Pensions in Europe: Planning for the future

Ladies and gentlemen

Thank you so much for inviting me to the launch event of this third European Retirement Week.

We always say that a greater awareness and understanding of pensions and savings is an important factor in closing pension gaps, and European Retirement Week is proving to be very effective in drawing attention to the most important issues that can improve – or stand in the way of – a comfortable retirement for many people.

This year’s programme is no exception and at EIOPA we very much support this initiative.

It will come as no surprise to any of you that closing pension gaps is a priority for EIOPA. It also won’t be a surprise to any of you that we are in a period of change – economic and societal – and this is affecting the retirement outlook for many people.

You know the facts and figures as well as we do at EIOPA.

• An ageing continent puts more pressure on state pension systems, while living longer means people have to be able to fund a longer retirement;
• The cost-of-living crisis means some people are having to defer or stop their pension scheme contributions, the impact of which may only become clear in years to come; and
• The continuing shift from defined benefit to defined contribution schemes puts additional pressure on people to take more control of their pensions saving, choosing how to invest and how to drawdown.

Looking ahead, we have the European elections next year. These elections will signal a new policy cycle at EU level and this is a change that we should all prepare for so that we can ensure that closing pension gaps remains top of the agenda. 

This is something that we have been doing at EIOPA, just as the participating members of European Retirement Week have done.

Indeed, I was heartened by the policy recommendations that you are putting forward to strengthen future pension adequacy, since many of the proposals are in line with EIOPA’s own thinking.

In my remarks today, I would like to focus three particular areas that you have highlighted in your policy recommendations, namely the importance of funded pension schemes; value for money; and awareness and communication issues.

One thing that we all agree on is the importance of funded pension provision and pension gaps cannot be closed by relying on the first pillar alone.

When it comes to occupational pensions, these play an essential role in providing people with income retirement in later life.

To work effectively, they must be well managed and here the IORP II Directive sets out the framework to ensure the soundness and sustainability of occupational pension schemes.

In reviewing the IORP II Directive, our aim was to embrace the future, while protecting the legacy. I said at the beginning of these remarks that we are in a period of great change, and this too has had an influence on our advice.

First and foremost, we have had to take account of the continuing shift from defined benefit to defined contribution schemes, as well as the challenges of climate change and the importance that we need to place on diversity and inclusion. This is what we mean by embracing the future.

At the same time, our advice aims to protect the legacy, by addressing topics such as risk assessment and liquidity risks.

I am sure that many of you will have taken part in the consultation on the review of IORP II and I would like to thank you for your contributions. Hearing from different stakeholders, including from national supervisors, pension fund providers, social partners, has helped us to provide balanced advice that represents the view of 27 EU supervisors.

When it comes to the pensions landscape, we also need to pay attention to the third pillar – private pensions.

For many years, you will have heard us talk about the PEPP – the pan-European Personal Pension Product. The thinking behind the PEPP – a portable, transparent, simple savings product – is still valid, and although we are still in its early days, the take up of PEPP from a provider perspective has been very low.

We still see the merit in PEPP and our recommendation to the incoming Commission will be to evaluate the PEPP Regulation to assess if its implementation has been adequate and whether the conditions for providing PEPPs are viable. This may include looking at the cost cap conditions and risk mitigation techniques and fiscal treatment.

Having pensions schemes and products in place is one achievement. Another is getting people to save into them.

Here trust plays an important part – and connected to this is value for money.

Today, as the shift from defined benefit to defined contribution schemes continues, increasingly members are bearing risk and costs.

We know that seemingly small levels of fees can have a big impact over the longer term, and it is therefore important to have transparency of costs and fees.

It has already been two years since EIOPA issued its Opinion on the supervisory reporting on costs and charges of IORPs and with our review on IORP II, we are making further recommendations of the reporting of costs.

More broadly, value for money is firmly in our focus at EIOPA. And when we talk about this, we are referring to the principle that the cost and charges of a product are proportionate to the benefits and reasonable, taking into account the expenses carried by product providers.

This is particularly important when considering the more complex insurance products that people invest in for their retirement. Through our work, we want to see consumer interests and the heart of the entire product lifecycle.

We know that value for money and issues related to advice will be tackled by the Retail Investment Strategy – and we broadly welcome the approaches proposed.

We know from our recent Eurobarometer surveys that issues like value for money and unbiased advice are areas where we must continue to act to maintain consumer trust in savings.

The third area that I would like to address today is that of awareness and communication.

People need to know why they should be saving for retirement – and they need to know this when they are young – and they need to know what they can expect to receive when they retire.

Financial education plays a role here – but it will not solve every issue.

Our advice on IORP II also makes a case for improvements to the Pension Benefit Statement, taking into consideration both digital and behavioural approaches.

Two other important tools are dashboards and tracking systems.

Building on our proposals from 2021, we would like to see these further developed by the incoming Commission.

Yes, it’s clear that there are challenges in bringing all the information into one place, but dashboards and tracking systems are invaluable for presenting information clearly and supporting well-informed decision making.

Before I conclude, I would like to say a few words on the broader context.

I have spoken about our recent work on the review of the IORP II Directive.

But when it comes to encouraging long-term saving, we also have to consider other regulatory frameworks.

I am thinking of Solvency II, where during the review, we have looked at the long-term nature of investments that suit insurers and where we have proposed a more favourable, but still prudent treatment of insurers with long-term liabilities, as well as for long-term equity investment held against long-term illiquid liabilities.

I am also thinking of the Retail Investment Strategy – and other horizontal or cross-sectorial regulation that we are seeing more and more of.

And here, I want to reassure you, that at EIOPA, one of our roles, when confronted with horizontal regulation, is to make sure that the regulation works for the sectors that we supervise, and the specificities of the insurance and pensions sectors are taken into account during the development of such regulation.

Now to conclude.

Let me underline again the importance of European Retirement Week in drawing attention the issues that we need to address to make sure that people have sufficient income during their retirement.

We cannot address these issues alone. As we look to the future, I hope that we can continue to work together to close pensions and savings gaps.

Thank you very much and I wish you all the best for this year’s European Retirement Week.