Buy-in from Member States will be essential
Today, EFAMA published its position paper on the European Commission’s Supplementary Pensions Package, welcoming the initiative as a decisive step toward closing Europe’s growing pensions gap. With demographic pressures rising and persistently low participation in occupational pensions, empowering citizens to build adequate retirement income is both a social and economic imperative. The Pan-European Pension Product (PEPP) and broader supplementary pension reforms are vital tools for channelling long-term savings into capital markets and supporting economic growth across the EU.
However, turning this opportunity into real benefits for Europeans will depend heavily on effective implementation at the national level. The PEPP and IORP proposals must be combined with national measures, such as auto-enrolment in occupational pensions, supportive tax incentives, and pension tracking systems, to boost participation and make investing more inclusive.
The following elements will be essential to ensure successful future PEPP uptake:
The proposal to remove the 1% fee cap for the Basic PEPP will help with product viability and encourage provider participation. However, the proposed Value for Money framework is questionable as it cannot meaningfully capture the long-term performance of pension products.
The removal of the mandatory advice requirement will simplify product access. However, if citizens want advice, they should be able to choose from both independent and non-independent advisors, as the former are still very limited in many countries.
We support life-cycle investment strategies as the default option for the Basic PEPP, as evidence shows that age-appropriate investments with long-term growth potential deliver much better outcomes compared to low-risk, low-return capital guarantees. However, providers should retain flexibility in designing these strategies.
The current 5% limit for investment in private assets is too restrictive. The framework should allow investors – either individually or collectively – to select risk profiles that can include higher exposure to unlisted or illiquid assets.
The recommendations below for the IORP II Directive should also encourage long-term investment, provided that changes do not disrupt well-functioning national pension systems:
The Prudent Person Principle must be maintained to ensure IORPs can prudently invest across a broad range of asset classes, including equities and illiquid assets.
A principles-based approach to cost transparency is needed, as allocating costs to individuals in collective pension schemes is often impractical and risks creating misleading signals.
Proportionate application of depositary requirements is necessary. Existing national custody, audit and supervisory frameworks must be recognised, to avoid creating additional administrative costs without clear prudential benefits.
Kimon Argyropoulos, EFAMA Regulatory Policy Advisor, commented: “It is essential that we get supplementary pensions to work better throughout Europe to alleviate pressure on state-sponsored pension systems. By boosting participation in workplace and private pensions, we can strengthen retirement outcomes while also channelling long-term savings into the wider economy. The Commission has delivered, but it now needs Member State support. A flexible PEPP and a principles-based IORP framework are critical to making this a reality.”
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Notes to Editors
You can find the European Commission’s proposals here.
For further information, please contact:
Hayley McEwen
Head of communications and membership development
