
37 
37 
65 

38.2 

33.1 
33.8 
Note: AE Member State with auto-enrolment, AE* no data yet about impact of auto-enrolment on participation 
rate, M Member State with mandatory participation in occupational pensions or non-existing, + Lithuania stopped 
auto-enrolment. 

17.4 
18.1 

36.3 
36.1 

31.3 
31.5 

The introduction of pension tracking systems and the review of PEPP and IORP ultimately aim 
to  increase  participation  in  voluntary  private  pensions,  which  is  lower  than  occupational 
pensions (18% for personal versus 21% for occupational pension products in the Eurobarometer 
survey also used above. In the absence of empirical estimates in the literature, the following 
scenarios were used. First, participation increases to close 50% of the gap to the Member State 
with  the  third  highest  participation  rate  (DK  30%).  Second,  participation  increases  to  the 
average of those Member States that already have a pension tracking system which covers all 
3 pension pillars (22.6% for DK, EE, FR, HR, LV, SK, SE). DE was not included in this list 
because  its  PTS  is  too  new  to  be  visible  in  the  numbers.  Third,  a  5%pt  increase  in  the 
participation rate is assumed for all MS that do not yet have a fully-fledged pension tracking 
system.  The  5%  number  is  motivated  by  a  study  that  found  that  a  shift  from  neutral  to  full 
confidence increases the participation rate by this amount (229).  

Assuming  no  change  in  the  participation  in  voluntary  retirement  savings  in  those  MS  that 
already have a fully-fledged PTS, the average participation rate could increase by 4 to 5 %pts 
to 22 to 23%. Differences in the results between the scenarios are negligible.  

229 Goedkoop, F. et al. (2023), ‘Trust in the financial performance of pension funds, public perception, and its 
effect on participation in voluntary pension saving plans’, De Nederlandsche Bank Working Paper No 783 / June 
2023. 

127 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Figure 24: Voluntary pension savings and trust in one’s personal pension fund in 2021 

Source: Goedkoop, F. et al. (2023), ‘Trust in the financial performance of pension funds, public perception, and 
its effect on participation in voluntary pension saving plans’,  De Nederlandsche Bank Working Paper No 783 / 
June 2023. 

Table 33: Scenarios of higher participation rates in personal pension savings 

Baseline 

Scenarios 

Eurobarometer 

50% of gap 
to third 
highest 

100% to average of 
MS with PTS* 

5 %pt increase 

P 

P 

P 
P 

P 

Belgium 
Bulgaria 
Czechia 
Denmark 
Germany 
Estonia 
Ireland 
Greece 
Spain 
France 
Croatia 
Italy 
Cyprus 
Latvia 
Lithuania 
Luxembourg 
Hungary 
Malta 
Netherlands 
Austria 
Poland 
Portugal 
Romania 
Slovenia 

33 
24 
25 
30 
26 
15 
24 
9 
11 
15 
21 
14 
5 
21 
22 
27 
13 
19 
12 
19 
11 
6 
22 
12 

33.0 
24.0 
25.0 
30.0 
26.0 
15.0 
24.0 
22.6 
22.6 
15.0 
21.0 
22.6 
22.6 
21.0 
22.6 
27.0 
22.6 
22.6 
22.6 
22.6 
22.6 
22.6 
22.6 
22.6 

31.5 
27.0 
27.5 
30.0 
28.0 
15.0 
27.0 
19.5 
20.5 
15.0 
21.0 
22.0 
17.5 
21.0 
26.0 
28.5 
21.5 
24.5 
21.0 
24.5 
20.5 
18.0 
26.0 
21.0 

128 

38.0 
29.0 
30.0 
30.0 
31.0 
15.0 
29.0 
14.0 
16.0 
15.0 
21.0 
19.0 
10.0 
21.0 
27.0 
32.0 
18.0 
24.0 
17.0 
24.0 
16.0 
11.0 
27.0 
17.0 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Slovakia 
Finland 
Sweden 

P 

P 

17 
12 
39 

17.0 
21.0 
39.0 

17.0 
22.6 
39.0 

17.0 
17.0 
39.0 

EU 

23.0 
Note: P Member State a pension tracking system that covers statutory and supplementary pensions, * baseline 
number if the baseline number was higher the average of Member States with a comprehensive pension tracking 
system (22.6%).  

18.2 

23.0 

22.1 

The  amount  of  additional  retirement  savings  auto-enrolment  is  able  to  generate  depends 
crucially on how the higher participation rate translates into monetary terms. The first scenario 
assumes that the additional pension savers use the set contribution rate as a % of their wage bill 
(230). IE will start with a 2% contribution rate that converges towards 14% over 10 years. A 4% 
points contribution rate applied on the total economy’s wage sum would mobilise EUR 30-40 
billion per annum in the three scenarios used above. If no effect is assumed to occur in those 3 
Member States that had already auto-enrolment in place, the impact would decline to 25-32 
billion. A larger contribution rate would lead to a proportional increase in the saving amount.  

An alternative calculation uses the average amount that households saved in pension claims 
over the last 10 years (231). These were 120 billion per year in the EU-27, respectively 70 billion 
without the NL and SE. To obtain the amount saved, these amounts were multiplied with the 
increase in the participation rate calculated with the above scenarios, with one modification. 
This modification covers the effect that the increase in the participation rate will mean that less 
well-off people become enrolled. The AE study estimated the effect of less wealthy people to 
enrol would be a 4% decline in the average contribution to pension savings. Incorporating this 
effect  and  taking  the  percentual  increase  in  the  occupational  participation  rate  from  the 
scenarios above yields additional savings in the range EUR 40-55 billion. This corresponds to 
5% of households’ savings, respectively 0.6% of their disposable income in the EU-27. 

Table 34: Translation of higher participation rates in supplementary pensions in money saved, millions of EUR 

Scenario 1 

2% of contribution of wage bill 
to IE 
16%+ 

50 gap 

Scenario 2 
Households 
saving in 
pension 
products** 

proportional 
increase in 
additional pension 
savings 
50 gap 

to IE 

16%+ 

1454.6 
0.0 
692.1 
0.0 
11814.5 
0.0 
771.9 
382.9 
3573.7 
7017.8 
214.3 
4099.8 

1181.9 
0.0 
584.0 
0.0 
7014.9 
0.0 
217.1 
382.9 
4132.1 
6798.5 
221.0 
4099.8 

1545.5 
0.0 
778.7 
0.0 
7384.1 
0.0 
0.0 
550.4 
6253.9 
9649.5 
321.4 
5893.5 

2728.4 
959.3 
1114.48 
-546.21 
35060.6 
237.8 
2833.4 
143.01 
1153.3 
11113 
1286.3 
5075.7 

1593.4 
0.0 
715.6 
0.0 

1986.3 
0.0 
856.4 
0.0 

2117.2 
0.0 
969.0 
0.0 
18543.2  10440.3  11063.6 
0.0 
0.0 
0.0 
217.5 
219.8 
151.2 
3398.4 
2229.7 
10935.2  10579.6  15202.6 
2228.2 
1515.8 
7802.1 
5365.7 

0.0 
1062.9 
151.2 
1922.2 

1468.3 
5365.7 

Wages 
and 
salaries* 

227283 
31309 
108147 
183336 
1846014 
14486 
120608 
59823 
558387 
1096530 
33480 
640598 

BE 
BG 
CZ 
DK 
DE 
EE 
IE 
EL 
ES 
FR 
HR 
IT 

230 Wages and salaries in ESTAT/ nasa_10_nf_tr. 
231 Households‘ asset transactions in F63_65 in ESTAT/ nasa_10_f_tr. 

129 

 
 
 
 
 
 
 
 
 
CY 
LV 
LT 
LU 
HU 
MT 
NL 
AT 
PL 
PT 
RO 
SI 
SL 
FI 
SE 
EU 

70.5 
0.0 
220.3 
142.2 
482.2 
47.2 
0.0 
1230.6 
1547.4 
697.7 
858.5 
182.4 
272.6 
0.0 
0.0 
35773.3 

11021 
17366 
34429 
22217 
75347 
7377 
396205 
192287 
241775 
109023 
134140 
28498 
42592 
112219 
221120 
6565617 

83.8 
0.0 
385.6 
248.8 
904.2 
70.8 
0.0 
1538.3 
2030.9 
1308.3 
1234.1 
148.2 
170.4 
0.0 
0.0 
40500.2 
Notes:  *_2024  or  most  recent  observation,  for  most  Member  States  2023.  **  average  increase  in  households 
pension assets (F63_F65) 2015-2024; For Member States with a decline in households’ assets over this period, a 
zero  impact  was  assumed.  The  second  scenario  incorporates  that  the  higher  participation  reduces  the  average 
saving per person by 4%. 

177.3 
0.0 
1335.0 
19.1 
1031.6 
10.6 
0.0 
1328.5 
3977.5 
0.0 
3893.5 
92.4 
327.5 
0.0 
0.0 
51348.7  41343.1  55144.5 

182.1 
554.8 
453.07 
6.49 
253.2 
6.1 
27163.1 
1219.5 
3260.3 
-219.3 
2533.0 
192.6 
1037.7 
-237.4 
22174.3 
119738.5 

61.7 
0.0 
254.8 
164.4 
587.7 
48.7 
0.0 
1115.3 
1450.7 
850.4 
858.5 
125.4 
161.8 
0.0 
0.0 
30311.3 

148.1 
196.3 
755.1 
10.8 
545.5 
7.0 
0.0 
1053.1 
2999.4 
0.0 
2677.7 
115.6 
548.8 
0.0 
0.0 

128.7 
25.6 
875.9 
12.5 
667.0 
7.2 
0.0 
949.8 
2803.8 
0.0 
2677.7 
77.0 
309.0 
0.0 
0.0 

Since households earned 100 basis points more on occupational pension claims than on bank 
deposits, a 1 percentage point contribution from their wage bill would translate for an employee 
earning the average wage into substantially higher financial wealth. Assuming a continuous 
inflow of 1 percentage point of their wage bill, which is about 350 EUR per year for the average 
wage  earner,  the  100  basis  points  return  advantage  would  allow  the  average  individual  to 
accumulate more than EUR 4000 after 10 years, EUR 8000 after 20 and 17000 after 40 years. 
The employers’ co-financing of the same amount would double a wage earners’ capital income.  

To put the amount in relation to the savings need of a young person to offset the decline in the 
projected public pension benefit ratio. A contribution of 4% of the salary of an average wage 
earner (35000 p.a.) to a pension scheme would close a EUR 45,000 pension gap after 32 years. 
If there is a 1 percent return after inflation on these accumulated savings, which is the difference 
between returns on occupational pensions and bank deposits in the last decade, the gap would 
be closed after 28 years. Lower fees might add another 25 basis points increase in the returns, 
a more equity-intense investment policy of the pension manager add another 30 basis points. 
This would multiply the retirement savings proportionately, i.e. for the case of a 150 basis points 
return advantage over bank deposits times a 5 percentage point contribution, the pension gap 
would be closed after 25 years. If the young person can count on the 150 basis points returns 
and wants to retire after 32 years, the contribution would need to be 3%, i.e. a 150 bps return 
on  the  pension  savings  over  a  period  of  32  years  would  allow  this  person  to  reduce  the 
contribution by a third.  

•  Savers can earn 1% higher returns by moving from bank deposits to occupational 

pensions 

European  households  earned  about  100  billion  EUR  in  investment  income  from  pension 
entitlements in 2023 (232). This corresponds to 0.9% of their disposable income. When taken as 

232 D442 in ESTAT/nasa_10_nf_tr. Note that data for Bulgaria is missing for this variable. 

130 

 
 
10-years average 2014-2023 in relationship to the EUR 4.3 trillion assets that households hold 
as  claims  against  pension  managers  (233),  they  earned  an  implicit  return  of  2.1%  (234).  This 
compares to an implicit return of 0.8% on interest income, i.e. bank deposits and debt securities, 
over the same 10-years  period or a 1% interest  on bank deposits  with  agreed maturity (235). 
Hence, households could earn about 100 basis point additional, on average, if they moved from 
bank deposits to occupational pensions. While the statistics cover occupational pensions, the 
larger  fees  that  usually  charged  on  personal  pension  products  (see  Annex  4.6)  suggest  that 
returns might be on average somewhat smaller.  

Figure 25: Implied return on pension claims in %, average 2014-2023 

Source: FISMA calculations with Eurostat data. 

The nominal returns that pension funds accomplished over the last decade were low. The end 
of the low-interest rate environment may allow them to achieve higher returns in the future. 
The next calculations take the returns of the major income categories that pension funds invest 
in as given and derive how much higher the return would have been if they had invested a larger 
share in equity.  

There is hardly empirical support to generate scenarios on how higher returns or higher trust 
could  translate  into  monetary  amounts.  Two  case  studies  suggest  that  higher  returns 
respectively public subsidies can be effective.  

The first “natural experiment” shows that households in the euro area reacted to rising returns 
on term deposits in 2022 and 2023 by increasing their holdings of this asset class. When the 
yield  spiked  at  2.5%  in  2023,  they  shifted  about  EUR  500  billion  from  overnight  into  term 
deposits. Driver of the yield increase was the energy price shock that increased inflation and 
implied  deeply  negative  returns  on  bank  deposits.  Since  term  deposits  have  a  much  shorter 
maturity than pension products, the mobilisation of EUR 500 billion to a 250 basis points yield 
improvement  if  however  difficult  to  use  for  scenarios  of  how  an  assumed  100  basis  points 
increase in the return on pension products could translate into higher retirement savings. 

233 F63-F65 in ESTAT/nasa_10_f_bs. 
234 Weighted average over those Member States for which data was available, weighted with households’ pension 
assets. 
235 In the Euro area, with ECB/MIR/L22/new business. 

131 

 
 
 
The second “natural experiment” shows that German households increased their holdings of 
personal  pension  products  (‘Riester  Rente’)  also  due  to  public  subsidies.  The  average 
contribution was about EUR 1000 per contract in 2021. About 15 million persons made use of 
the public subsidies that could be used for different saving vehicles. Almost two thirds  of the 
contributions were paid for insurance products. The scheme has become under scrutiny in the 
last  years  since  households  realised  low  returns  and  over  time  noticed  that  they  were  being 
charged high accumulating fees by financial intermediaries. The experiment nevertheless shows 
the potential private pension product could have and underlines the needs for the careful design 
of it to secure trust is maintained in order to ensure its long term success.   

Figure  26:  Households  deposit  holdings  and  yields  on 
deposits, euro area 

Figure  27:  Riester  contracts  and  public  fiscal  support  in 
Germany 

Source: FISMA calculations with data of the German 
Federal ministry for labour and social affairs. 

Notes:  Spread  1  shows  the  difference  between  the 
yield  on deposits  redeemable  at  agreed  maturity  and 
overnight  deposits,  spread  2  the  difference  of  the 
former  to  deposits  redeemable  at  notice.  Deposit 
holdings  are  annual 
transactions  calculated  as 
cumulative flows over 12 months 
Source: FISMA calculations with ECB data. 
While these two events suggest that the prospect of higher returns has the possibility to increase 
demand for long-term saving products, the data situation does not allow to quantify the effect. 
It is already difficult to define a baseline since a large share of personal pension products are 
held  in  the  form  of  life  insurance  contracts  or  are  linked  to  insurance  services.  Different 
statistics give conflicting indications about the amount of personal pension products held by 
households (236).  This  means  there  is  neither  a  good  data  base  for  the  benchmark  of  current 
holdings of personal pension products nor a sufficiently reliable elasticity to translate higher 
returns into larger demand.  

•  Pension funds could generate higher returns by increasing the equity share of their 

investment 

Pension  funds  are  important  investors  on  bond  markets,  with  large  exposures  towards  both 
sovereign and corporate bonds. The long-term nature of their liabilities should allow them to 
be also important investors on equity markets. Their role as equity investors is however small 
when compared to US peers (Table 43 in Annex 3.4). This section explores their lack of size as 
a key determinant of low equity investment and presents scenarios about plausible increases in 

236 For example, cross country rankings of the available observations differ between life insurance and annuities 
in the national accounts, (b) personal pension products as source of income in SILC, the incomplete data for most 
Member States in EIOPA’s pension product data base.  

132 

 
 
 
 
 
 
their equity share from the proposed changes to supervisory scrutiny when applying the rules 
of IORP 2. 

Detailed asset allocations of European pension funds are available in EIOPA’s exposure data 
base, though limited to IORPs. The advantage of the exposure data is that they allow a look 
through of the investment  that is done via investment funds. This look-through is  important 
because  pension  funds,  like  insurance  corporates,  invest  a  large  share  of  their  portfolio 
indirectly via investment funds. The EIOPA exposure data quantifies the share of EU IORPs’ 
direct investment in equity at 20%, that of investment funds at 38% of total assets. 

The table below shows  a wide dispersion  of  IORPs asset allocations across  Member States, 
especially  of direct  investment  in  equity or via equity funds, which total  almost  30% in  the 
sample. Private equity funds add up 3.7% of the exposure, competing with the double amount 
(7.3%) invested in other risky asset classes such as strategic, alternative or infrastructure funds, 
bringing the whole share of investment that is more sensitive to volatility and losses to 40%.  

