The European Commission’s Targeted Consultation on Supplementary Pensions is a not-to-be-missed moment to strengthen pension systems across the EU and ensure that citizens can build adequate retirement savings. The Commission’s recommendations will cover pension tracking systems, dashboards, auto-enrolment, and two legislative reviews on the IORP II Directive, and the PEPP Regulation. EFAMA, representing investment managers across the EU, has highlighted several key points for future success.
Tanguy van de Werve, Director General of EFAMA, said: "This is the most ambitious initiative by the Commission regarding supplementary pensions to date. Time is running out, and immediate action is needed to address one of the most urgent challenges posed by Europe’s ageing population. EU citizens must benefit from expanded occupational and private pensions to avoid old-age poverty, which currently affects 1 in 5 Europeans. Two key strategies include increasing auto-enrolment in workplace pensions and revitalising the Pan-European Personal Pension Product (PEPP)."
Key recommendations:
Pension tracking systems and dashboards can increase awareness of retirement savings and possible gaps. Tracking systems provide individual savers with a clear view of their accrued savings and projected retirement income, while national dashboards enable Member States to monitor pension adequacy and sustainability across the entire country.
EFAMA fully supports the Commission’s promotion of auto-enrolment for occupational pensions and strongly suggests that life-cycle investment strategies be used by default to ensure adequate returns. This means taking on riskier investments like stocks for younger savers and lower risk investments like bonds for those nearing retirement. Numerous national examples exist that demonstrate the significant drawbacks of systems overly focused on guarantees and low-risk strategies.
EFAMA urges the creation of a “PEPP 2.0” that is simple, appealing, and financially sustainable. Removing the fee cap and lifting the mandatory advice requirement to allow execution-only options would encourage more asset managers to offer PEPPs. Again, life-cycle investment strategies should be the default, unlocking higher value for savers currently limited by stringent risk rules and mandatory stochastic modelling. Introducing workplace PEPPs could be particularly effective in Member States with limited occupational pension options.
The IORP II Directive should recognise that smaller IORPs can benefit from economies of scale by outsourcing investment and execution strategies. To strengthen the performance of IORPs, life-cycle investment strategies with adequate equity allocations should be encouraged, especially for defined contribution schemes. Lastly, operational and regulatory barriers that currently constrain cross-border IORPs and their activities should be removed.
Gabrielle Kolm, EFAMA Regulatory Policy Advisor, concluded: "Life-cycle investment strategies will be crucial for the European Commission’s pension adequacy objectives, as they have the potential to improve retirement outcomes across Europe. By incorporating professionally designed, age-appropriate investment approaches with high-growth opportunities, savers can achieve both security and higher returns, thereby increasing their financial security in retirement.”
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Notes to Editors
Read our answer to the EC’s call for evidence on pensions here.
Read our position paper on the PEPP here.
For further information, please contact:
Hayley McEwen
Head of communications and membership development
