The European Commission will today propose measures to boost supplementary pensions amid concerns that a shrinking workforce and ageing populations will mean that national pensions will become stretched over time.
The move comes amid signs that a previous effort to boost the pan-European pension market has fallen short of expectations.
Officials suggest an effort to liberalise supplementary pensions and make them more attractive on a cross-border basis is part of an overall strategy to encourage European citizens to invest more of their savings, as part of the Savings and Investment Union (SIU) initiative.
The new proposals, to be adopted by the European Commission today, are aimed at strengthening both the demand for and the supply of supplementary pensions, both private and occupational.
The Commission will recommend that member states introduce auto-enrolment, or the automatic inclusion of workers in supplementary pensions, with freedom to opt out, as a way to encourage people to participate in such schemes.
According to a draft statement, seen by RTE News, auto-enrolment will increase participation and boost the overall pensions market.
Member states will also be encouraged to develop comprehensive pension tracking systems, in order to boost awareness of supplementary schemes and to provide workers with a clearer overview of their pension rights and projected benefits.
The proposal will also encourage national capitals to develop so-called pension dashboards so that policy makers can have a better view of the "coverage, sustainability and adequacy" of multi-pillar pension systems, with the national dashboard feeding into a European dashboard.
The Commission intends to change existing EU legislation on financial institutions in order to allow for pension schemes to diversify their investment and to scale up the level of supplementary pensions.
This would include amending the Directive on Institutions for Occupational Retirement Provision (IORP) II.
According to the draft statement, the directive would "[enhance] the protection of savers and remove barriers to market-driven consolidation and other forms of fostering economies of scale."
The statement says such measures would reduce costs and allow institutions to diversify their investment portfolios including in equity and "to deliver stronger returns on citizens' savings."
This also contributes to increased financing opportunities for European companies.
The IORP II directive set common EU standards on the management and supervision of pension funds.
A further amendment of the Pan-European Personal Pension Product (PEPP) regulation would be designed to create "a more attractive, accessible and cost-effective option" by removing removing existing requirements and design features that have hampered the take-up of the PEPP "while at the same time continuing to ensure a high level of consumer protection."
PEPPs were introduced three years ago and heralded as a genuine cross-border transferable pension plan.
However, according to reports last year, only one investor materialised and take up was restricted to four member states.
The review will introduce an "affordable and easily accessible Basic PEPP" to be invested in simple financial assets and offered to the public without advice.
Savers will also have access to "tailored" PEPPs that may include guarantees and more complex assets, requiring advice to ensure consumer understanding, according to the draft.
As such, the PEPP will be adaptable to different investor preferences and suitable for various types of providers.
Under the SIU Strategy, the EU is trying to encourage more opportunities for households to invest in capital markets as a way of boosting economic growth and competitiveness.
According to an internal note, public pension schemes "remain the cornerstone of pension systems in member states and their organisation remains under member states' responsibility".
"This package does not replace national measures, which remain the sole responsibility of Member States. Here we are strengthening supplementary pensions, not replacing public pensions," the note added.
The note said that auto-enrolment schemes would encourage people to think about their pensions earlier in their working life.
"Instead of having to take the first step themselves, workers are included by default, while still retaining the full freedom to opt out at any time. This encourages early savings and ensures citizens don’t miss out on the benefits of starting to save sooner," said the note.