Table 35: Average size and investment breakdown of EU IORPs, 2024 

avg size 

Equity 

thereof 
listed 

Equity 
funds 

Private 
equity 
funds 

other 
risky 
funds* 

Billion 
EUR 

% of total assets 

AT 
BE 
DE 
DK 
EL 
ES 
FI 
FR 
HR 
IT 
LU 
LV 
NL 
PT 
SE 
SI 
SK 
total 

3.8 
0.3 
1.8 
0.4 
0.0 
0.1 
0.1 
9.8 
0.0 
1.1 
0.2 
0.1 
9.1 
0.1 
20.2 
0.5 
0.2 
2.1 

0.3 
5.4 
1.5 
2.8 
1.8 
5.5 
8.9 
6.3 
26.1 
27.8 
1.0 
1.0 
21.3 
3.3 
43.1 
13.2 
1.0 
19.6 

0.0 
5.0 
0.0 
2.3 
1.5 
4.7 
2.6 
2.8 
26.1 
19.9 
0.0 
0.9 
21.3 
2.3 
34.4 
12.4 
1.0 
18.3 

24.9 
30.8 
8.7 
0.0 
15.4 
25.1 
23.2 
10.2 
9.7 
6.4 
27.4 
29.3 
9.7 
14.4 
4.8 
9.5 
42.9 
9.9 

4.6 
1.0 
3.6 
0.0 
0.0 
5.8 
5.2 
1.4 
0.6 
0.0 
1.0 
2.1 
4.5 
1.2 
2.5 
0.9 
0.0 
3.7 

29.8 
6.8 
30.4 
7.2 
27.6 
5.2 
2.7 
11.7 
0.9 
3.7 
11.1 
0.0 
4.2 
2.4 
3.0 
4.2 
4.4 
7.3 

Correlation with 

Average size 
other risky funds 

0.65 
-0.42 

0.61 
-0.43 

-0.38 
-0.03 

0.20 
0.15 

-0.05 

*) sum of asset allocation, alternative and infrastructure funds. 
Source: FISMA calculations with EIOPA data 

Cross-country  correlations  suggest  that  the  average  size  of  an  IORP  goes  in  tandem  with  a 
higher share of assets invested in equity, though not in equity funds. The high correlation shown 
in the table above is due to Sweden where IORPs are large and invest strongly in listed equity. 
The  finding  of  size  as  important  determinant  of  equity  investment  is  consistent  with  the 

133 

 
 
 
 
 
EIOPA’s technical input (237) that shows that small IORPs with a balance sheet of below EUR 
100  million  hold  less  than  5%  of  their  assets  in  listed  shares,  those  with  balance  sheet  size 
between EUR 100 million and 1 billion between 20 and 25%, and those with more than EUR 1 
billion around 25%. 

In  a  cross-country  perspective,  the  larger  the  average  equity  share  of  IORPs,  the  lower  the 
average share in other risky investment. The cross-country correlations suggest that the share 
of investment in private equity funds is weakly correlated with size. This differs from Figure 
29, which shows that the share of private equity investment increases with the size of the IORP. 
The weak cross-country  correlation, however, suggests that size is  not the sole determinant. 
High private equity investment in Member States with relatively small funds such as Spain and 
Austria contrast with relatively low shares in France and Sweden, which have large IORPs.  

Figure  28:  Consolidation  path  of  IORPs,  average  size  of 
IORPs in Member States (inflation adjusted, 2015=100) 

Figure  29:  IORPs  private  equity  investment  by  size  of  the 
IORP 

Source: FISMA calculations with EIOPA and Eurostat 
data. 

Source: EIOPA. 

The  table  below  presents  the  results  of  three  scenarios  how  IORPs’  equity  holdings  could 
increase, starting from their holdings of listed equity and equity funds in 2024. This excludes 
unlisted equity and private equity funds, which are analysed further below. Listed equity and 
equity funds differ from these other two asset classes by being traded or tradable, which allows 
their  value  being  market  determined.  While  pension  funds’  investment  in  listed  equity  and 
equity funds may not directly lead to additional equity funding for firms through issuance of 
new shares by new firms (initial public offering) or additional issuance of shares of already 
quoted firms (secondary offering), it adds to higher liquidity on secondary markets. A large 
investor  base  and  high  liquidity  are  important  determinants  of  market  conditions  on  both 
primary and secondary  markets  and therewith  of enterprises’ interest  to  tap capital  on stock 
markets. 

The first two scenarios assume that the share of these two asset classes in total assets converges 
to the Dutch benchmark. Scenario 1 assumes that one third of the difference with the benchmark 
would decline, Scenario 2 one half. The underlying idea of these two scenarios is that the risk 
perception of IORPs would converge to those of Dutch IORPs, independent of whether this is 
due to the strengthened prudent person principle or the increase in their average size. For those 
Member  States  that  had  a  higher  share  than  the  Netherlands,  the  share  was  kept  constant. 
Scenario  3  assumes  that  the  average  size  of  IORPs  increases  by  50%  and  translates  the 
percentual increase into a rate of closure to the Dutch equity ratio. It therewith focuses on the 
impact of consolidation and excludes the effect of a strengthened prudent person principle. A 

237 See figures 3 to 5 in EIOPA (2025), ‘Statistical Annex on IORPs.’ 

134 

 
 
 
 
 
 
50% increase in  the average size of  IORPs occurred in  Germany and Spain  over the period 
2015-2024,  it  was  even  higher  in  Italy  and  the  Netherlands  (see  Figure  28).  This  scenario 
excludes those Member States where the equity ratio is higher than in the Netherlands and those 
where the average size of IORPs is larger, i.e. France and Sweden. Sweden would represent a 
more demanding benchmark. Thanks to its large average size of IORPs and possibly also to its 
access to a liquid and well-developed domestic equity markets, its high equity share may not 
be  attainable  by  other  Member  States.  This  third  scenario  yields  a  1.0%  increase  in  equity 
investment,  the  first  two  of  4.3  and  6.6%  respectively.  Consolidation  towards  larger  IORPs 
would therefore have a smaller impact than convergence in the risk taking akin to Dutch pension 
funds. While it appears unlikely that such convergence could be accomplished without IORPs 
becoming larger, asset pooling in large vehicles might be a suitable way forward to arrive at 
higher equity shares.  

Table 36: Three Scenarios about possible increases in IORPs equity holdings, million EUR 

Scenario 1 

Scenario 2 

Scenario 3 

Equity 
* 

7436 
15837 
20693 
122 
10504 
867 
26139 
90 
47844 
317 
108 
544139 
2684 
107791 
403 
1813 
786788 

33% of 
gap to 
NL 

8034 
15837 
38075 
632 
10639 
924 
38182 
90 
50649 
331 
109 
544139 
3448 
107791 
457 
1813 
821151 

AT 
BE 
DE 
DK 
ES 
FI 
FR 
HR 
IT 
LU 
LV 
NL 
PT 
SE 
SI 
SK 
total 

extra equity 
investment 

598 
0 
17383 
509 
135 
57 
12043 
0 
2805 
14 
1 
0 
764 
0 
54 
0 
34363 

50% of 
gap to 
NL 

8342 
15837 
47030 
894 
10709 
953 
44386 
90 
52093 
338 
110 
544139 
3842 
107791 
486 
1813 
838853 

extra equity 
investment 

906 
0 
26338 
771 
204 
87 
18247 
0 
4249 
21 
1 
0 
1158 
0 
83 
0 
52065 

50% 
increase 
avg size 

7857 
15837 
24874 
123 
10506 
868 
26139 
90 
48233 
318 
108 
544139 
2692 
107791 
404 
1809 
791788 

extra equity 
investment 
638.3 

6342.7 
12.3 
2.5 
1.1 

589.1 
0.4 
0.0 
0.1 

0 

2.9 
7601 

Source: FISMA calculations with EIOPA exposure and balance sheet data. 

Like for public markets, a greater availability of capital for investment in private equity markets 
can make access to capital for those firms easier and more convenient, and encourage more 
firms  to  consider  raising  capital  for  their  investments  via  this  channel.  The  contribution  of 
pension funds’ investment in the other risk asset classes shown in the Table 33 is not directly 
flowing into enterprises and is therefore ignored in the subsequent analysis. Regarding private 
equity, pension funds can invest either directly in firms or through private equity funds. The 
amounts  in  EIOPA  statistics  suggest  that  private  equity  funds  are  the  preferred  investment 

135 

 
 
 
 
 
 
 
 
 
vehicle. In 2024, IORPs held about 100 billion EUR in private equity funds, compared to EUR 
32 billion in unlisted equity (238).  

Investment  via  private  equity  funds  offer  more  diversification  opportunities.  This  comes, 
however, at the expense of costs to be paid to fund managers (see below). Direct investment in 
firms requires a minimum investment and requires therefore a minimum size of the pension 
fund. Market sources suggest that investments into private equity should be at least EUR 25 
million per investment ticket and that diversification needs mean that a pension fund should 
have different exposures across years and industries (239). If one assumes that a portfolio of 15 
exposures  is  required  for  a  sufficient  degree  of  diversification,  a  meaningful  private  equity 
investment would imply an investment ticket of 7.5 billion and an overall fund portfolio of EUR 
375 million (if the private equity target represents 5% of a pension funds’ balance sheet).  

These considerations are consistent with EIOPA’s finding that almost all investment in private 
equity funds is undertaken by IORPs with balance sheets larger than 1 billion EUR, see Figure 
9. It is also consistent with the EIOPA statistics that show that 80% of the EUR 104 billion 
holdings of private equity funds in the EU is due to Dutch IORPs, which allocate 4.5% of their 
assets to this asset class. The exposures are much smaller in most other EU Member States; in 
5  of  the  19  EU  Member  States  covered  in  the  EIOPA  database,  IORPs  had  no  holdings  of 
private equity funds at all. However, the share of assets held in private equity is not the highest 
in the Netherlands, but in Spain, Finland, and Austria with 5.8%, 5.2%, and 4.6% respectively.  

Academic research confirms that scale emerges as a critical determinant across all jurisdictions. 
Large  institutional  investors  exhibit  a  stronger  preference  for  private  equity  compared  to 
intermediate-sized counterparts, with this relationship particularly pronounced among pension 
funds (240). Small pension funds face significant structural disadvantages: management costs 
can  represent  3.64%  of  assets  under  management  in  schemes  with  fewer  than  50  members, 
compared to only 0.32% in schemes with more than 500 members, limiting their capacity to 
dedicate resources to complex investments like private equity (241). 

Despite the limitation of private equity to large pension funds, pension funds represented 12.5% 
of investors’ inflows into EU private equity funds in 2024 (242). They were the second most 
important investor category after funds of funds (15%). Funds-of funds offer opportunities for 
smaller pension funds to get exposure to private equity. This entails additional costs to be paid 
to the mangers of these funds.  

Although scale is an important determinant on private equity investment, the application of the 
interpretation of the prudent person principle and the risk profile chosen by IORPs’ participants 
also have an influence. This is suggested by the imperfect cross-country correlation between 

238 The balance sheet data provides a breakdown of listed and unlisted equity shares, but no look-though of the 
investment via investment fund. The latter is available in the exposure data, which however, does not provide a 
breakdown of listed and unlisted equity. 
239  See  also  Pensions  for  a  Purpose  (2025),  ‘Venture  &  growth  capital  in  Europe  -–  mapping  pension  funds’ 
attitudes’ 
www.pensionsforpurpose.com, 
https://drive.google.com/file/d/1tXVQSynZTK4FidvEEcCzRKTE8vADGahY/view.  
240  Cumming,  D.,  Khan,  M.Z.,  Khan,  N.U.  and  Khan,  Z.U.  (2024),  'Size  matters:  Unpacking  the  relationship 
between institutional investor size and private equity asset allocation within diverse institutional contexts', Journal 
of 
101958, 
Institutions 
https://doi.org/10.1016/j.intfin.2024.101958. 
241 OECD (2008), 'Pension Fund Governance: Challenges and Potential Solutions',  OECD Working Papers on 
Insurance and Private Pensions, No. 18, OECD Publishing, Paris, p. 13 https://doi.org/10.1787/241402256531. 
242 Invest Europe 2024 market statistics, breakdown by sources of funds. 

Financial  Markets, 

and  Money, 

International 

Vol. 

92, 

136 

 
 
the private equity share and the average size of IORPs in a Member State as displayed in the 
Table below. IORPs in Austria and Spain invest much more in private equity than their average 
size suggests and French and Swedish IORPs much less. Member States without data on private 
equity funds in EIOPA’s exposure data could not be taken into account due to lack of data, for 
example Italy, although market sources suggest that Italian pension funds are not totally absent 
in this market. 

Table 37: Size and private equity investment of EU Member States 

Number of IORPs 

Large 

Mid-sized 

Average size 

Bn EUR 

AT 

BE 

DE 

DK 

ES 

6 

11 

64 

1 

5 

2 

11 

16 

1 

7 

3.8 

0.3 

1.8 

0.4 

0.1 

PE  share  in 
total assets 

% 

4.6 

1 

3.6 

0 

5.8 

FI 
FR 
NL 
PT 
SE 
total 

5.2 
1.4 
4.5 
1.2 
2.5 
3.7 
*) shift from small to mid-sized. Zero or non-available for all other EU Member States. 

2 
1 
39 
1 
1 
110 

0.1 
9.8 
9.1 
0.1 
20.2 

21 
105 
6 
13 
281 

avg. 
large 

Estimated 
PE 
IORPs 

in 

Bn EUR 

230.4 

38.2 

134.9 

0 

396.7 

171.1* 
133.1 
757 
32.1 
409 
2302.5 

The share of pension funds’ investment in private equity in Europe is substantially below those 
in  other  jurisdictions.  Canadian  funds  allocate  approximately  24%  to  private  equity,  while 
major US pension plans average 14% (243) (244). Among the 20 pension funds with the largest 
private equity allocations worldwide, only one EU fund appears (a Dutch IORP at position 12), 
while  the  United  States  accounts  for  thirteen  funds  and  Canada  for  four (245).  Australian 
superannuation funds, despite currently allocating just 4.4% to private equity, demonstrate the 
upside potential: major funds like AustralianSuper plan to increase allocations from 5% to 9% 
by 2028 (246).  

To  obtain  a  benchmark  for  the  impact  of  the  envisaged  policy  measures  on  private  equity 
investment, four scenarios were created that can materialise independent from each other. They 
cover the impact of (i) the prudent person principle, (ii) market consolidation, (iii) catch-up and 
(iv) asset pooling. Those scenarios are described below in more detail. The small size of the 

Investment  Council 

243 S&P Global Market Intelligence (2024), 'The world's top pension funds by private equity allocation, 2024', 21 
November  2024,  https://www.spglobal.com/market-intelligence/en/news-insights/articles/2024/11/the-world-s-
top-pension-funds-by-private-equity-allocation-2024-85966202. 
244  American 
https://www.investmentcouncil.org/wp-content/uploads/2025/07/AIC-2025-Pensions-Report.pdf. 
245 S&P Global Market Intelligence (2024), 'The world's top pension funds by private equity allocation, 2024', 21 
November  2024,  https://www.spglobal.com/market-intelligence/en/news-insights/articles/2024/11/the-world-s-
top-pension-funds-by-private-equity-allocation-2024-85966202. 
246    Bloomberg  (2024),  'Australia's  Top  Pension  Plans'  Private  Equity  Spree  from  New  York',  11  April  2024, 
https://www.bloomberg.com/news/articles/2024-04-11/australia-s-top-pension-plans-private-equity-spree-from-
new-york. 

‘2025  Retirement  Security  Report’, 

January  2025, 

(2025), 

137 

 
 
 
 
 
 
 
IORP sector in many Member States, the small size of many IORPs in most Member States and 
their low private equity investment however implies that a gradual increase in size will have a 
small impact on their capacity to invest more into this asset class. The scenarios below suggest 
that a significant increase in the amount of private equity investment relies on large pension 
funds, either their own asset growth or significantly increasing their exposure to this asset class. 

Scenario 1 - Clarification of the prudent person principle: If the clarification of the prudent 
person principle led the total IORP sector to invest as much in private equity funds as the IORP 
sector in Spain, the 5.8% private equity ratio in Spain would translate into total private equity 
investment  of  EUR  156  billion.  This  implies  additional  investment  of  EUR  56  billion,  an 
increase of 55%. An alternative benchmark would be convergence to the private equity ratio in 
the Member State with the third highest ratio to circumvent the dependency of the calculations 
from  Spain  and  Finland  being  outliers  and  their  high  ratio  being  driven  by  country  specific 
conditions. IORPs in Austria and the Netherlands invested about 4.5% of their assets in private 
equity, which if applied to the total IORP sector would lead to 23 billion EUR additional private 
equity investment.  

A different approach would be that either the pension funds sector increases its private equity 
share by a specific factor or only the largest pension funds do so. If this factor is 0.5%-pt and 
applied on all IORPs, it would mean EUR 13.4 billion additional investment. About the same 
amount, i.e. EUR 13.2 billion could be accomplished if the largest pension funds with a balance 
sheet  of more than 20 billion EUR increase their private equity  ratio by  0.5%.  In this latter 
sample of 40 pension funds, about the half are IORPs and the broad half are not. Total assets in 
the total IORP sample and the sample of largest pension funds is broadly the same, implying 
that the very large pension funds that are not IORPs manage as many assets as all EU IORPS 
with a balance sheet of less than 20 billion EUR.  

Scenario 2 – Market consolidation: The consolidation scenario investigates how much larger 
private equity investment would be if pension funds become larger. Market consolidation can 
be observed throughout the last twenty years according to EIOPA data (Figure 28). 

For very large funds, private equity investment is likely to increase in tandem with their size, 
but there is no evidence that the ration of private equity investment to their assets could increase 
with size if they are larger than EUR 20 billion. The EIOPA data suggests that larger IORPs 
invest a larger share of their assets in private equity, the analysis of the private equity investment 
of  the  largest  pension  funds  is  not  correlated  with  their  size.  This  sample  compromised  EU 
pension funds, including funds that are not IORPs with a balance sheet sum of more than EUR 
20 billion. For half of these funds, data on private equity investment was available though it 
could not be verified whether definitions were similar. The result of this analysis suggests that 
the effect of market consolidation may only be visible for pension funds smaller than EUR 20 
billion.  

If market consolidation leads to an increase in the average size of IORPs in the range of EUR 
5 to 20 billion by 50%, this could lead to an increase of private equity investment of EUR 4 
billion.  While  Figure  29  shows  that  the  private  equity  ratio  increases  with  size,  the  curve 
becomes shallower with size. If these observations are extrapolated and multiplied with the 188 
IORPs in the size range 1 to 5 billion and 64 in the range 5 to 20 billion, a 50% increase in the 
average size increases private equity investment by EUR 2.1 billion in the smaller size cluster 
and EUR 1.6 billion in the larger. The assumption of a 50% increase in size is consistent with 
the trend over the last 10 years in a number of Member States (see Figure 28).  

138 

 
Scenario 3 – Catch up: In the catch-up scenario, the situation in France is zoomed in. France 
combines a large average size of IORPs with a very low share of investment in private equity 
funds. This might be due to French IORPs being relatively new in the market, they may have 
underinvested and are still gaining the necessary know how to catch up. It is therefore assumed 
that the French IORPs catch up in their private equity investment to German IORPs’ average 
of 3.6%, close to the EU average. Such convergence could mobilise EUR 4.2 billion additional 
private equity investment. The French pension funds in scenario 1 are not IORPs, thence this 
scenario does not overlap with it.  

Scenario  4  –  Asset  pooling:  Small  and  very  small  IORPs  can  invest  in  private  equity  by 
delegating this asset management to large IORPs. If one assumes that they boost this share from 
zero  to  the  EU  average  of  3.7%,  this  could  mobilise  a  maximum  of  EUR  6.8  billion.  Asset 
pooling is not limited to delegation to larger IORPs in the same Member State, which allows 
also IORPs in other Member States to gain exposure to this asset class. A 50% uptake seems to 
be more plausible than the 100% maximum. Hence, asset pooling is assumed to add 3.4 billion 
EUR. 

The  table  below  summarises  the  results  of  these  scenarios.  The  four  scenarios  are  additive, 
suggest an accumulative effect of about EUR 25 billion additional investment in private equity 
funds, increasing their share by 35%, respectively from 3.7 to 4.2%. The largest impact would 
be from the largest pension funds increasing their investment, contributing half of the estimated 
increase. Market consolidation and asset pooling could contribute a sixth each. Convergence of 
the still nascent French IORPs to the average PE share could add another sixth. 

Table 38: Scenarios on private equity investment 

Scenarios 

Assumptions 

Baseline 

IORPs’ exposure to private equity funds in 2024 

Estimated  private  equity  investment  of  other  large  pension 
funds247 

investments 
billion EUR 

in 

100.4 

63.9 

Scenario  1:  Prudent 
person principle 

40 largest EU pension funds increase their PE investment by 0.5%  13.2 

Scenario 
Consolidation 

2: 

Mid-sized IORPs (1< > 20 billion) increase their size by 50% and 
realise  the  PE  share  of  larger  IORPs  (extrapolation  of  private 
equity ratios across size classes) .  

4.0 

Scenario 3: Catch up 

French large IORPs increase their share to the share realised in 
Germany, which is about the same as the EU average 

4.2 

Scenario  4:  Asset 
Pooling 

50% of small and very small IORPs delegate their PE investment 
to large IORPs or asset managers and realise an average PE share 
of 3.7% 

3.4 

Sum 

189.1 (+15%) 

247 Since there is no statistics available and no data on their private equity investment was available for many of 
these large pension funds, it was assumed that they invest as much as large IORPs 

139 

 
 
 
 
The  table  below  displays  the  actual  returns  on  different  EU  asset  classes  taken  from  either 
benchmark  indices  or  for  the  three  non-listed  equity  classes  from  an  industry  benchmark 
publication. Volatility is measured as the standard deviation of returns (248). The Sharpe ratio is 
a metric of risk-adjusted returns, by relating the excess return of an asset over the safe asset to 
its volatility over time. All numbers are illustrative for the broad performance. Taken them at 
face value appears not suitable as they suffer from biases in their calculation. For example, the 
composition of indices changes over time, which entails a survivor bias. This is most evident 
for bond indices, which do not fully reflect defaulting bonds since these tend to be downgraded 
before they fail. The corporate bond indexes are also not available for 20 years, as their first 
observation dates to mid-2009. The private equity benchmarks are based on a relatively small 
number  of  observations.  They  are  taken  from  a  benchmark  exercise  by  an  industry 
association (249). There may also  be a measurement  bias since less successful  private  equity 
investments may not be liquidated (250). The 20-year period includes the years of great financial 
crisis whereas the 10-year period is characterised by a low-interest rate environment. Despite 
the length of the period looked at, these events left a clear trace in the performance data. 

Table 39: Actual returns on different EU asset classes 

Sovereign 
bonds 
(10Y) 

1.5 
1.1 

0.7 

3.4 
1.9 

Corporate bonds (5Y) 

Equity 

A rated 

1.1 
1.3 

0.6 

1.6* 
1.3* 

BBB 

High 
yield 
10 years holding period 
7.3 
4.3 
11.9 
1.6 

Listed 

1.4 
1.3 

0.8 

2.4 
0.6 
20 years holding period 
8.1 
5.1* 
16.3 
2.1* 

1.9* 
1.4* 

GCF 

VCF 

PIF 

23.6 
NA 

NA 

17.3 
NA 

16.0 
NA 

NA 

8.3 
NA 

18.0 
NA 

NA 

9.0 
NA 

Average 
Volatility 
Sharpe 
ratio 

Average 
Volatility 
Sharpe 
ratio 

0.4 

0.9 

0.9 

0.7 

2.1 
Sovereign bonds are the average of EU Member States with 10 years maturity, Corporate bond indices along rating 
categories, maturity around 5 years, * averages over  15 years as longest available time  period, listed equity is 
annual  change  in  %  of  Eurostoxx 600  performance  index, GCF  (Growth  capital  funds), VCF  (Venture  capital 
funds), PIF (private infrastructure funds) are returns on a sample of funds that were liquidated, i.e. returns realised. 
Volatility as standard deviation of monthly observations, The Sharpe ratio is the difference of average returns to 
the German sovereign 10-year bond divided by the volatility of the asset class, 5-year German bond for corporate 
bonds. 
Source: FISMA calculations with ECB, Eurostat, Bloomberg and Invest Europe data. 

NA 

NA 

NA 

The following calculations build on the historical nominal returns (3.4 for sovereign bonds, 4.0 
for  corporate  bonds,  8%  for  equity,  16%  for  private  equity)  shown  in  the  table  above,  but 
adjusted for investment costs. This accounts for the difference of investment costs for listed 
financial instruments and for private equity investment, which can be substantial. An academic 

248 This was not possible for the three non-listed equity indices for which the average is calculated as the return of 
individual deals, limited to those where the fund completely disinvested, i.e. returns were realised. 
249 Invest Europe (2025), ‘The performance of European Private Equity  – Benchmark Report 2024’, June 2025. 
The date used is that of liquidated growth funds with a 20 year times horizon. 
250 For measurement bias on the returns on private equity investments, see Huether, N. (2022), ‘Do Private Equity 
Managers  Raise  Funds  on  (Sur)real  Returns?  Evidence  from  Deal-Level  Data’,  Journal  of  Financial  and 
Quantitative Analysis, Vol 58, No. 7, pp.2959-2992. Hayley, S. and O. Sefiloglu (2022), ‘Measurement Bias in 
Illiquid Asset Returns, https://openaccess.city.ac.uk/id/eprint/29002/ 

140 

 
 
 
 
 
paper  reports  investment  costs  of  Dutch  pension  funds  across  different  asset  classes, 
distinguishing  between  large  and  small  pension  funds  and  breaking  down  the  costs  into 
management fees, performance fees and transaction costs.  

Table 40: Investment costs by investment margins, in % of investments, 2019 

All 

0.16 
0.23 
3.70 

Largest 
(total assets >11 billion) 

0.14 
0.20 
3.71 

assets  <0.17 

Smallest  
(total 
billion 
0.23 
0.31 
3.58 

,Fixed income 
Stocks 
Private equity 

Source: Bikker, J.A. and J.J. Meringa (2022), ‘Have  scale effects on cost margins of  pension fund investment 
portfolios disappeared?’, Applied Economics, Vol. 54, No. 39 pp. 4501–4518. 

A second research paper by the same authors (251) documented quarterly net returns on private 
equity investments were about 3%, (see ), which translates into an annual return of 12% and is 
consistent with the industry benchmark of 16% corrected for 4% fees. It is therewith between 
the 14.8% net return of European growth capital funds found in a recent study for the European 
Commission (252) and the 10% expected return that a Danish body expects private equity should 
yield (253). The baseline uses a 33% share for sovereign bonds, corporate bonds and equity as 
seen  in  the  EU  average.  The  bond  positions  implicitly  cover  also  real  estate  and  credit 
exposures. Infrastructure investment is not covered because of absence of return data.  

The gauge is the internal rate of return over a 30-years investment horizon. It  compares the 
baseline to increases in the share of public and private equity. The 3.7% share of private equity 
is the average for EU IORPs including the NL. The final scenario 5 replicates the public and 
private equity share observed in the NL in 2024. The academic research used in the table in 
Annex  4.7  shows  that  the  share  of  private  equity  in  the  portfolios  of  Dutch  pension  funds 
increases with size. It is above 6% in pension funds with Asset under Management above EUR 
28 billion, 2.8 in pension funds with AuM between 10 and 28 billion. The simulations show 
that moderate increases in the equity share can boost returns by 30 basis points. 

Table 41: Return scenarios for pension funds with variation in the equity share over a 30 year investment horizon 

Net return in % 

public 
bonds 

private 
bonds 

listed 
equity 

other 
equity 

3.24 

3.84 

7.77 

12 

Total 

0  Baseline 
1  higher public equity and constant private 

0.334 
0.309 

0.334 
0.309 

equity 

Share in portfolio  Return 
0.037 
0.295 
0.037 
0.345 

6.17 
6.39 

251. Bikker, J.A. and J.J. Meringa (2024), ‘Large pension funds do not invest more effectively than smaller pension 
funds’ DNB Working Paper No 822, December 2024. 
252 See Table 2 and Figure 6 in Civitta, Course Consult and EBAN (2025) ‘Study of barriers to, and drivers of, the 
scaling-up  of  funds  investing  in  innovative  and  growth  companies’,  Final  report,  September  2025, 
https://op.europa.eu/en/publication-detail/-/publication/6531d67f-a978-11f0-89c6-01aa75ed71a1/language-
en#:~:text=The%20study%20focuses%20on%20funds%20investing%20in%20innovative,up%20their%20fundr
aising%20and%20investments%20across%20the%20EU.  
253  See  Chart  16  in  Sondergaard  S.  G.  (2025),  ‘The  road  to  more  risky  assets  in  the  Danish  pension  sector, 
2025, 
Danmarks 
https://www.nationalbanken.dk/media/343my12n/the-road-to-more-risky-assets-in-the-danish-pension-
sector.pdf.  

Nationalbank 

September 

Insurance 

Pensions, 

and 

141 

 
 
 
 
 
 
 
 
2  higher private equity and constant public 

0.332 

0.332 

0.295 

0.042 

6.25 

equity 

3  combination of 1 and 2 
4  Shift from public to private equity 
5 

total equity share increasing to 40% 

0.307 
0.334 
0.3 

0.307 
0.334 
0.3 

0.345 
0.29 
0.358 

0.042 
0.042 
0.042 

6.46 
6.24 
6.51 

The main body of this text and annex 4 document significant variation in fees across pension 
funds.  EIOPA  plotted  the  cost  ratio  against  the  size  of  pension  funds  separated  for  defined 
benefits  and  defined  contribution  schemes.  Despite  the  large  variation,  a  downward  sloping 
trend  line  is  visible  and  although  the  scale  is  not  well  visible  in  the  charts,  the  difference 
between large and small funds is on average about 50 base points. Variation is also higher for 
small funds, suggesting scope for lower fees if those funds with a high ratio get control over 
their  costs.  If  the  pension  market  were  characterised  by  more  intense  competition  and 
supervisory pressure on underperforming pension funds, the variation of costs across Member 
States and fund sizes suggests that a 25 basis points reduction in fees should be reachable.  

Figure 30: Costs as percentage of total assets – DB schemes 

Figure 31: Costs as percentage of total assets – DC schemes 

Source: EIOPA. 

5.  SUMMARY OF COSTS AND BENEFITS 

The table below summarises the pros and cons of the various options as they emerged in the 
analysis in the main body. 

Table 42: Pros and cons of options 

Option 

Pros 

Cons 

Pension Tracking Systems 

PTS Option 1 (do 
nothing) 

PTS Option 2 (a 
recommendation on 
the development of 
pension tracking 
systems) 

PTS Option 3 (a 
binding legal 
instrument 

No additional costs or resources required. 

to  foster 

Would  provide  necessary  political 
momentum 
the  voluntary 
development  of  tracking  systems  at  the 
national  level,  using  examples  of  best 
practices  in  terms  of  design  features.  It 
for  better 
would 
the  ground 
lay 
connectivity  between 
tracking 
systems and the ETS.  
A  uniformity  of  pension 
tracking 
schemes  across  the  EU,  which  should 

these 

142 

Insufficient  to  achieve  the desired  policy 
objectives. A fragmented landscape across 
the EU persists. 
Member  States  must  still  develop  such 
systems  and  due  to  national  specificities 
they  may  not  be  universally  aligned  or 
compatible.  

Significant 
proportionality and subsidiarity.  

concerns 

regarding 

 
 
 
 
Option 

Pros 

Cons 

mandating pension 
tracking systems) 

increase  transparency  for  the  individual 
user. 

There  would  likely  be  time  delay  in 
achieving legislative agreement, as well as 
the associated costs. In addition, Member 
States  with  existing  schemes  may  face 
challenges  reorienting  them  to  be  in  line 
with any mandated framework. 

Pension Dashboards 

No additional costs or resources required.  The  fragmented  overview  of  the  macro-
level  data  on  pensions  persists,  limiting 
stakeholders’ ability to plan effectively. 
No  comparability  across  Member  States. 
High  likelihood  that  only  few  Member 
States  will  create  a  dashboard  with  large 
coverage and deep granularity. 

PD Option 1 (do 
nothing) 

PD Option 2 
(national 
dashboards) 

PD Option 3 (EU 
pension dashboard  

AE Option 1 (do 
nothing) 

AE Option 2 
(recommendation 
on enabling auto-
enrolment) 

AE Option 3 
(recommendation 
on auto-enrolment 
best practices) 

AE Option 4 (use of 
a public body to 
facilitate auto-
enrolment) 

Dashboards would reflect Member States 
policy  prerogatives  and  national  data 
availability. It may amplify the effect of 
pension tracking systems on individuals’ 
saving  behaviour  or  be  used  by 
individuals as a substitute to guess their 
individual pension gap 
As with Option 2 but with possibilities to 
compare  performance  across  Member 
States,  which  entices  inspiration  for 
pension  reforms  from  practices  in  other 
Member States  

No additional costs or resources required.  Large 

Auto-Enrolment 

Increased  awareness  and  public  debate 
on 
the  merits  and  drawbacks  of 
establishing an auto-enrolment scheme. 

As with Option 2 but the inclusion of best 
practices  would  allow  policymakers, 
industry  and  the  public  at  large  to 
consider such practices more thoroughly 
and  how  they  can  be  applied  in  that 
Member State. This could be expected to 
lead to a more constructive public debate 
and a proper role for social partners. 
As  with  Option  2/3,  but  with  further 
detail on the creation of a public body to 
organise  an  auto-enrolment  system  that 
can  generate  efficiencies  and  result  in 
lower  costs  overall,  particularly  for 
employers.  It  also  assists  in  tackling 
related  issues,  such  as  portability  of 
pension pots. 
Greatest  benefit  can  be  expected  to  be 
found  in  Member  States  where  social 
partners  do  not  play  a  stronger  role  in 
pension provision, as well as those with 
under-developed supplementary pension 
systems. 

IORP 

143 

the 

involved 

in 
Costs 
streamlining/coordinating 
relevant 
information.  Development  of  common 
approach  will  be  challenging.  Greater 
costs and administration for both industry 
and policymakers in collecting, analysing 
and reporting on the information. 

supplementary  pension  gaps 
remain, with increased pressure on public 
pension systems.  
Likely  to  generate  controversy  regarding 
the costs to businesses and individuals in 
contributing to such a scheme. Also risks 
isolating  key  stakeholders  such  as  social 
partners  which  may  feel  sidelined  if  not 
properly consulted. 
As with Option 2, but with the added risk 
of  the  debate  being  dominated  by  only 
consideration  of  best  practices  and  not 
other  practices  which  may  be  more 
relevant  for  that  Member  State  (i.e. 
simplified messaging). 

both 

States, 

There can be significant costs expected for 
one-
Member 
off/establishment  costs  and  regular  costs 
once  the  system  is  active.  This  may 
present a challenge to Member States with 
more limited budgetary resources. 
Social  partners, 
if  not  appropriately 
considered in the design of such a system, 
risk  being  isolated,  and  the  use  of  a 
“public” system may cause confusion for 
individuals who view this as an extension 
of Pillar 1 pension provision. 

