As part of its strategy for a Savings and Investment Union (SIU), on Thursday 20 November the European Commission presented a package of measures aimed at facilitating access to pension schemes to supplement public pensions in the Member States of the European Union. The package includes a recommendation to Member States and two legislative proposals amending the Institutions for Occupational Retirement Provision Directive (‘IORP II’) and the Pan-European Personal Pension Product Regulation (‘PEPP’).
Recommendation. The EU institution recommends setting up a system of automatic enrolment (‘auto-enrolment’) of employees in supplementary pension products, while maintaining the freedom for individuals to opt out.
The proposed measure is inspired in particular by the automatic accession mechanisms already implemented, for example, in Estonia and, since 2012, in the United Kingdom. The European Commissioner for the Savings and Investment Union, Maria Luís Albuquerque, also cited, on Thursday, the Danish, Swedish and US models as references.
The Commission recommends as well the further development of comprehensive pension monitoring systems aimed at providing citizens with a clear overview of the products on offer, including public, private and occupational schemes.
Furthermore, the EU institution is recommending the development of national pension ‘scoreboards’ to provide a clearer picture of the coverage, sustainability and adequacy of their multi-pillar pension systems. These national dashboards would eventually feed into a European pensions dashboard.
On Thursday, the Commission gave assurances that it would monitor the implementation of its Recommendation at national level through a number of mechanisms, including the ‘European Semester’ and that it will encourage the exchange of experience and best practice between EU countries.
‘IORP II’ Directive. By revising the directive on the Institutions for Occupational Retirement Provision, the European Commission is proposing to open up the supplementary pensions market further by removing “barriers to market-based consolidation” to enable funds to group together more easily, reduce their costs and improve returns for savers. At the same time, the Commission announced its intention to strengthen the protection of citizens, to ensure that this increased opening up of the sector benefits future pensioners above all.
‘PEPP’ Regulation. The Commission wants to make its ‘Pan-European Individual Pension Product’ more attractive. Launched in 2022 without any real success to date, the product is said to have some 20,000 users across the Union, according to a senior EU official on Thursday.
To maximise the potential of this European initiative, the Commission proposes to introduce an affordable and easily accessible “basic PEPP”, invested in simple financial assets and offered to the public without advice. It also proposes to introduce “tailored” PEPPs, possibly including more complex guarantees and assets and requiring advice to ensure clear understanding for users.
“Responding to demographic challenges”. Ms Albuquerque justified the reforms on Thursday as a response to a concern that she said was widely shared by EU countries. “Pension adequacy is not guaranteed with the current situation”, the Commissioner stressed at a press conference.
“This is a lot of Member States competence. It will require significant engagement, also from social partners. But this is about addressing the demographic challenges we have and guaranteeing that everyone, especially those of you younger, will have a good retirement income when your time comes to retire”, she said.
To see the recommendation: https://aeur.eu/f/jjx ; the legislative proposal on ‘IORP II’: https://aeur.eu/f/jjy ; the legislative proposal on the ‘PEPP’ regulation: https://aeur.eu/f/jjz ; and the Commission communication: https://aeur.eu/f/jk0 (Original version in French by Bernard Denuit)