EU: Review of the Regulation on a pan-European personal pension product (PEPP)

 

The EU Commission has published, for consultation, a review proposal for a regulation on a pan-European personal pension product.

Ensuring that people across the EU can retire with dignity, security and adequate income lies at the heart of the EU’s social and economic agenda. As EU citizens live longer, the challenge of maintaining decent living standards in retirement has become more pressing. Citizens expect that after a lifetime of work, they will have access to a stable income that is sufficient to support a decent quality of life. Yet, the sustainability of pension systems and the adequacy of retirement income across the EU are under increasing strain as a result of demographic ageing and new forms of work. The EU’s population is living longer, while the working-age population is shrinking. This structural shift implies that fewer workers will be available to finance the pensions of an increasing number of retirees, creating fiscal and social pressures that, if left unaddressed, could erode living standards and intergenerational fairness.

The EU must therefore act to help citizens secure their retirement income and preserve their standard of living in the face of unfavourable demographic developments, subdued productivity growth, and broader transformative challenges linked to climate change, digitalisation, and geopolitical uncertainty. The capacity to address the pension challenge effectively will shape the EU’s economic resilience and social cohesion in the decades ahead.

The pension challenge is therefore central to EU’s economic and social future. It concerns how a growing share of the population can maintain an adequate standard of living after retirement, while ensuring that the burden on future generations remains sustainable. The European Pillar of Social Rights1, particularly Principle 15 on “Old age income and pensions”, enshrines the right of workers and the self-employed to a pension that is commensurate with their contributions and ensures an adequate income, with equal opportunities for women and men to acquire pension rights.

The promise of an adequate and sustainable pension remains under pressure, despite numerous reforms at national level. Many Member States have reduced public pension replacement rates, increased the statutory pension age, or shifted from defined benefit to defined contribution schemes. Individuals are therefore increasingly expected to complement statutory pensions with occupational or personal savings. This places a “double burden” for the working-age population, who must finance current retirees, while also saving for their own retirement income.

People need to be able to access safe, efficient, transparent and high-performing pension products in order to build up sufficient retirement savings. Reallocating household savings from low-yielding deposits to supplementary pension products that offer long-term investment opportunities can help individuals achieve a higher and more stable retirement income. At the same time, these savings, when channelled through well-governed and efficiently managed pension institutions, represent an important source of long-term capital for the European economy. The supplementary pension sector plays a double role: safeguarding individuals’ financial security in retirement and contributing to EU’s long-term economic sustainability.

Recent high-level analyses have emphasised the importance of strengthening this channel between savings and investment. The reports by Mario Draghi2 and Enrico Letta3 highlighted that maintaining EU’s living standards in the context of a shrinking workforce will require stronger productivity and increased investment. The Draghi report, in particular, called for a more efficient mobilisation of household savings through long-term saving products such as pensions. It thus reinforces the idea that improving people’s access to effective, transparent, and affordable retirement saving options is not only a social goal but also an economic necessity. The EU should therefore promote retail participation through accessible, well-designed supplementary pension schemes, following successful national examples.

There is a strong need to strengthen supplementary pensions as part of the EU’s broader social contract. The European Council’s Conclusions of 17-18 April 20244 called for further work on developing pensions and long-term savings products, recognising their contribution to the green and digital transitions and to the growth of EU businesses. The European Council’s Conclusions of 20 March 20255 reiterated the importance of increasing private capital participation to support investment and competitiveness, and invited the Commission to promote greater retail participation in capital markets, including through pension products.

In the Political Guidelines 2024–20296, President von der Leyen announced the creation of a European Savings and Investments Union, designed to make EU savings work more effectively for long-term growth and prosperity. In its Communication of 19 March 2025 on the Savings and Investments Union, the Commission recognised the potential of the supplementary pension sector to contribute to this goal by mobilising private savings for productive investment and ensuring that the benefits of such investment are channelled back to citizens in the form of higher and reliable retirement incomes. Furthermore, in the Mission Letter7 addressed to the then Commissioner-designate for Financial Services and the Savings and Investments Union, President Von der Leyen emphasised the importance of harnessing the potential of private and occupational pensions to support EU citizens in securing their retirement and to facilitate the channelling of savings into the wider economy.

The European Court of Auditors concluded in 20248 that the EU had ‘not been effective in strengthening occupational pensions and establishing a pan-European personal pension product’. It underscored the need for renewed efforts in this area in order to better serve citizens’ retirement needs.

Regulation (EU) 2019/1238 on a pan-European Personal Pension Product (the PEPP) was adopted to address the fragmented and uneven development of personal pension markets across the EU. Individuals seeking to supplement their statutory and occupational pensions had only limited and unequal access to affordable and attractive personal pension products. Market fragmentation made it difficult for providers to realise economies of scale, diversifying risks, and fostering innovation. This in turn reduced consumer choice and increased costs for savers. The absence of a harmonised framework also constrained cross-border activity, with few providers or savers operating beyond national markets. This situation limited the depth and liquidity of EU capital markets compared with other jurisdictions, where pension funds play a greater role as institutional investors.

The review of the PEPP Regulation aims to ensure that the framework works better for EU citizens. The PEPP initially did not achieve the envisaged commercial success and this review seeks to enhance the PEPP’s functionality and practical effectiveness, by establishing a solid and efficient basis for a personal pension scheme that complements statutory and occupational pension systems of the Member States. The revised framework aims to make the PEPP a more attractive and accessible option for savers across the Union considering the different retirement saving preferences and ensuring that there is a clear offer of a simple scheme designed to be transparent, and cost-effective, thereby keeping production and distribution costs low. The framework will not only simplify the development of a streamlined basic product, but also facilitate the development of a more sophisticated PEPP with additional investment and/or risk management options, thus enabling providers to offer more tailor-made solutions that reflect different risk preferences, market conditions, and national contexts. Depending on the exact design, PEPPs would in principle also be able to invest in more diversified asset classes, such as broader categories of equity investments. This would allow PEPPs to better finance EU businesses in accordance with the EU’s priorities, including assets covered by the InvestEU program fostering the digital and green transition.