 
Option 

Pros 

Cons 

IORP Option 1 (do 
nothing) 

IORP Option 2 
(clarify prudent 
person principle) 

IORP Option 3 (+ 
enhanced 
supervision & soft 
nudges) 

IORP Option 4 (+ 
mandatory 
minimum scale) 

PEPP Option 1 (do 
nothing) 

PEPP Option 2 
(keep fee cap, 
remove mandatory 
features) 

PEPP Option 3 
(remove fee cap, 
digital focus) 

PEPP Option 4 
(dual PEPP system) 

Avoids  regulatory  disruption.  Preserves 
current balance between EU and national 
competences. 
new 
compliance burdens. 

Imposes 

no 

single 

assets. 

Improves 

accountability 
Better 

Enables  higher  returns  for  members. 
Encourages  avoiding  excessive  reliance 
on 
risk 
management  and  portfolio  stability. 
and 
Enhances 
transparency. 
long-term 
sustainability. 
Encourages  better 
risk  management 
without  rigid  obligations.  Aligns  with 
social  partnership  approach.  Makes 
framework  more  accessible.  Promotes 
consistency 
EIOPA 
recommendations. Enhances governance 
through regulatory dialogue. 
for  achieving  scale 
Most  effective 
quickly.  Forces  decisive 
structural 
reform. Promotes consolidation reducing 
inefficiencies  and  costs  per  member. 
Allows  greater  diversification 
and 
improved return-risk profiles. 

via 

PEPP 

fragmentation, 
Perpetuates  market 
inefficiencies, 
and  uneven  member 
protection. Limits sector's contribution to 
SIU. IORPs remain marginal or absent in 
several countries. 
Unclear how far superior to other options 
in fostering consolidation. May need to be 
combined  with  other  options  to  be  fully 
effective. 

Relies on voluntary improvements. Impact 
on  economies  of  scale  takes  more  time. 
Fragmentation and subscale schemes may 
persist  longer.  Higher  supervision  costs 
compared to status quo. 

Scale may not be main factor in improving 
outcomes.  Could  face  strong  stakeholder 
resistance.  Risk  of  benefits  being 
neutralised  by  resistance.  Demands  on 
supervisor  capabilities  and  liability  risks. 
Contravenes market-driven approach with 
top-down mandate. 

Greater  provider  freedom  in  design  and 
distribution. Enhanced consumer choice. 
Maintains  consumer  protection  through 
fee cap. Avoids complex design features. 

No additional costs or resources required.  PEPP  remains  niche,  symbolic  product. 
1%  fee  cap  renders  product  unattractive 
for  most  providers.  No  meaningful 
contribution  to  closing  pension  savings 
gap. 
100 bp fee cap still seen as major blocking 
factor.  Excludes 
insurance  and  asset 
management  sectors.  Limited  to  online-
only  distribution.  Insufficient  to  address 
low  provider  uptake  and  consumer 
recognition. 
Cannot  include  guarantees.  Limited  to 
basic  lifecycle  glidepath.  Restricted  to 
digitally-savvy under-45 population. May 
not appeal to large part of savers. 

Alters  competitive  dynamics.  Allows 
innovation and optimized cost structures. 
Leverages  MiFID’s  best  execution 
framework .  Allows  5% 
in  unlisted 
assets.  Instant  brand  recognition  as 
product.  Addresses 
execution-only 
interoperability 
existing 
infrastructures. 
complex 
Allows 
guarantees 
private  market 
strategies.  Higher 
exposure beyond growth phase. Permits 
strategies. 
other 
Fosters 
broader 
diversification. 

risk-management 

innovation 

with 

and 

and 

familiar 

Higher  costs  for  consumers.  Introduces 
classes.  Less 
asset 
less 
predictable risk portfolios. More complex 
investment strategies. 

144 

 
 
 
ANNEX 3: ANALYTICAL METHODS 

1.  

A PRIMER ON THE PENSION STATISTICS USED 

Different institutions collect statistics about supplementary pensions in the EU Member States. 
They  collect  them  for  different  purposes,  have  different  mandates  to  collect  data  and  use 
different  concepts  and  definitions.  This  causes  numbers  on  most  variables  to  be  somewhat 
different across institutions and it is upfront impossible to classify any statistical data source as 
superior to others.  

EIOPA  has  the  most  granular  data  on  pension  products  and  pension  funds.  Its  database  on 
pension  products  has  an  extensive  coverage,  though  with  incomplete  quantitative  data.  It 
collects the largest number of variables on pension funds but limited to IORPs. While EIOPA 
collects  granular data  for insurance companies,  a delineation of assets of  insurance  firms  or 
performance  indicators  from  insurance  companies  for  their  business  of  offering  pension 
products is not yet possible. A change in reporting templates will make this possible in future 
years. 

The ECB has a larger coverage of pension funds than IORPs, but releases data only for euro-
area Member States, balance sheet aggregates and information on members.  

The OECD covers many variables, a broad set of financial institutions that offer supplementary 
pensions and almost all EU Member States. They are used in different OECD publications. The 
drawback with OECD data is that most of them are delivered by national institutions, which 
leads to differences in definitions and concepts.  

Eurostat’s national  accounts show balance sheet data for pension funds that are active in an 
employment context, i.e. occupational pensions. Personal pensions products are included in the 
insurance sector and it is not possible to delineate the share of insurance assets that are linked 
to pension products.  

Beyond  Eurostat’s  compilation  of  pension  statistics  for  the  national  accounts,  the  European 
Commission is involved in two further data exercises on pensions with Member States. The 
ageing  report,  produced  by  DG  ECFIN  together  with  the  Economic  and  Policy  Committee 
provides  projections  over  the  next  50  years  on  pensions  and  other  items  influenced  by 
demographic  developments  and  relevant  for  long-term  fiscal  sustainability  such  as  health 
expenditure,  long-term  care,  education.  Some  Member  States  also  provide  data  on 
supplementary pensions.  As side product of the  work on the  ageing  report, data on pension 
reforms feeds into the Penref database. The pension adequacy report is produced by DG EMPL 
with  the  Social  Protection  Committee  and  supported  by  the  OECD.  It  focuses  on  latest 
developments across different dimensions of pension adequacy across population groups and 
Member States.  

Data from private institutions is used to fill gaps in statistics from public bodies.  

The consumer organisation Better Finance compiles data on costs and performances of selected 
pension products in the different EU Member States. It has done so for many years and provided 
the raw data to the Commission for this analysis. Mercer is a consultancy firm that publishes 
regular reports on pension systems in many countries including about half of the EU Member 
States. The index and its sub-indices were used for this report.  

145 

 
The Commission also has access to firm data compiled by Bureau van Dijk. It covers balance 
sheet data, though with numbers available from pension funds in a few Member States only. 
P&I is a US news service for the pension industry. It established and published a list of the 
largest pension funds in the world.  

For this Staff Working Document, EIOPA was tasked to carry out analytical work that fed into 
the analysis. The analysis also builds on the reports prepared by EIOPA in 2021 in response to 
the Commission’s calls for advice on pension tracking and on pension dashboards.  

Further input to this Staff Working Document was a study on auto-enrolment done on behalf 
of the European Commission  in  2020/21  by London Economics, on care credits in  2024 by 
Natale  et  al.  and responses on supplementary pensions by Member States to  surveys by the 
Financial Services Committee on the policy areas covered in the Eurogroup’s CMU statement 
in 2024 and 2025. 

Since numbers in the various data sources differ, it was tried whenever possible to build the 
analysis  on  at  least  two  data  sources.  The  most  frequent  approach  was  a  first  analysis  with 
granular data from EIOPA for IORPs. In a second step, it was tried to cross check the conclusion 
with other data sources. If this was not possible, the results from the academic literature were 
used as substitute for own empirical analysis. 

PRINCIPAL  CONSIDERATIONS  ON  THE  RELATIONSHIP  BETWEEN  PAY-

2.  
AS-YOU-GO AND SUPPLEMENTARY PENSIONS 

The  envisaged  policy  measures  intend  to  strengthen  supplementary  pensions  as  part  of  the 
multiple  pillar  pension  system  that  exists  in  all  EU  Member  States.  The  strengthening  of 
supplementary pensions is not undoing the impact of the demographic trend on the declining 
share of people in work that provide goods and services for a rising share of those in retirement. 
The dominant pay-as-you go system has the advantage that it makes the underlying pressure 
transparent. It also has the advantage of leaving a very limited set of policy options to deal with 
this pressure: higher contributions of the young, smaller payouts to future or current retirees or 
increases in the workforce through longer work life or migration (254). Finally, it allocates a 
clear  responsibility  to  the  governments  to  implement  policy  solutions  with  a  view  to  the 
observation that purely voluntary savings is not sufficient for a large part of the population to 
accomplish an adequate retirement income (255).  

While the shift to a funded system dilutes the clarity of policy choices, it has two economic 
advantages. First, people’s savings when working feed into investment, so that the smaller next 
working generation has a larger capital stock at its disposal, therewith can be more productive. 
This  allows  a  smaller  future  workforce  to  cater  for  more  retirees.  Second,  by  saving,  the 

254 The academic literature identified a further advantage in pay-as-you-go systems incentivising the investment 
in the education and human capital formation of the younger generation. Initially made in  Pogue, T.F. and L.G. 
Sgontz (1977), ‘Social security and investment in human capital’, National Tax Journal, Vol. 30 Issue 2, pp. 157-
169 or more recently, Kaganovich, M and I. Zilcha (2012), ‘Pay-as-you-go or funded social security? A general 
equilibrium comparison’ Journal of Economic Dynamics and Control, Vol. 36, Issue 4, pp. 455-467. 
255 For the case of the UK, almost 40% of private employees are at risk of missing their target replacement rate 
and almost 15% a benchmark of minimum pensions according to data presented in the Institute of Fiscal Studies 
(2024),  ‘The  Pensions  Review:  final  recommendations’  https://ifs.org.uk/publications/pensions-review-final-
recommendations. Almost 40% of US households were at risk of not having sufficient retirement income according 
to the 2022 index calculated by the Centre of at Boston College.  https://crr.bc.edu/the-national-retirement-risk-
index-an-update-from-the-2022-scf/. 

146 

 
 
working-age  populations  acquires  property  rights  on  the  capital  stock  and  the  return  on  the 
capital stock when old is legitimate market income. This may boost the saving rate. Knowledge 
that  savings  in  funded  pensions  will  translate  into  future  retirement  income  strengthens  the 
interest to work whereas a contribution to an unfunded system in the form of a tax on labour is 
disincentivising labour supply.  

These principles are independent on whether there is a public funded system or a privately run 
supplementary  pension.  The  scope  for  private  persons  to  save  for  retirement  out  of  current 
income  should  be  independent  from  whether  they  are  contributing  to  a  funded  public  or  a 
supplementary  private  scheme.  The  central  difference  is  how  productively  the  savings  are 
invested.  Contributions  to  supplementary  pensions  increase  the  capital  allocated  via  private 
capital markets and financial intermediaries, whereas public funded regimes leave control over 
the capital with public actors. The latter may also reinforce linkages to the public pay-as-you-
go  system.  The  perceptions  of  ownership  and  distance  from  political  processes  could  be 
stronger in a supplementary pension system. Scope for redistributive policies to address old-
age poverty or career interruptions by caregivers is hardly present in supplementary pensions, 
which reinforces the need to keep a sufficiently large public pension system.  

The main difference between occupational and personal pensions relates to the coverage and 
possibilities to impose mandatory rules. Occupational pensions cover employees and typically 
do not cover self-employed. Some Member States allow for mandatory participation if social 
partners  organise  occupational  pensions.  This  allows  the  realisation  of  scale  economies. 
Personal pensions are open to everyone and are often the default option for self-employed. They 
are  per  se  voluntary  and  even  if  people  were  obliged  to  enrol  in  a  system,  they  face  higher 
degrees of freedom compared to occupational systems where and how to contribute. 

A further economically relevant distinction between pay-as-you-go and funded pension systems 
relates to the impact on labour incentives. The shrinking share of the working age population 
implies  a  continuous  increase  in  contributions  to  pay-as-you-go  pension  schemes.  These 
contributions are typically levied similar like a tax on labour income, with potentially adverse 
effects  on  labour  costs  and  work  incentives.  Tax  rates  on  labour  income  become  more 
disincentivising to work the higher they are, suffering from a ‘Laffer curve’ effect that some 
academics are cautioning to become material. For example, the calculations by Herr et al (2020) 
suggest that the threshold from which on contributions in the form of labour tax are no longer 
sufficient to finance the payouts to retirees could be reached in a number of EU Member States 
by 2030 (256). The distortive effect on labour taxation on labour supply increases the more the 
individual’s expected retirement income is below the actuarial value of their contributions (257).  

The impact of demographic changes on the private saving rate is less clear cut and depends on 
various design features (258). 

256 See Herr, J. et al. (2020), ‘Population aging, social security and fiscal limits’, Journal of Economic Dynamics 
and Control, Vol. 116. 
257 See Disney, R. (2004), ‘Are contributions to public pension programmes a tax on employment?’ Economic 
Policy July 2004 pp. 267–311. or mor recently Fouejieu, A. et al. (2021), ‘Pension Reforms in Europe, How Far 
Have We Come and Gone?’ IMF Discussion Paper DP/2021/016. 
258 For an empirical analysis, see Amaglobeli, D. et al. (2019), ‘The Future of Saving: The Role of Pension System 
Design in an Aging World’ IMF Discussion Paper SDN 19/01. 

147 

 
 
3.  

REPLACEMENT RATES 

There are different methods used to determine the replacement rate as the ratio of the income 
of  people  in  retirement  to  their  income  when  in  work.  It  aims  to  inform  about  the  living 
standards they can afford when being retired compared to  what  they are used to. Therefore, 
their  income  immediately  after  retirement  is  compared  to  that  before.  For  practical  reasons, 
different approaches are used to measure the relevant income, i.e. salary or broader income, and 
the time period in view of many people not retiring exactly at the statutory retirement age.  

The standard method to obtain the actual replacement rate in the EU is through the EU-Statistics 
on Income and Living Conditions (EU-SILC). EU-SILC is the main source for the compilation 
of statistics on income, social inclusion and living conditions in the EU, collecting comparable 
micro-data  across  the  EU  Member  States  on  a  number  of  dimensions  through  a  common 
framework (259). The aggregate replacement rate is measured as the ratio of income in the age 
bracket 65-74 relative to 50-59. These replacement rates are shown for example in the Pension 
Adequacy Report and can be extracted from Eurostat’s website (260). Retirement income covers 
public and occupational pensions, but not other capital income.  

The OECD calculates theoretical replacement rates from the parameters of the pension system 
combined with assumptions about a typical work career. This allows to identify the impact of 
changes in work careers, calculate replacement rates for different income levels and to break 
down the contribution of public and supplementary pensions. 

Table 43: Theoretical gross pension replacement rates for 100% of individual earnings 

Mandatory Public 

Total mandatory* 

Total with voluntary 

Austria 
Belgium 
Czechia 
Denmark 
Estonia 
Finland 
France 
Germany 
Greece 
Hungary 
Ireland 
Italy 
Latvia 
Lithuania 
Luxembourg 
Netherlands 
Poland 
Portugal 
Slovak Republic 

74.1 
43.5 
47.4 
30.2 
28.1 
58.4 
57.6 
43.9 
80.8 
52.4 
26.2 
76.1 
39.8 
18.2 
74.8 
29.1 
29.3 
73.9 
54.9 

74.1 
43.5 
47.4 
73.1 
28.1 
58.4 
57.6 
43.9 
80.8 
52.4 
26.2 
76.1 
39.8 
18.2 
74.8 
74.7 
29.3 
73.9 
54.9 

52.4 

47.4 

54.7 

55.7 

30.1 

an 

For 

introduction 

259 
explained/index.php?title=EU_statistics_on_income_and_living_conditions_(EU-SILC)_methodology_-
_introduction#SE_MAIN_TT.  
260 Online data code: tespn070 data source ilc_pnp3 

EU-SILC, 

see 

of 

https://ec.europa.eu/eurostat/statistics-

148 

 
 
  
  
  
  
  
  
  
  
  
  
  
  
  
  
 
Slovenia 
Spain 
Sweden 

OECD 
EU27 

Bulgaria 
Cyprus 
Croatia 
Malta 
Romania 

42.1 
80.4 
49.0 

42.3 
49.5 
non-OECD EU Member States 

44.2 
64.3 
29.9 
58.2 
30.7 

42.1 
80.4 
62.3 

50.7 
54.8 

58.3 
64.3 
43.0 
58.2 
43.5 

55.2 
57.8 

Source: Pensions at a Glance 2023  - © OECD 2023, Pension entitlements for the base case  - Table 4.2. Gross 
pension replacement rates from mandatory public, mandatory private and voluntary private pension schemes, in 
percentage, * mandatory public and private (DB and DC). 

The projection exercise  of the Ageing  report focuses on actual replacement  rates but  with  a 
limitation to public pensions. This is motivated by the ultimate objective of these projections to 
identify the impact of pensions on the long-term sustainability of public pensions. It is also a 
consequence of many Member States not delivering projections for supplementary pensions. 
The  advantage  of  the  Ageing  report  is  its  forward-looking  character  due  to  the  projections 
spanning a time span of the forthcoming five decades, currently until 2070. 

4.  LOW AND UNEQUAL ACCESS TO SUPPLEMENTARY PENSIONS 

Statistics from different sources show that the use of supplementary pensions is small in most 
Member States. Denmark, the Netherlands and Sweden stand out with high participation rates. 
Participation rates are however lower than 10% in many other Member States, despite variation 
across the statistical sources used.  

When compared over the different data sources shown in the table below, the participation rate 
is lowest in the labour force survey for most Member States. Since this information shows the 
number  of  pensioners  that  receive  supplementary  pensions,  differences  to  other  statistical 
sources that also include people of working age reflect that supplementary pensions have more 
or less important over time. The higher participation rate when measured through the number 
of members in pension schemes is likely due to a sizeable number of people being member in 
more than one pension fund, for example in two different occupational pension funds after a 
change of job, or in occupational and personal pension schemes at the same time. 

Table 44: Participation in supplementary pensions in %, variation across different sources 

Eurobarometer 
survey 2024 

Eurostat 
LFS 2023 

ECB pension statistics 

OECD pensions statistics 2023 

%H 

Occ. 

Pers. 

BE 

BG 

CZ 

DK 

DE 

EE 

20 

31 

19 

55 

27 

15 

33 

24 

25 

30 

26 

15 

Members of pension funds  

%R 

6.0 

NA 

5.5 

68.2 

20.9 

5.9 

total 
%Pop 

19 

NA 

NA 

NA 

28 

0 

active %WAP 
18 

NA 

NA 

NA 

19 

0 

149 

mandatory or 
quasi 
mandatory* 

voluntary 

Occ.*  Pers.* 

NA 

NC 

0 
ATP over 90, 
QMO: 67.7 

0 

68.9 

56.8 

NC 

X 

NA 

54 

0 

NA 

NC 

64.3 

18.4 

30 

25.6 

beneficiary %R 

0 

NA 

NA 

NA 

20 

0 

 
  
  
  
 
 
 
 
  
 
 
 
IE 

EL 

ES 

FR 

HR 

IT 

CY 

LV 

LT 

LU 

HU 

MT 

NL 

AT 

PL 

PT 

RO 

SI 

SK 

FI 

37 

14 

9 

15 

13 

14 

18 

39 

9 

9 

7 

13 

46 

17 

16 

7 

14 

24 

27 

22 

24 

9 

11 

15 

21 

14 

5 

21 

22 

27 

13 

19 

12 

19 

11 

6 

22 

12 

17 

12 

56.8 

11.0 

10.4 

14.9 

3.1 

5.6 

1.6 

NA 

7.5 

8.9 

0.9 

15.7 

87.5 

14.6 

10.9 

9.4 

0.5 

14.0 

8.2 

13.7 

31 

2 

23 

16 

70 

11 

14 

69 

54 

4 

NA 

4 

103 

12 

NA 

6 

NA 

30 

53 

1 

23 

2 

31 

14 

110 

18 

16 

75 

80 

4 

NA 

3 

54 

13 

NA 

7 

NA 

31 

71 

0 

13 

1 

7 

9 

3 

1 

3 

5 

1 

2 

NA 

7 

108 

8 

NA 

4 

NA 

0 

7 

3 

X 

0 

0 

0 

NC 

: A 

NC 

~100 

76.7A 

X 

X 

NC 

94.5 

78.5 

13.8A 

X 

NC 

X 

X 

93 

59.4 

17.8 

3 

NA 

NA 

NA 

24.5 

13.2 

NC 

12.6 

NC 

0.9 

X 

4.5 

NA 

NC 

NA 

15.3 

NA 

5.2 

NC 

NA 

X 

7 

NC 

15 

NC 

25.4 

5.2 

NA 

18.5 

NC 

NA 

15.3 

65.2 

NA 

NC 

NA 

47.8 

18 

65 

39 

SE 

89.9 

NA 
Notes : % HH, Pop, R,WAP stands for % of households, population, retired population, working-age population, respectively, 
Occ.  =  occupational  pensions,  Pers.  =  Personal  pensions,  X  does  not  exist;  M  mandatory  participation;  V  voluntary 
participation, A auto-enrolment, : exists, but no data, P personal schemes only, * WAP or national definitions, reference to 
national regimes in OECD columns. 

PPS 96.4 

NA 

NA 

X 

NA 

Source: Eurobarometer, Eurostat, ECB, OECD. 

Information about money saved in pension products varies also between data sources. The table 
below  shows  data  from  Eurostat’s  pension  statistics,  the  national  accounts  and  the  OECD’s 
classification  of  retirement  assets,  expressed  in  %  of  GDP.  More  recent  data  in  Eurostat’s 
pension statistics will become available in 2026, in OECD statistics at end 2025. 

Table 45: Amounts in pension plans, in % of GDP 

Accrued 
claims in 
private 
pensions 

26.9 

14.0 

9.2 

68.0 

22.8 

NA 

27.0 

2.4 

BE 

BG 

CZ 

DK 

DE 

EE 

IE 

EL 

Pension statistics 
2021 

Financial accounts, 2023 
households claims against 

OECD 2023 

% of social insurance 
pensions 

Pension 
entitlements 

Pension managers and 

Assets earmarked for 

life insurers 

retirement 

7.8 

6.7 

3.4 

72.6 

6.6 

NA) 

15.8 

0.6 

19.6 

12.4 

7.6 

53.7 

29.5 

0.0 

31.3 

2.0 

150 

45.3 

13.6 

10.8 

143.9 

57.0 

1.1 

43.7 

7.2 

39.6 

NA 

8.8 

192.3 

6.5 

13.0 

26.7 

0.9 

 
 
 
ES 

FR 

HR 

IT 

CY 

LV 

LT 

LU 

HU 

MT 

NL 

AT 

PL 

PT 

RO 

SI 

SK 

FI 

SE 

5.2 

NA 

30.6 

8.8 

13.2 

19.7 

10.4 

6.8 

NA 

NA 

147.0 

12.4 

7.7 

10.9 

7.4 

5.2 

10.8 

3.6 

99.2 

1.0 

NA) 

8.7 

2.0 

4.3 

7.7 

3.6 

1.9 

NA 

NA 

35.6 

2.7 

2.6 

2.8 

1.9 

1.3 

4.5 

1.1 

32.9 

12.4 

7.8 

28.3 

12.8 

15.2 

18.9 

10.0 

4.4 

3.4 

0.2 

151.8 

13.8 

8.2 

6.4 

8.1 

7.8 

14.2 

2.8 

101.9 

23.5 

71.3 

31.3 

47.9 

22.1 

21.6 

11.7 

18.7 

6.7 

14.2 

161.4 

27.4 

10.0 

20.5 

8.9 

13.0 

17.1 

22.3 

123.1 

11.8 

10.9 

NA 

11.3 

NA 

16.3 

8.7 

2.0 

4.2 

NA 

150.7 

6.9 

6.7 

17.1 

NA 

7.0 

13.7 

59.0 

97.9 

Notes:  NA  =  not  available,  pension  entitlements  cover  financial  assets  classified  as  F63  to  F65,  pension  and 
insurance  covers  pension  entitlements  and  F62  (life  insurance  and  annuities).  Assets  earmarked for  retirement 
excludes  public  pension  reserves.  For  Romania  private  total  pensions  entitlements  in  social  insurance  do  not 
include defined benefit schemes for general government employees classified in general government. 
Sources; Eurostat, OECD. 

Low use of supplementary pensions may reinforce pension adequacy for vulnerable groups. 
Attention has focused on the following social groups. 

–  The pension gender gap. The gender gap in pensions in the EU was 24.5% in 2024, 
versus  gender  pay  gap  of  12%  (261).  There  are  many  reasons  for  this,  including  that 
women  are  more  likely  to  work  in  lower-paid  jobs,  work  part-time  and  take  longer 
career breaks.  

–  The self-employed pensions shortfall. The 2024 Pension Adequacy Report (262) found 
that pensions for the self-employed are projected to be on average a third lower than 
those of full-time employees with a similar career, due to differences in rules and in 
average earnings. 

–  Lower participation rates by younger workers. Younger people tend to work in more 
short-term, precarious and “non-standard” employment, limiting their ability to qualify 
for occupational pensions which can have long vesting periods. 

–  Lower  income  workers’  lack  of  coverage.  Even  in  mandatory  and  auto-enrolment 
schemes,  there  persists  a  lower  participation  rate  among  lower  income  workers. 
Supplemental pensions represent a proportionally higher cost to this group, which may 
be more focused on current expenditure. 

EIOPA’s 2024 Eurobarometer survey reveals a clear and evident gender gap in terms of pension 
participation.  The  number  of  women  that  participate  in  an  occupational  pension  or  own  a 

261 See Eurostat data sets ilc_pnp13 and earn_gr_gpgr2. 
262 The 2024 pension adequacy report - Publications Office of the EU. 

151 

 
 
personal  pension  is,  respectively,  5  basis  points  and  6  basis  points  lower  than  for  men. 
Ultimately,  women  feel  more  negative  than  men  about  their  retirement  outlook,  47%  for 
women, against 37% for men.263 Women traditionally have more uneven periods of work, often 
due to caring responsibilities, and are also more likely to undertake part-time work than men. 
This makes women having a 35% higher risk of poverty in retirement than men (264). 

There is also a notable pension adequacy gap between employed and self-employed individuals. 
According to the OECD, self-employed workers can expect to receive an old-age pension equal 
to 79% of that of their employed counterparts (265). Many Member States restrict or limit access 
to  public  pension  schemes  for  the  self-employed,  and  they  also  face  limited  access  to 
occupational  schemes.  Self-employed  individuals  also  tend  to  have  more  irregular  incomes, 
making it more difficult for them to put money aside for a pension.  

Another group that suffers from a lack of supplementary pension provision is those on lower 
incomes.  Low  coverage  of  supplementary  pensions  in  the  lower  income  brackets  can  be 
attributed  chiefly  to  the  inability  to  save,  as  well  as  higher  replacement  rates  from  public 
pensions  and  lower  attractiveness  of  tax  incentives  (266).  Lower  participation  can  be  found 
among lower income groups even in countries with quasi-mandatory coverage (such as NL), 
and lower earners  are regularly excluded from  auto-enrolment  schemes  by default (IE, UK) 
(267). 

Finally,  younger  people  also  tend  to  be  underrepresented  in  pension  participation  –  despite 
evidence showing that the longer a person saves for a pension, the better returns they can expect. 
This group is also the one most likely to suffer from the ‘double burden’ in the coming years, 
discussed  in  the  main  text.  Young  people  are  more  likely  to  work  in  “non-standard 
employment” (268), with less opportunity to participate in occupational pension schemes until 
they are more firmly established in their careers. A 2024 Eurobarometer (269) indicated that 10% 
of those aged 18-24 had an occupational pension (against an overall average of 20%), while 
11% had a personal pension (overall average 18%). Improving engagement and participation 
of younger people in  pension-related matters, including supplementary pensions, could  help 
foster long-term saving habits and provide more security in retirement for future generations. 

5.  

EU INVESTOR BASE IN COMPARISON TO THE US 

The comparison of size and composition of asset holdings across the main institutional actors 
yields that the size of EU financial sector when measured in total asset held in the economy is 
slightly below the US level (80%). This ratio is consistent with the GDP ratio between both. 
The table below informs about the relative size of the EU versus the US domestic investor base, 
with 100 representing the amount of financial assets held by the different institutional sectors 
in the US. Numbers come from the annual national sectoral accounts and are non-consolidated. 

263  The  forthcoming  Eurobarometer  indicates  that  the difference  in  participation  between women  and men  has 
slightly increased. 
264 Unlocking the potential of pensions in Europe - EIOPA. 
265 Pensions at a Glance 2023 (EN) Page 176. 
266 Final Report of the High-Level Group of Experts on Pensions, 2019, page 16 
267 Ibid. 
268 EMPL - The Hague 2025  
269 Eurobarometer 2024: consumer trends in insurance and pension services - EIOPA. 

152 

 
 
Table 46: Asset holdings in EU27 in billion EUR divided by US holdings in billion EUR in %, 2020, non-consolidated, 
Eurostat international data cooperation 

Total  financial 
assets/liabilities 

Currency 
and 
deposits 

Debt 
securities  Loans 

Listed 
shares 

Investment  fund 
shares/ units 

80 
139 
170 
74 
13 
306 
75 
17 
38 

total economy 
NFCs 
banks 
investment funds 
OFIs 
captive financials 
Insurance 
Pension funds 
Households 
Source: FISMA calculations with Eurostat international data cooperation data. 
The most striking difference is in the smaller role of pension funds in total assets (17%) and as 
investors in listed shares (6%). EU pension funds are holding relatively more of their assets in 
deposits and loans. 

63 
61 
2576 
1066 
#N/A 
51 
148 
38 
27 

115 
3188 
146 
132 
6 
1621 
79 
145 
11 

174 
132 
443 
1375 
112 
46 
254 
253 
94 

24 
88 
890 
35 
83 
7019 
22 
6 
7 

67 
76 
74 
98 
27 
81 
62 
22 
19 

EU residents hold more deposits and loans than their US counterparts, particularly intra-firm 
loans (3188%) and investment funds holdings of claims against banks in the form of deposits 
(1375%).  

The holdings of debt securities of most institutional sector is broadly consistent with the total 
asset share (67% total, 74% for banks, 62% for insurers).  

EU  banks  hold  considerably  more  financial  assets  than  US  banks  (170)  in  line  with  the 
perception of a bank dominated financial system in the EU (146% loans) and are considerably 
overinvested in listed shares (890% relative to US).   

EU asset holdings of listed shares are just a quarter of that of US residents, especially that of 
pension  funds  (6%)  and  households  (7%)  stand  out.  Both  hold  more  deposits  than  their  US 
counterparts, also relative to their total size. 

6.  

THE FEES OF PENSION FUNDS AND PRODUCTS 

Better Finance, EIOPA and the OECD collect data on the fees of pension products. The fees on 
other investment products by ESMA and calculations with data from Eurostat’s non-financial 
and financial sectoral accounts provide benchmarks. 

Better  Finance  reported  median  costs  for  a  sample  of  personal  pension  of  1.1%  and  for 
occupational pension products of 0.3% in 2023, with respect to the value of AuM. These were 
the lowest costs observed over two decades. The numbers from Better Finance are consistent 
with data from fees on asset backed pensions from the OECD, which also amount to about 1% 
of assets under management, thus can be interpreted as deduction from returns. The latter has 
numbers however, for only eight Member States (270). EIOPA data for IORPs shows variation 
of expense ratios between at or below 0.5% for AT, ES, IT, LU, NL, PT averages and 1 % or 
higher in BE, FR, HR and MT. This is consistent with lower costs for occupational pension 

270 Table 9.7 in OECD’s pensions at a glance 2023. 

153 

 
 
 
funds  due  to  mandatory  participation,  scale  and  lower  distribution  costs  than  for  the  total 
pension funds covered in OECD statistics. 

A  stock  take  exercise  by  the  German  regulator  found  a  cost  ratio  of  German  occupational 
pension  funds  at  below  0.8%  in  2021(271).  The  Italian  regulator  compiles  a  synthetic  cost 
indicator, which varies between 0.5% and 2.2% depending on the type of pension fund (272). 
An analysis on Austrian market points at cost ratios of occupational pensions at 1.7%, compared 
to 7.1% for personal and 0.7% for public pensions (273) with data for 2023. The cost study of 
the Belgian supervisor found that costs are higher for individual contracts than for industry-
wide pension plans and that costs of distribution are connected to scale economies (274). It also 
diagnosed that the use of unit-linked insurance costs are costly because two types of costs are 
charged: those for asset management and those pertaining to the insurance contract. 

These numbers suggest that pension funds’ average costs are slightly lower than that of active 
managed  investment  funds.  For  comparison,  ESMA  identified  annual  costs  for  equity  and 
mixed UCITs at 2%, bond UCITS at 1.5%; costs for ETFs are considerably lower at 0.5% (275). 
A 1% cost of pension funds’ management is also consistent with the results of a cross-country 
regression that compares the implied returns on pension products over 2014-2023 with OECD 
data on the price adjusted returns of pension funds in the EU Member States over the same 
time. The low number of observations and conceptual differences between both variables (276), 
however, question the reliability of such estimate.  

Detailed analysis of the data from Better Finance on returns and charges of pension products 
shows that returns have been volatile over the last decade. Pension funds provided on average 
slightly higher returns than insurance products in the sample due to outperforming the latter in 
boom  years.  Lower  losses  on  insurance  products  in  2018  and  2022  reduced  the  return 
difference. This finding of higher average returns for households from claims against pension 
fund than against insurers is however not confirmed with the internal returns on insurance and 
pension products with macroeconomic data from Eurostat.  

The Better Finance data set suggests that voluntary pension funds deliver higher returns than 
mandatory/occupational  funds  in  the  sample.  This  is,  however,  due  to  a  different  country 
coverage in the sample since a more granular comparisons of the relative performance in only 
those  Member  States  where  performance  data  for  both  types  are  available  suggests  no 
difference.  

third 

open 

were 

category 

271 
https://www.bafin.de/SharedDocs/Veroeffentlichungen/DE/Fachartikel/2024/fa_bj_1704_EbAV_Kosten_im_Gr
iff.html?cms_expanded=false . 
272 For a 10 year investment horizon. The lower bound was for contractual pension funds, the higher for New PIP. 
See 
The 
https://www.covip.it/sites/default/files/annual_report/supplementary_pension_funds_in_italy_at_the_end_of_20
24_-_main_data.pdf . 
273  See  https://www.momentum-institut.at/news/pensionen-verwaltungskosten-fressen-beitraege-bei-privaten-
pensionen-auf/ . 
274 See FSMA - Étude des coûts au sein des deuxième et troisième piliers de pension : principales constatations. 
275  This  concerns  the  time  period  201-2023,  see  ESMA  Market  report  on  Cost  and  Performance  of  EU  Retail 
Investment Products 2024. 
276 The implied return presents households’ benefits from past savings, pension funds return their generation of 
benefits for future retirees. Pension funds’ returns are also strongly influenced by market valuations, whereas their 
payouts to members are smooth over time. 

pension 

1.35%. 

funds 

at 

154 

 
 
While  charges  are  broadly  comparable  between  pension  funds  and  insurance  products,  the 
breakdown  suggests  markedly  higher  fees  for  voluntary  than  for  mandatory/occupational 
pension  funds.  The  average  1.5  percentage  point  difference  over  2014-2023,  shrinks  to  1 
percentage point if the comparison is limited to those Member States where data for both types 
of pension funds are available. 

Figure  32:  Net  nominal  returns  of  supplementary  pension 
the  Better  Finance  panel,  2013-2023 
products 

in 

Figure  33:  Real  return  of  pension  funds  and  households 
implied return on pension savings, averages for EU Member 
States 2014-2023 

Source: FISMA calculations with Better Finance data. 

Figure  34:  Difference  in  net  nominal  returns  between 
voluntary and occupational/mandatory funds 

Source: FISMA calculations with Eurostat and OECD 
data. 
Figure  35:  Difference  in  charges  between  voluntary  and 
occupational/mandatory funds 

Source: FISMA calculations with Better Finance data. 

7. 

 PROFITABILITY AND SCALE EFFECTS 

Any  assessment  of  the  return  of  pension  funds  depends  on  the  chosen  time  period.  The 
information content of annual observations of their returns is limited in view of their position 
as  long-term  investors,  caring  for  the  build-up  of  asset  positions  for  their  members  over  an 
average work life of 37 years and average pay outs per Member stretched out over 20 years 
(277). The sizeable impact of the losses recorded during the 2008 financial crisis and the 2022 
energy price shock on 10-year returns underpin the notion of the time horizon to be the most 
critical determinant of the return on retirement savings.  

277 See Duration of working life averaged 36.9 years in 2023  - News articles - Eurostat. 

155 

 
 
 
 
 
Figure 36: Real investment rates of returns of pension 
providers across selected EU Member States 

Figure 37: Level and volatility of pension fund’ real rates 
of turns across OECD countries, average 2002-2023 

Source: OECD. 

Source: OECD. 

The  cross-country  comparison  of  the  performance  of  pension  funds  in  the  OECD  Member 
States  over  20  years  shows  no  correlation  between  their  average  returns  and  volatility  (see 
Figure 37), suggesting that volatility has no or at least limited impact on long-term returns. The 
economic  lesson  should  be  that  the  earlier  people  save  for  retirement,  the  better  they  are 
sheltered from market volatility. A second lesson would be that the main value added of pension 
funds lies in their possibility to run life-cycle investment strategies that give a large weight to 
very long-term asset classes even at the expense of their volatility to build up wealth for younger 
members  and  gradually  shift  the  asset  composition  to  low  volatility,  safer  asset  classes  as 
members get approach retirement age.  

Other factors impair the comparability of pension funds’ returns across countries and individual 
funds  (278).  A  prime  determinant  of  their  returns  is  the  extent  regulation  or  members’ 
preferences lead to schemes be organised as defined benefits or defined contributions and the 
extent  minimum  returns  need  to  be  guaranteed.  Representative  of  EU  occupational  pension 
funds  often  describe  themselves  as  social  institutions  caring  for  stable  returns  than  profit 
maximising financial intermediaries. They quote the risk aversion of and preference of their 
members  for  safe  returns  as  reason  for  conservative  investment  strategies.  A  second  crucial 
determinant is the age distribution of members. The closer their average age comes to retirement 
age, the less can pension funds afford to invest in volatile asset classes. A third factor is that 
differences in size imply that pension funds in different countries have different possibilities to 
realise scale effects. 

EIOPA  analysis  of  the  relationship  between  the  size  of  IORPs  and  their  returns  finds  an 
ambiguous picture (see figures below). The correlation is weakly positive for DB schemes, but 
no upward slope could be found for DC schemes. The variation of returns is much larger for 
small  funds,  suggesting less  diversification  of  their  investment  strategies.  Returns  for  larger 
funds are in a narrower range, which is indicative of them running more diversified investment 
strategies. The average lower returns for large DC funds could be due to their focus on stable 
rather than high returns (279).  

278 See OECD Pension outlook 2024. 2024 for the impact of guarantees on the return of DC pension schemes and 
for applying a methodology that aims to capture age cohort effects. 
279 A further explanation could be that most of the large funds are Dutch and carry extra costs from the transition 
from DB to DC. Such costs relate to the need to establish an administrative system that encompasses individual 
claims. This would be consistent with the large share of administrative costs in DC schemes. 

156 

 
 
 
Figure 38: Return over size, DB schemes 

Source: EIOPA. 

Figure 39: Return over size, DC schemes 

Source: EIOPA. 

Empirical studies on scale effects in the US or Dutch pension industry find mixed results on 
whether scale effects related to their investment or their cost management matter (280). Plots 
comparing pension funds’ size and their performance do not show positive correlation (281). It 
should  be  noted  that  small  and  especially  very  small  funds  tend  to  be  underrepresented  in 
empirical studies, given weaker availability of data for them (282), it is not possible to conclude 
that very small funds accomplish the comparable returns to larger ones. 

There is more robust evidence of scale effects on costs for investment funds, which also benefit 
from spreading their fixed costs over more units the larger they are, and which have broadly 
comparable cost structures to pension funds (283). Mosson (2025) demonstrates that size impacts 

280 See Bikker and Meringa (DNB paper 2024) and the literature quoted therein. See also Keskiner and Mathias 
(McKinsey, 2024) Trujlo (reason foundation, 2024), Baker (pension&investment, 2023).  
281 See Keskiner and Mathias (McKinsey, 2024) Trujlo (reason foundation, 2024) 
282  Bikker  and  Meringa  (2024) cover  98.3%  of  the  Dutch  market,  which  also  means  they  cover  many  smaller 
pension funds. They exclude those with less than 100 members, which were just 4 out of 464 funds in their sample 
and funds with incomplete data, which is more likely to eliminate smaller than larger actors. 
283 Bikker and Meringa (2022). 

157 

 
 
 
 
on the costs of EU investment funds and that this effect is weaker than for US peers, which tend 
to be larger on average (284).  

A  2024  research  paper,  using  data  from  about  1000  pension  plans  (285)  found  evidence  for 
significant scale effects resulting from better access to more profitable investment opportunities 
and  higher  bargaining  power  in  negotiating  fees  with  external  service  providers.  Better 
possibilities for in-house management than outsourcing investment management emerged as 
third important source of scale economies. A 2025 think tank paper identifies scale economies 
in the investment management costs in 4 countries with large DB pension funds, USA, UK, 
Canada  and  the  Netherlands  after  controlling  for  other  factors  including  the  service  model 
used (286).  

A  number  of  Dutch  papers  analysed  scale  economies  in  the  Dutch  pension  fund  industry, 
suggesting that its importance declined as the industry consolidated over time. Using detailed 
Dutch data for the year 2013, a study presented strong evidence of scale effects, namely that a 
pension fund with 10 times more assets benefits from almost 8 basis points lower investment 
costs (287). Scale economies were found in investment in fixed income, equity and commodity, 
but not in real estate investments, private equity and hedge funds. The study also identified that 
large pension funds pay much higher performance fees, especially for equity, private equity and 
hedge fund investments.  

A 2022 re-examination however found that the effects disappeared as the pension industry in 
the Netherlands consolidated (288). While administrative costs continued to show scale effects, 
scale  economies  on  total  costs  faded  due  to  large  expenses  of  larger  pension  funds  for 
performance fees. This newer study detected that these fees considerably dent the returns on 
fixed income and equity investments, but that returns on alternative investments such as private 
equity and hedge funds were sufficiently high to overcompensate the still higher fees paid for 
these asset classes. Since the average size of Dutch pension funds is much larger than in most 
other EU Member States, there should still be significant room to realise scale effects in many 
of them. 

The analysis by Bikker and Meringa (2024) provides evidence on the interaction between the 
size of pension funds  and their asset allocation and therewith  returns. When breaking  down 
Dutch pension funds in 5 size classes, they found very small variation in total returns over the 
period 2007-2022Q2. For the 10 years since 2012 for which more detailed data was available, 
they show much larger returns on investment in private equity and hedge funds for larger funds. 
They also demonstrate that larger funds invest a much larger share into these asset classes, in 
line with the notion that only large funds have access to these asset classes and can afford to 

284  Mosson,  Natascha  (2025),  ‘The  scale  factor:  Impact  of  size  on  EU  fund  cost  structures’,  ESMA  TRV  Risk 
analysis. 
285 Thereof 613 US plans and 524 non-US plans, including form the NL, SE, FI. See De Vries, T. et al. (2024), 
‘Scale  Economies,  Bargaining  Power  and  Investment  Performance:  Evidence  from  Pension  Plans’,  FEB-RN 
Research Paper No. 10/2024, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4633444. 
286 The research distinguishes between the provision of core services to members and an enhanced service model 
that covers elements such as professional contact centres and counselling. See Flynn, C. et al. (2025), ‘The Impact 
of  Service  Models  on  Pension  Administration  Costs:  A  Global  perspective’,  CEM  Benchmarking,  May  2025., 
https://www.cembenchmarking.com/research/the-impact-of-service-models-on-pension-administration-costs-a-
global-perspective/. 
287 Broeders, D. et al. (2016), ‘Scale economies in pension fund investments: A dissection of investment costs 
across asset classes’, Journal of International Money and Finance, Vol. 67, pp. 147–171. 
288 Bikker and Meringa (2022). 

158 

 
 
cover  the  related  information  costs.  Their  investment  share  in  these  asset  classes  was  still 
modest at 6.1% and 2.1% for the largest size class, compared to 0.3 and 0.4% for the smallest. 
Returns on investment in hedge funds was barely positive on average and small at 0.66% even 
for  the  largest  pension  funds.  Interestingly,  the  largest  pension  funds  earned  less  on  fixed 
income investments, which the authors subscribe to their reduction in hedging activity against 
interest rate risks, which led to massive losses on fixed-income positions in 2022. 

Table 47: Asset allocation and returns for Dutch pension funds across size classes, average 2012-2022 Q2 

Size  class 
billion EUR 

in 

Fixed-income 
Equities 
Real estate 
Private equity 
Hedge funds 
Commodities 

Fixed-income 
Equities 
Real estate 
Private equity 
Hedge funds 
Commodities 
Total (reported) 
Total (derived) 

>28 

10-28 

2.8-10 

0.8-2.8 

<0.8 

Total 

53.2 
29.8 
10.4 
6.1 
2.1 
2.6 

Asset allocation in % 
60.4 
28.4 
7.9 
2.3 
1.1 
1 

62.6 
30.1 
5.9 
0.9 
0.6 
0.8 
Average quarterly returns 

60.1 
30.2 
7 
2.8 
0.7 
0.9 

0.33 
2.5 
2.12 
3.58 
0.66 
-0.97 
1.5 
1.69 

0.56 
2.47 
1.77 
2.33 
-0.88 
-0.84 
1.4 
1.54 

0.54 
2.34 
1.79 
3.37 
-0.38 
-0.84 
1.38 
1.41 

0.64 
2.19 
1.14 
1.18 
1.45 
-0.55 
1.47 
1.46 

in billion EUR 
694 
396 
117 
72 
26 
3 

0.43 
2.44 
1.92 
3.09 
0.07 
-0.9 
1.45 
1.6 

62.1 
30.2 
4.2 
0.3 
0.4 
0.7 

0.59 
2.03 
0.75 
0.46 
0.16 
-0.7 
1.49 
1.45 

in % 
53.1 
30.3 
8.9 
5.5 
2.0 
0.2 
Sharpe ratio 
0.00 
0.28 
0.29 
0.53 
-0.05 
-0.13 
0.21 

Source: Bikker and Meringa 2024. Except the Sharpe ratio that was calculated by dividing the difference of the 
returns by asset class to the German 10 year bund, by the standard deviation reported in Bikker and Meringa (2024, 
Table 1). 

The  empirical  analysis  in  Bikker  and  Meringa  (2024)  shows  that  both  total  assets  and  the 
number of members have a positive and significant impact on funds’ performance (289). Large 
funds invest differently than smaller ones, with a larger share in less liquid investment classes, 
and yielded higher returns on their equity and real estate investments than smaller funds, but 
less on fixed income. Hence, access to more profitable asset classes emerged as an important 
determinant of scale effect. The study also detected that less efficient hedging of interest rate 
risks and higher fees paid to other service providers prevented that this translated into better 
performances of larger pension funds. 

8.  

INVESTMENT DESTINATIONS AND HOME BIAS 

As  sophisticated  large  institutional  investors,  pension  funds  are  expected  to  diversify  risks 
geographically and show a smaller home bias than retail investors. The ECB security holding 
statistics suggests that 70% of euro-area pension funds’ total assets are in euro area and 30% in 
financial assets  issued outside the euro  area. Notably,  the share of domestic financial  assets 
declined from 80% to 70% over the five years 2021-2025 for which this statistic is available. 

289 See the estimates in table 5 in Bikker, J.A. and J.J. Meringa (2024), ‘Large pension funds do not invest more 
effectively than smaller pension funds’ DNB Working Paper No 822, December 2024. 

159 

 
 
 
 
 
The  practice  of  investing  through  investment  funds  complicates  the  analysis  of  geographic 
exposures. Investment in domestic investment funds must not mean that the investment funds 
invest domestically. With the unequal information about look-through, the OECD data shows 
an average of about 50% of investments non-domestically, ranging  from below 20% in CZ, 
HU, PL and RO to above 85% in LV, LT, the NL and PT. The table below breaks down IORPs’ 
geographical exposures for three asset classes (government bonds, corporate bonds and direct 
equity  investment,  i.e.  without  investment  via  investment  funds)  for  the  year  2023.  It 
distinguishes between investment in the domestic economy, other EU economies and outside 
the EU. While Member States’ observations are very heterogenous, the average home bias is 
highest  for  equity  and  lowest  for  government  bonds.  Large  Member  States  and  those  in 
Northern Europe tend to have the highest share of investment outside the EU, smaller and those 
in the CEE region in other EU Member States. 

Table 48: Geographical breakdown of IORPs' assets, % 

government bonds 

corporate bonds 

equity (excluding via 
investment funds) 

abroad  domestic  other EU  abroad 

domestic 

other EU 

abroad  domestic 

AT 

BE 

DE 

DK 

ES 

FI 

FR 

HR 

IT 

LU 

LV 

MT 

NL 

PT 

SE 

SI 

13.8 

12.4 

50.1 

62.5 

22.4 

33.4 

52.6 

68.0 

27.6 

14.1 

9.7 

NA 

15.0 

3.8 

50.6 

25.3 

84.5 

63.3 

36.4 

38.5 

49.4 

65.9 

40.3 

19.7 

45.3 

77.3 

87.5 

NA 

58.2 

92.5 

24.1 

66.9 

1.7 

24.3 

13.5 

-1.1 

28.2 

0.7 

7.2 

12.3 

27.1 

8.6 

2.7 

NA 

26.8 

3.7 

25.3 

7.8 

48.2 

10.6 

47.1 

84.2 

19.7 

63.8 

37.6 

94.2 

7.5 

8.7 

41.1 

0.0 

13.4 

9.6 

66.2 

15.2 

other 
EU 

44.8 

51.4 

38.4 

6.8 

41.3 

31.5 

32.8 

5.8 

48.0 

59.1 

58.4 

5.4 

33.8 

59.2 

19.8 

57.5 

7.0 

38.0 

14.5 

9.0 

39.0 

4.7 

29.6 

0.0 

44.5 

32.2 

0.4 

94.6 

52.8 

31.2 

13.9 

27.2 

SK 
Source: FISMA calculations with EIOPA exposure data for IORPs. 

82.9 

20.4 

63.0 

8.3 

8.8 

16.6 

73.1 

14.2 

55.0 

0.0 

0.7 

76.8 

66.8 

66.4 

5.4 

100.0 

7.6 

0.0 

3.7 

72.9 

49.9 

16.4 

NA 

26.9 

22.0 

39.8 

0.0 

61.8 

3.8 

30.8 

20.4 

28.0 

0.0 

68.3 

38.5 

16.6 

19.1 

16.8 

24.9 

NA 

0.0 

63.8 

5.1 

100.0 

37.5 

19.4 

2.4 

13.2 

66.7 

0.0 

24.1 

61.5 

79.8 

8.1 

33.4 

58.7 

NA 

A recent study by Bruegel researchers reveals that home bias is lower if investment through 
investment funds is included (290). By combining the investment through investment funds of 
the  aggregate  of  insurance  corporations  and  pension  funds  sector  with  data  of  the  asset 
breakdown of investment funds from other sources, their research accomplishes a look-through 
approach. This  assumes that insurance corporations  and pension funds do not  deviate in the 
geographical spread of their investment in investment funds from other investors. The research 
found that the insurance and pension sector invests predominantly in the EU: 40% of their listed 
shares and 72% of their bond portfolio were from EU issuers in 2023. The ratio of listed shares 
from US issuers was slightly smaller at 39% and that of debt securities at 11%. Since the US 

290 Lappe, M.-S. and D. Pinkus (2025), ‘Plugging the investment gap: understanding the potential of leveraging 
institutional investors’ Bruegel Policy Brief, September 2025. 

160 

 
 
 
 
share is still below the market share of the US on global capital markets, the authors conclude 
that the insurance and pension sector was not excessively strongly directed towards the US.  

Other  research  found  evidence  of  home  bias  in  Italian  occupational  pension  funds  (291),  the 
Dutch (292) and Danish pension sector (293). 

9. 

DATA GAPS IN PENSION DASHBOARDS 

As general rule, the more information is available and the more accurate and comparable it is, 
the more effective will be pension dashboards or a European pension monitor in stimulating 
reform efforts at Member States level. The value of better information for policy making stands 
in a trade-off to the costs of producing information. The latter can be broken down between the 
resource use in public institutions to collect and process additional information on the one hand, 
and the reporting costs to the private sector if additional data is collected on the other hand.  

The EIOPA advice suggested to start with existing data and to envisage closing data gaps once 
occasions to do so emerge. The first step would be to recommend Member States to compile 
national  data on supplementary pensions and use them to  add projections on supplementary 
pensions  in  the  ageing  report.  The  most  relevant  variables  would  be  similar  to  those  in  the 
options  above,  the  value  added  would  be  that  they  would  be  used  to  project  pension 
expenditures from occupational and personal pension schemes, which translate into benefits for 
their members, and their translation into a breakdown of the replacement into the public and 
supplementary pensions. This data could be calculated for the most recent period and projected 
into the future. This would be a starting position for a comprehensive EU pension dashboard 
that covers the key dimensions of pension adequacy and sustainability. 

The accuracy of such estimates would improve if Member States closed data gaps. The EIOPA 
advice revealed which data is  missing and identified the elements  that are important  for the 
accuracy  of  pension  projections  (see  Table  below).  This  concerned  in  particular  data  on 
supplementary  pensions  related  to  members,  liabilities,  assets,  asset  allocation,  investment 
returns, costs and charges, contributions and benefits. The most important information gaps are 
for personal pension products that provide defined benefits offered by pension funds operating 
under national legislation, investment companies, banks, estimated to provide about one third 
of the products.  

Table 49: Data needs and availability 

Projections  Dashboards  Occ. DC  Occ. DB  Pers. DC  Pers. DB 

Members  
 breakdown by age 
 breakdown by gender 
 breakdown by member type 
Liabilities 
 breakdown by age 

√ 
√ 
√ 
√ 
√ 
√ 

√ 

√ 

67% 
19% 
24% 
63% 
- 
- 

48% 
17% 
26% 
45% 
35% 
na 

61% 
31% 
24% 
37% 
- 
- 

38% 
12% 
12% 
29% 
35% 
na 

291  Lippi,  A.  (2016),  ‘(Country)  Home  bias  in  Italian  occupational  pension  funds  asset  allocation  choices’, 
Quarterly Review of Economics and Finance, Vol. 29, pp. 78-82. 
292 Rubbaniy. G. et al. (2013), ‘Home bias and Dutch pension funds’ investment behaviour’, European Journal of 
Finance, Vol. 20, pp. 978–993. 
293 Sondergaard S. G. (2025), ‘The road to more risky assets in the Danish pension sector, Danmarks Nationalbank 
Insurance  and  Pensions,  September  2025,  https://www.nationalbanken.dk/media/343my12n/the-road-to-more-
risky-assets-in-the-danish-pension-sector.pdf 

161 

 
 
 
 
 
 
 
 breakdown by gender 
Assets 
 breakdown by age 
 breakdown by gender 
Asset allocation 
 Investment return 
Costs and charges 
Contributions 
breakdown by age 
breakdown by gender 
Benefits 
(Cash flows past DB accruals) 

√ 
√ 
√ 
√ 
√ 
√ 
√ 
√ 
√ 
√ 
√ 

Source: EIOPA advice on pension dashboard 221. 

√ 
√ 

√ 
√ 
√ 
√ 
11% 
na 
√ 

- 
48% 
8% 
na 
32% 
na 
36% 
69% 
2% 
na 
69% 
- 

na 
55% 
na 
na 
43% 
na 
33% 
48% 
16% 
na 
44% 
7% 

- 
52% 
18% 
na 
45% 
na 
47% 
65% 
6% 
na 
53% 
- 

na 
38% 
na 
na 
38% 
na 
35% 
53% 

33% 
12% 

This option would entail that the recommendation also covers that Member States gradually fill 
the  data  gaps  to  improve  the  accuracy  of  pension  projections.  EIOPA  advised  that  any 
additional data collection would need to be efficient and proportionate, meaning to minimise 
the costs for pension providers, in particular smaller ones. Hence, the reporting burden imposed 
on private actors would need to be justifiable with the benefits from higher accuracy of pension 
projections. EIOPA also highlighted that definitions should be consistent and internationally 
recognised and that the final indicators allow for a breakdown across the various private pension 
providers (IORPs, insurers, UCITS and banks) and the type of pension scheme (DC and DB). 

Both options face the challenge of data gaps. Filling them would enable pension projections to 
become more accurate over time. Based on the existing data, projections  of expenditure and 
benefits of supplementary pensions  will rely on many assumptions in many Member States, 
which implies a high degree of uncertainty surrounding them. Data and projections are already 
available  for  public  pensions.  Data  gaps  exist  for  supplementary  pensions  and  the  EIOPA 
advice documents that they cannot be filled from centralised data at EU level. Hence, filling the 
data gaps will require efforts from Member States. Additional costs would emerge from the 
collection of missing data for supplementary pensions and from the analytical tools to use them 
for projections. Data coverage and available tools differ widely across Member States, implying 
that the costs for setting up the dashboard with national data will also differ widely. 

Regarding the collection of additional data on supplementary pensions, the impact assessment 
annexed to  the EIOPA advice on pension dashboards gives  an overview  of where reporting 
burden would emerge for four different options  

(1) Use existing data 

(2) Basic pensions data with low granularity from private pension providers  

(3) Basic data with low granularity as well as cash flows /sensitivity analysis 

(4) Basic pensions data with high granularity 

The EIOPA advice advocated option 2, i.e. to collect basic pension data with low granularity 
from private pension providers. The basic pension variables are already available for one to 
two-thirds  of  pension  products  and  plans.  Additional  data  needs  relate  to  the  breakdown  of 
assets  (DC),  liabilities  (DB),  contributions  and  members  by  age  groups  and  gender.  IORPs 
would only have to report the breakdowns, since the aggregate basic data is already reported to 
EIOPA. The data would have to be reported at low granularity, only distinguishing DB and DC 

162 

 
 
 
 
 
 
 
as well as occupational and personal pensions. This option would ensure a comprehensive set 
of basic information on privately provided supplementary pensions, including breakdowns by 
age and gender to enable pension projections. 

163 

 
 
ANNEX 4: COUNTRY-SPECIFIC INFORMATION 

Table 50: Private asset-backed pension schemes in EU Member States 

Mandatory 
personal  

occupational 

or 

Voluntary occupational 

Voluntary personal 

Auto-enrolment 

BE 

(for 
•Company  plans 
employees 
self-
and 
employed  people  with  a 
company):  collective  or 
individual plans  

•Sector 
employees 

plans 

for 

is 
their  company 
If 
subject  to  a  collective 
agreement  that  provides 
second  pillar, 
for  a 
participation 
an 
in 
occupational scheme can 
be 
for 
mandatory 
employees 

•Free  supplementary  pension  for 
the self-employed (VAPZ)  

•Free  supplementary  pension  for 
employees (VAPW)  

•Pension  agreement  for  the  self-
employed  without  a  company 
(POZ)  

•Long-term  savings  individual  life 
insurance (third pillar)  

•Pension  savings  accounts  (third 
pillar) 

X 

 quasi  M  for  those  born  after 
31/12/1959  

BG 

•Universal pension fund  

•Professional pension fund 

Voluntary  pension  fund 
under 
occupational 
schemes (VPFOS) 

•Voluntary pension fund 

•PEPP 

NA 

•Supplementary  pension  insurance 
scheme: transformed funds  

Supplementary 
earnings-related 
(ATP),  self-
pension  scheme 
employed  individuals  have  the 
option to join ATP 

CZ 

DK 

DE 

X 

•Supplementary  pension  savings 
scheme: participating funds 

X 

Voluntary personal pension plans 

X 

funds 
and 
•Direct 

•Collective 
agreement 
pension plans •Company 
pension plans 
 •Pension 
(Pensionskassen 
Pensionsfonds) 
insurance 
(Direktversicherung) 
•Direct 
(Direktzusagen) 
•Support 
(Unterstützungskassen) 

commitments 

funds 

is 
their  company 
If 
subject  to  a  collective 
agreement  that  provides 
second  pillar, 
for  a 
participation 
an 
in 
occupational scheme can 
be 
for 
mandatory 
employees 

•Riester pension plans  

•Basic pension plans (Rürup) 

•Private 
pension 
(Rentenversicherung) 

insurance 

: 

 X 

164 

 
 
 
 
 
 
 
EE 

IE 

EL 

ES 

FR 

No 
occupational 
pensions,  but  employers 
may  contribute  to  their 
employees’ 
personal 
pension schemes. This is 
not  widely  used 
in 
practice. 

 quasi  mandatory  funded  pension 
(Kohustuslik pensionifond) 

• Supplementary funded pension 

X 

•Retirement 
(RACs)  

annuity 

contracts 

 X 

•Occupational 
schemes 

pension 

•Personal 
accounts (PRSAs 

retirement 

savings 

From 2026 

4Occupational  Insurance  Funds 
were  established  in  2014,  which 
were modified and converted from 
public  pay  as-you-go  (PAYG) 
system  to  a  funded  occupational 
pension scheme.  

Since  20222,  new  labour  market 
entrants  are  covered  by  a  funded 
defined 
scheme 
contribution 
(TEKA) 

•Group pension insurance contracts  

•Occupational  insurance 
funds 

•Simple  personal  pension  plans 
•Personal  pensin  plans 
(profit-
sharing or unit-linked) 

X 

pension 
•Occupational 
plans (planes de empleo) 
•Simplified  occupational 
pension  plans  (planes de 
empleo simplificados)  

pension 
•Mutual 
provident 
entities 
(entidades / mutualidades 
de prevision social)  

•Collective 
pension 
insurance  plans  (seguro 
colectivo) 

•Associated 
asociados)  

plans 

(planes 

 •Non-autonomous  funds 
(fondos  de  pensiones 
internos) 

•Personal 
individuales)  

plans 

(planes 

 X 

 •Employer 
prevision plans 

social 

•Insured prevision plans (planes de 
prevision asegurados) 

X 

Not for asset-based supplementary 
pensions:  There  are  different 
complementary  pension 
funds 
(e.g.,  AGIRC  ARRCO,  RAFP, 
etc.),  and  the  insured  person  is 
automatically  affiliated  with  the 
their 
corresponding 
fund 
regime.  These  supplement 
the 
social  security  system,  operating 
on a points-based system and pay-
as-you-go. 

to 

•Occupational  DB  plans 
for  managers  (article  39 
of General Tax Code)  

•Retirement 
Savings 
Plans  (Mandatory  PER 
and Occupational PER)  

•Company 
savings plans (PERE)  

retirement 

•Complementary pension 
plans  for  civil  servants 
(PREFON)  and 
local 
government 
representatives 

•Retirement 
(Individual PER)  

Savings 

Plans 

•Mutual 
combatants (RMC) 

retirement 

plan 

for 

X 

165 

 
(FONPEL, 
MUDEL) 

CAREL-

•Closed-ended  voluntary 
pension  fund  (Zatvoreni 
dobrovoljni  mirovinski 
fond|) 

•Open-ended  voluntary  pension 
fund 

•Mandatory 
(Obvezni mirovinski fond) 

pension 

fund 

•Pension  from  Voluntary  pension 
insurance (DMF) 

NA 

LV 

 •Mandatory  state  funded pension 
scheme 

HR 

IT 

CY 

 X 

 X 

 quasi M 

LT 

LU 

HU 

166 

•Contractual 
funds  

pension 

•Open pension funds  

•Pre-existing 
autonomous 
funds  

pension 

• Open pension funds  

•Pre-existing 
autonomous 
funds 

non-
pension 

• Individual pension plans provided 
through  life  insurance  contracts 
(PIPs) 

: 

individual  pension  plans  provided 
through life insurance contracts 

X 

pension 
voluntary 
•Private 
schemes: Open and closed pension 
funds 

X 

•Second  pillar  open  pension  funds 
•Third pillar open pension funds 

75.8 

voluntary  occupational 
for  certain  employees 
(usually  for  white-collar 
employees,  but  also  for 
others;  depending  on 
employer)  

•Occupational 
schemes 

pension 

•Life assurance contracts 
under 
which 
pensions 
occupational 
are accumulated 

•Employers  have 
the 
option 
of 
paying 
into 
contributions 
voluntary  pension  funds 
for their employees 

•Association  d'Epargne-
(ASSEP)  and 
Pension 
d’Epargne-
Sociétés 
Pension 
Capital 
Variable (SEPCAV)  

à 

• Pension funds  

•Group 
insurance 
contracts (traditional and 
unit-linked) 

 X 

 • Book reserve schemes 

Individual 
contracts 

pension 

savings 

for 
•Institutions 
occupational 
retirement 
provision  (foglalkoztatói 

funds 
pension 
•Private 
(magánnyugdíjpénztár)  •Voluntary 
(önkéntes 
funds 
pension 

X 

X 

 
 
 
 
nyugdíjszolgáltató 
intézmény 

nyugdíjpénztár) 
•Individual 
retirement  accounts  (nyugdíj  elő-
•Pension 
takarékossági 
insurance 
products 
(nyugdíjbiztosítási termékek) 

számla) 

Occupational  Retirement 
Scheme 

Personal Retirement Schemes 

X 

 Quasi  M.  •Sector  or  industry-wide  pension  plans  •Company 
pension  funds  •Pension  funds  for  professions  •Insured 
occupational plans 

Private 
provisions 

personal 

old-age 

: 

•Pension 
companies 
(Pensionskassen)  •Direct 
commitments 
(Direktzusagen) 
•Occupational 
insurance 
Kollektivversicherung) 
•Direct 
(Direktversicherung) 
•Support 
(Unterstützungskassen) 

group 
(Betriebliche 

insurance 

funds 

•Employee pension funds 
(PPE) •Employee capital 
plans (PPK) 

•Closed  pension  funds 
•Open  pension 
funds: 
collective  membership 
•Collective 
pension 
insurance contract 

insurance 
•State-
retirement  provision 

•Pension 
(Pensionsversicherung) 
sponsored 
(Prämienbegüngstigte 
Zukunftsvorsorge) 

X 

funds 

pension 

•Open 
•Individual 
(IKE) 
insurance accounts (IKZE) 

(OFE) 
retirement  accounts 
pension 

•Individual 

16.7 

•Open  pension  funds:  individual 
membership 
•Retirement  saving 
schemes  (PPR)  •Public  regime  of 
capitalisation (RPC 

X 

mandatory  privately  managed 
(Fonduri  de  pensii 
pensions 
facultative). 
is 
Participation 
mandatory  for  individuals  under 
the  age  of  35,  optional 
for 
individuals up to the age of 45 who 
are already insured and contribute 
to the public pension system. 

Introduced  by  Law  No. 
1/2020.  Until  2024,  no 
occupational 
pension 
scheme has been set up  

Fonduri  de  pensii  administrate 
privat 

NA 

•Mutual pension fund •Umbrella pension fund •Guarantee fund  X 

Supplementary  Pension 
Management 
Fund 
(both 
Company 
occupational 
and 
personal 

•Individual 
retirement  accounts 
(pillar  2)  •Supplementary  pension 
plans 
(pillar  3)  •Pan-European 
personal pension products (PEPP) 

50.6 

to 

plans 

closed 

•voluntary  occupational 
have 
pension 
marginal  role  and  they 
are 
new 
members. 
•Company  and  industry-
funds 
wide 
pension 
•Group 
pension 
insurance contracts in life 
insurance 
companies 
•Book  reserve  pension 
plans 

earnings-related 

• 
statutory 
pension  provisions  for  private 
sector  workers 
and 
seamen (MEL) 

(TyEL) 

pension 
the 

insurance 
•Individual 
provided 
employer 
•Individual pension insurance taken 
out by an individual 

by 

X 

MT 

NL 

AT 

PL 

PT 

RO 

SI 

SK 

FI 

167 

 
 
 
  
 
  
  
•Premium pension system 

SE 

Quasi Mandatory 

•Individual  pension  savings  (IPS) 
•Individual pension insurance 

X 

•Occupational  pensions  undertakings  (tjänstepensionsföretag) 
•Occupational pensions associations (tjänstepensionsföreningar) 
•Pension 
insurance 
companies •Book reserves 

(pensionsstiftelser) 

foundations 

•Life 

X does not exist, NA: exists but is not available. 

Source:  EIOPA  pension  product  data  base  2025,  FSC  survey  to  Member  States  2024, 
OECD fiscal incentives for funded private pension plans 2023.  

Table 51: Fiscal treatment of employers’ contributions to pension plans 

AT 

BG 

BE 

CZ 

Pension  companies  and  occupational  group  insurance:  Employer  contributions  are  tax-deductible 
company expenses, up to 10% of salary, provided that the total benefit target including social security 
benefits does not exceed 80% of current salary. 

Employer contributions into UPF, PPF, VPF and VPFOS are deductible from corporate income tax. For 
VPF and VPFOS, the tax relief is valid: i) for contributions not exceeding the amount of BGN 60 per 
month per employee and ii) if the employer does not incur any coercively enforceable public obligations. 

Employer contributions to an occupational pension plan are deductible as business expenses to the extent 
that total retirement benefits, including the statutory pension, do not exceed 80% of the last gross annual 
salary. 

Employer contributions into supplementary pension schemes are deductible from corporate tax  - more 
precisely they constitute expenses for tax purposes.  Social contributions are not levied on employer’s 
contributions up to the limit of CZK 50 000 per year. 

DK 

Contributions made by employers are, like other parts of salaries, fully tax deductible as expenses. 

DE 

EE 

IE 

ES 

Payments to a direct insurance, a pension fund or a support fund can be deducted as operational expenses. 
If employers contribute at least EUR 240 per year to an occupational pension scheme on behalf of a low-
income earner (earning less than EUR 2 575 monthly), in addition to the regular wage payment, they get 
a  tax  allowance  of  30%  of  the  contribution,  up  to  a  maximum  contribution  of  EUR  960  (i.e.  the  tax 
allowance varies between EUR 72 and EUR 288 per year). The allowance is administered through the 
wage tax and reduces the employer’s wage tax liability. 

Contributions  to  voluntary  pension  plans  made  by  the  employer  are  classified  as  expenses  related  to 
business,  so  they  are  exempt  for  corporate  income  tax  purposes.  Nevertheless,  contributions  are  still 
subject to social tax payable by the employer. 

Employer  contributions  to  occupational  pension  plans  on  behalf  of  their  employees  are  deductible  in 
computing the income for tax purposes of the employer’s business. Employer contributions attract full 
Pay-Related Social Insurance relief. Employer contributions are not liable to the Universal Social Charge. 

Employer contributions are tax-deductible company expenses. Employers can also deduct from corporate 
income tax 10% of their contributions into an occupational pension plan in favour of employees with an 
annual gross remuneration of less than EUR 27 000. When the worker earns more than EUR 27 000, the 
deduction  will  apply  to  the  proportional  part  of  the  employer  contribution  that  corresponds  to  a 
remuneration at that threshold. Employer contributions to occupational pension plans are not subject to 
social security contributions up to a contribution limit of EUR 115 per worker and per month. 

168 

 
 
 
 
 
FR 

EL 

HR 

IT 

HU 

LV 

LT 

LU 

Employer contributions to occupational private pension plans (article 39, PERE and PER) are deductible 
from  corporate  tax.  Employer  contributions  are  subject  to  a  fixed  social  fee  of  16%  instead  of  usual 
employer social contributions. 

Employer contributions are deductible from gross operating income 

Employer contributions up to EUR 796.44 per year into closed voluntary pension funds represent a  tax-
deductible expenditure for employers. 

Employer contributions are always  considered as costs for the employer and hence they are  deducted 
from business income in calculating the corporate tax. Employer contributions to supplementary pension 
funds are subject to a social security contribution of 10% (lower than the standard contribution rate of 
about 24%), on earnings up to a ceiling; for earnings exceeding the ceiling, the standard contribution rate 
applies. 

Employers can deduct contributions to private  pension plans as expenses. Employer contributions are 
taxed the same  way as wage  or salary since 2019, so there is no financial  incentive for employers to 
contribute to a pension plan. Employers can also make contributions as donations. Employers can deduct 
donations as expenses. In order to be eligible for tax relief, employers have to make a contract with the 
fund  to  make  contributions.  The  employer’s  contribution  has  to  be  identical  (same  amount  or  same 
percentage) for each employee who is a fund member 

Employer contributions are tax-deductible company expenses. If an employer sets up or contributes to a 
funded  private  pension  plan,  these  contributions  are  not  subject  to  income  tax  and  social  insurance 
contributions,  as  long  as  the  total  does  not  exceed  10%  of  the  gross  remuneration  calculated  for  the 
employee in the taxation year 

For  the  purpose  of  calculating  corporate  income  tax,  all  contributions  to  pension  funds  made  by  the 
employer are considered as tax deductible. 

Employer contributions into complementary pension plans are tax deductible from  corporate tax up to 
20% of the employee’s ordinary earnings. 

NL 

Employer contributions are tax-deductible company expenses. 

PL 

PT 

RO 

SK 

SI 

Employer contributions into the employee pension funds (PPE) are deductible from corporate tax, up to 
7% of the employee’s salary. Employer contributions into Employee capital plans (PPK) are deductible 
from corporate tax 

Employer  contributions  to  occupational  pension  plans  are  tax-deductible  expenses  as  long  as  some 
requirements are fulfilled. Social contributions are not levied on employer pension contributions 

Employer contributions into voluntary private pension plans are deductible from corporate tax up to the 
RON equivalent of EUR 400 per year. 

Employer contributions into supplementary pension plans are tax deductible for the employer (corporate 
tax) up to 6% of the member’s salary. Employer contributions into supplementary pension plans are not 
subject  to  social  insurance  contributions  but  health  insurance  contributions  are  levied  on  these 
contributions 

Employer contributions are tax deductible from corporate tax up to 5.844% of the employee’s gross wage. 
This cap cannot exceed EUR 2 903.66 per year (in 2023). Employer and employee contributions benefit 
from tax relief if the pension plan is approved by ministry of labour and entered into a special register 
kept by the competent tax authority. The sum of employer contributions per member into pension plans 
cannot  be  lower  than  EUR  345.12  a  year  (in  2023).  Employer  contributions  above  5.844%  of  the 
employee’s  gross  wage  or  above  EUR  2  903.66  (in  2023)  are  subject  to  social  contributions. 
Contributions within the limit are not subject to social contributions 

169 

 
FI 

SE 

The employer contributions to e.g. pension insurances can be deducted in the taxation of the employer, 
similarly to salary expenses. Some employer (or employee) social contributions are not payable on e.g. 
voluntary pension insurances, if conditions are met. 

Employers can deduct 35% of an employee’s salary, but maximum 10 price base amounts (SEK 525 000 
for 2023) per employee for private pension plans. To be eligible for tax relief, several conditions must be 
met. 

Source: OECD fiscal incentives for funded private pension plans 

170 

 
 
ANNEX 5: SUMMARY OF NATIONAL TAX TREATMENT PEPP 

Direct tax treatment of PEPPs: follow-up to 2017 Commission Recommendation on tax 
treatment of PEPPs (294).  

At  the  occasion  of  the  release  of  the  proposal  for  a  PEPP  Regulation (295)  in  2017,  the 
Commission  also  adopted  an  accompanying  recommendation  on  the  tax  treatment  of 
personal  pension  products  (PPPs),  including  the  PEPP  (“Recommendation”).  The 
Recommendation focussed on Member States' application of tax rules to individuals who 
qualify as PEPP savers. It encouraged Member States to grant PEPPs the same tax relief 
as the one granted to national PPPs, once these PEPPs are launched on the personal pension 
market, even in those cases where the PEPPs product features do not match all the national 
criteria required by the Member State to grant tax relief to PPPs. The recommendation also 
called on Member States where they have more than one type of PPP to give PEPPs the 
most favourable tax treatment available to their PPPs.   

The  Commission  services  have  taken  stock  of  how  Member  States  complied  with  the 
Recommendation (296).  Based  on  available  information  reported  most  Member  States 
indicate that tax incentives for PEPPs are available in their national legal frameworks for 
savers, and in some Member States for third parties (e.g employers). Member States tax 
frameworks  are  varied  but  the  type  of  incentives  are  more  or  less  similar,  i.e.  the  tax 
deductibility of contributions up to a certain ceiling or as a certain percentage of income. 
Most Member States’ tax incentives are similar to tax incentives offered for some or all 
their  national  PPPs.  As  to  the  taxation  or  non-taxation  of  pay-outs  to  savers  the  tax 
frameworks  of  Member  States  show  variation.  When  PEPPs  are  transferred  between 
Member States, the applicable tax regimes are reported to be generally similar for most 
Member States.  

A more detailed analysis reveals the following main conclusions regarding the taxation of 
PEPPs in the EU.  

• 

(Un)availability of tax incentives for PEPPs and types of incentives  

Nineteen Member States (Bulgaria, Cyprus, Czech Republic, Estonia, Germany, Greece, 
Spain, Finland, France, Ireland, Italy, Lithuania, Luxembourg, Latvia, Malta, Netherlands, 
Poland,  Portugal,  and  Sweden)  indicate  tax  incentives  are  available  for  savers  for 
contributions made to PEPPs as it is the case for other national PPPs (297). Other Member 
States (Austria, Croatia, Hungary, Romania, Slovenia) do not seem to provide for such tax 
incentives.   

294 C(2017)4393 final 
295 Regulation (EU) 2019/1238 of the European Parliament and of the Council of 20 June 2019 on a pan-
European Personal Pension Product (PEPP), OJ L 198, 25.7.2019, pp. 1.  
296 25 out of 27 Member States fully or partially replied to the enquiry. 
297 One Member State (Belgium) indicates that in principle there is no legal obstacle to provide PEPPs with 
similar tax incentives as the ones which exist in its national legal framework for third-pillar pension products 
provided they meet similar conditions, but it remains unclear to which extent such tax incentives are given 
in practice. Belgium gives tax incentives in the form of deductions from taxable income for personal pension 
products.  

 
 
 
 
As regards the type of tax incentives offered, Member States generally do not establish a 
specific tax incentive framework for PEPPs on a stand-alone basis. Instead, the tax regime 
is fully or largely aligned with that of other supplementary pension products. These tax 
incentives  typically  take  the  form  of  deductions  from  taxable  income  for  contributions 
made  by  employees  and/or  their  employers  (Bulgaria,  Czech  Republic,  Estonia,  Spain, 
Finland,  France,  Germany,  Italy,  Luxembourg,  Netherlands,  Poland,  Portugal),  an 
exemption from taxable income (Cyprus, Ireland, Lithuania, Latvia) or tax credits (Malta). 
One Member State (Sweden) applies an annual tax to the net value of savings accumulated 
in the PEPP, although amounts up to a specified ceiling are exempt from taxation. As part 
of  the  design  of  their  tax  incentives,  Member  States  also  set  general  ceilings  for  tax 
deductibility,  or  limit  tax  deductibility  up  to  a  specific  percentage  of  the  employee’s 
income that can be contributed to supplementary pension products, or condition their use 
on special circumstances linked to the type of employment.  

Eight Member States (Bulgaria, Cyprus, Czech Republic, Greece, Estonia, Ireland, Italy, 
Portugal) provide also tax incentives to taxpayers other than the savers (e.g. employers or 
other third parties). However, most Member States (Austria, Belgium, Germany, Spain, 
Finland,  Hungary,  France,  Lithuania,  Luxembourg,  Latvia,  Malta,  Netherlands,  Poland, 
Romania, Slovenia, Sweden (298)) do not seem to provide such tax incentives.  

•  Tax policy considerations for (not) providing tax incentives to PEPPs 

As to possible considerations that may have influenced a Member State’s decision not to 
provide tax incentives, it is noted that only a few Member States report reasons such as the 
fact that the general tax regime applies to PEPPs and the tax regime depends on the type 
of  product  (Austria),  or  the  choice  to  incentivize  other  alternative  insurance  products 
(Greece),  or  budgetary  constraints  (Croatia).  However,  most  Member  States  did  not 
provide clear tax policy insights as to why they do currently not provide any tax incentives 
for  PEPPs  either  in  relation  to  contributions  made  by  the  savers  (Hungary,  Malta, 
Romania) or to taxpayers other than the savers such as employers or other third parties 
(Germany,  Spain,  Hungary,  France,  Luxembourg,  Latvia,  Romania,  Sweden),  beyond 
stating that PEPPs are simply aligned with the tax treatment of national PPPs (Belgium, 
Finland, Lithuania, Malta, Poland, Portugal, Slovenia). One Member State (Netherlands) 
clarified  that  the  PEPP  is  a  third  pillar  product  voluntarily  concluded  by  an  individual 
taxpayer,  that  the  employer  is  not  involved  in  such  decision  and  hence  that  no  tax 
incentives are provided for the latter. 

•  Similarity of incentives offered to PEPP vs. national PPPs 

On the similarity of tax incentives provided to PEPPs in comparison to those offered to 
national  PPPs,  seventeen  Member  States  (Belgium,  Bulgaria,  Cyprus,  Czech  Republic, 
Germany,  Spain,  Croatia,  Estonia,  France,  Ireland,  Italy,  Latvia,  Netherlands,  Poland, 
Portugal, Slovenia) report that their tax incentives are similar to most or all national PPPs. 

298 One Member State (Sweden) indicates that contributions to a “pension insurance” are deductible when 
made  by  the  employer,  but  not  when  made  by  the  saver.  However,  PEPPs  are  taxed  as  an  “endowment 
insurance” rather than as a “pension insurance”, the latter benefiting from a more favourable tax regime. 
When PEPP was implemented in Sweden, it was deemed not to meet the conditions required to be classified 
as a “pension insurance”. 

172 

 
 
 
Four  Member  States  (Austria,  Greece,  Hungary,  Sweden)  also  report  that  their  tax 
incentives  for  PEPPs  are  not  similar  or  that  certain  national  PPPs  benefit  from  a  more 
favourable tax regime. One Member State (Finland) reported that, as of 2027, its legislation 
will  be  amended  to  abolish  tax  incentives  for  national  PPPs  and  it  is  assumed  that  this 
amendment will also apply to PEPPs. 

As regards possible conditions or features a revised PEPP would need to meet in order to 
qualify  for  receiving  tax  incentives  available  for  national  PPPs,  Member  States  that 
responded provided varied input, including that no statement could be made due to ongoing 
reforms of tax-advantaged private pension plans (Germany); that it should be thoroughly 
checked whether PEPPs meet the specific financial requirements applied to certain types 
of national PPPs to determine whether the related tax treatment can be extended (Spain, 
Austria)  or  that  tax  incentives  are  available  if  PEPPs  meet  the  conditions  applicable  to 
national  pension products (Belgium);  or that PEPPs should follow certain requirements 
such as age of the recipient, minimum holding period, periodic payments or no withdrawals 
during  the  accumulation  phase  (Estonia,  Netherlands,  Sweden).  As  already  highlighted 
above, the matter is not relevant for one Member State (Finland) that currently offers tax 
incentives for national PPPs but will abolish them at the beginning of 2027.  

As regards possible conditions or features a revised PEPP would need to meet in order to 
qualify  for  receiving  tax  incentives  available  for  national  PPPs,  Member  States  that 
responded provided varied input, including that no statement could be made due to ongoing 
reforms of tax-advantaged private pension plans (Germany); that it should be thoroughly 
checked whether PEPPs meet the specific financial requirements applied to certain types 
of national PPPs to determine whether the related tax treatment can be extended (Spain, 
Austria)  or  that  tax  incentives  are  available  if  PEPPs  meet  the  conditions  applicable  to 
national  pension products (Belgium);  or that PEPPs should follow certain requirements 
such as age of the recipient, minimum holding period, periodic payments or no withdrawals 
during  the  accumulation  phase  (Estonia,  Netherlands,  Sweden).  As  already  highlighted 
above, the matter is not relevant for one Member State (Finland) that currently offers tax 
incentives for national PPPs but will abolish them at the beginning of 2027.  

•  Taxation of pay-outs to savers 

The stocktaking also reveals that eight Member States (Bulgaria, Greece, Estonia, Croatia, 
Lithuania,  Luxembourg,  Poland,  Sweden)  generally  do  not  tax  pay-outs  after  pension 
rights have been acquired, provided that certain pre-defined conditions are met (e.g. having 
reached the retirement age or a minimum number of years of contributions). Other Member 
States may tax the payouts of PEPPs to savers, either at ordinary rates (Spain, Hungary, 
Malta,  Netherlands)  or  under  preferential  rates  or  conditions  (Czech  Republic,  Latvia, 
Italy, Malta, Slovenia). Two Member States reported that the tax regime applicable to pay-
outs varies depending on whether contributions benefited from fiscal incentives at the time 
of payment (Belgium) or whether insurance premiums were deducted (Finland), in which 
case  only  the  profit  component  may  be  taxable.  The  taxation  of  the  pay-outs  may  also 
depend  on  the  specific  type  of  pension  product  (Austria,  Belgium)  or  the  modality  of 
disbursement (Cyprus, Germany, France, Ireland, Portugal). 

173 

 
 
•  Applicable tax regime in case of intra-EU/EEA PEPP transfers 

As regards the applicable national tax regimes when a PEPP is transferred from a PEPP-
provider in one Member State to a provider in another EU/EEA State and whether the tax 
treatment  in  such  a  scenario  is  similar  to  the  one  applicable  to  national  PPPs,  eighteen 
Member  States  (Belgium,  Cyprus,  Czech  Republic,  Germany,  Greece,  Spain,  Estonia, 
Finland,  Croatia,  Hungary,  Italy,  Lithuania,  Latvia,  Netherlands,  Poland,  Portugal, 
Slovenia,  Sweden)  report  that  the  applicable  tax  regimes  are  generally  similar  or  that 
transfer operations are exempt from any tax liability. 

No Member State explicitly indicated that its national tax regime for transfers differs from 
the one applicable to PEPPs. However, some Member States reported that transfers are not 
permitted (Ireland), that a general reply is not possible because the tax treatment depends 
on the specific product (Austria), or that they have no experience on such transfer cases 
(Bulgaria, France, Malta). 

Indirect (VAT) tax treatment of PEPPs 

Commission services (DG TAXUD) have launched in June 2024 an external study that 
will provide an informed analysis on the challenges stemming from the current taxation 
framework of the financial sector. This will include an analysis of the VAT treatment of 
pension  funds,  including  PEPPs  taking  into  account  and  reviewing  consistency  in  their 
treatment across the EU. 

174