Unlocking the potential of pensions in Europe

Ladies and gentlemen,

Thank you for inviting me to deliver the keynote speech at the Netspar Anniversary Conference. It is truly a privilege to stand before a community so dedicated to bridging the gap between science and practice to create better pensions for all. 

And this is a much-needed endeavour to ensure sound policy making, best industry practices and meaningful change. As we gather here today, I want to emphasize the critical role that pensions play in ensuring retirement security for our citizens. A well-functioning pension system is the backbone of a society that values dignity and well-being in old age. 

Europe is facing a pressing issue: the pension gap. The challenges posed by an ageing population, as highlighted in the recent report “Europese vergrijzing in het vizier” by the Wetenschappelijke Raad voor het Regeringsbeleid (WRR), have significant implications for our pension systems. Let me explain this with a figure: 20.2% of senior citizens in Europe—or 18.5 million individuals—are at risk of poverty. 

What I am about to say is well known to a Dutch audience, but it is worth remembering: while most Europeans rely on first pillar, or statutory pensions, for their retirement income, we know that this is no longer sustainable. There will be fewer workers contributing for an increasing number of retirees and some citizens risk being left behind. 

To secure a future where people can retire with dignity, we must strengthen and expand second and third pillars pensions, also known as occupational and personal pensions. A three-pillar system is necessary to address the pension gap and provide sufficient retirement income for all. And I am sure we will hear today about some best practices from the Netherlands that could be replicated elsewhere in Europe. 

[Vulnerabilities in the pension system and what to do about them]

Pension systems are not delivering for all, exposing the most vulnerable to financial insecurity. The pension gap does not affect everyone equally—some groups face far greater challenges, making retirement a time of uncertainty rather than security.

We cannot accept a system that works for some but fails others. True progress means ensuring that pensions serve everyone, regardless of gender, income, or employment history. It is our responsibility to close these gaps, challenge inequalities, and build a future where no one is left behind. A fair and inclusive pension system is not just an aspiration—it is a necessity.

Let me give you a few examples. First, women. The pension gap has a gender dimension. Women’s risk of poverty in retirement in the EU is 35% higher than that of men on average. This is a sobering statistic: why is this so? Women take career breaks more often than their male counterparts. However, the impact of career breaks on future retirement income tends to be overlooked by women when taking such decisions. This results in  lower pension contributions— and ultimately, less income in retirement—especially for those already disadvantaged by the gender pay gap.

A second at-risk category when it comes to pensions are the self-employed. They often save less for occupational pensions as they face limited access to such schemes. They also tend to have irregular income, and, depending on the type of profession, also limited financial resources, which reduces their ability to save for the longer-term. This can leave them vulnerable in old age, without a sufficient pension income to maintain a decent standard of living. 

Individuals with limited financial literacy and digital skills, who may struggle to navigate the complex pension landscape and lack access to relevant digital technologies, are a third example of pension vulnerability. This can lead to poor decision-making and a lack of engagement with pension planning, resulting in inadequate retirement savings. 

Now, what can we do about these vulnerabilities? The promotion of flexible pension schemes, allowing for differences in career paths, including breaks and irregular income, could help. EIOPA is very supportive of auto-enrolment in occupational pension schemes: introducing an element of automaticity can help improve coverage. We are currently working on a toolkit to assist EU Member States in developing defined contributions (DC) pension schemes. Tax incentives, particularly for personal pensions products, can play a role in encouraging retirement savings. 

Adequate access to digital infrastructure should be a reality for all population groups. And we also need to provide them with the means to use it by promoting financial literacy and education, including on cyber issues. EIOPA’s work on consumer protection focuses on providing the right information to individuals to ensure transparency and empower them to make informed decisions, including through the use of digital tools. 

Financial literacy and access to information is crucial when it comes to young people, as it helps shape their views on pensions. If young people have limited understanding of pension planning, they may not appreciate the importance of saving for their retirement, eventually accumulating inadequate savings. 

Having grown up in the Netherlands, it was normal for me to hear my parents talking about the importance of saving for retirement from an early age: it is a good habit that will serve you well throughout your life.  However, this is not the case for many other fellow Europeans. I know this requires a cultural shift, and it may take time to embed it into mainstream culture, but it is important to start acting now. 

[EU initiatives in the pension landscape]

Considering the challenges, it is clear that the current pension systems are no longer adequate in today's world. We need a more comprehensive approach. But let’s start to work with what we have. We need to be pragmatic and keep it simple, to ensure it can be implemented and can be done soon. The European Commission recently published a Communication on the Savings and Investments Union (SIU). EIOPA sees this as a very welcome development. The SIU aims to provide financial opportunities for citizens by increasing their participation in capital markets and provide financing for Europe’s much needed investment. Increasing the flow of savings into retail investments can generate greater returns for individuals and have a positive impact on the overall economy. Pension funds (and insurers), as long-term investors, have a key role to play in the SIU.

One way to increase retail participation in capital markets is by mobilising retirement savings. This, in turn, requires the development of the occupational and personal pension sector across the EU, at a national level or across borders. We were very pleased to see that there are plans to review the existing EU legislative framework for occupational and personal pensions in Europe—the IORP II Directive and the PEPP Regulation—to make them more effective and improve pension coverage, with proposals expected by the end of this year. The timeline is ambitious, but work is already ongoing since a while—in the Commission, in EIOPA, in the national competent authorities, as well as by many stakeholders who shared presentations and reflection papers with us—so I am confident that with this, and a pragmatic and targeted approach, the Commission will be able to deliver good proposals by the end of 2025. EIOPA stands ready to provide further technical support to the policy debate. 

To improve pension coverage, we also need accessible, clear and trustworthy personal pension products that offer value for money, be it PEPP or other long-term saving products. And value for money! Value for money, by the way, is a key concept for all third pillar pensions, including insurance products, e.g., life insurance with investment component (but I leave this to another time as the focus today is on pensions). On PEPP specifically, we have recently highlighted the reasons for its very limited uptake and suggested changes to the framework, which we trust will feed into the current EU debate on the topic. While we already mentioned the essential role of auto-enrolment, this is a good moment to recall it: auto-enrolment is a crucial tool to support the development of supplementary pensions and we are happy that the SIU Communication also considers actions on this.

Let me go back to the importance of a three-pillar system. Developing it requires a holistic understanding of pension coverage across the three pillars. This, in turn, helps raising awareness among citizens and policy makers about the pension gap and the need for effective reforms. As part of the SIU initiatives, we also recommend to establish Pensions Tracking Systems (PTS) and Pensions Dashboards. PTS are important tools helping individuals gain a complete view of their future retirement income. Meanwhile, pension dashboards serve as valuable instruments for policymakers to assess pension coverage and identify gaps—though it is important to stress that these are not intended to draw any comparison across EU Member States. 

[A broader debate on competitiveness]

By fostering citizens’ investment in capital markets, the SIU also aims to boost competitiveness in the EU. And to be truly competitive, Europe needs to maintain and further develop its Single Market. The SIU recognises the importance of promoting retirement savings and providing individuals with greater access to pension products: simple, clear and innovative products should cater to the needs of individuals and deliver value for money. 

We also need to ensure adequate consumer protection across EU Member States. If you ask citizens to move their money from bank deposits, where they are guaranteed by deposit guarantee schemes, to pension funds (and insurance products), this is key. 

I am often asked what actions pension funds (and insurers) can take to become more competitive. I believe the question should be framed differently: how can the pension and insurance sector contribute to EU competitiveness and wider economic growth? And an important way to do is via innovation. What is clear is that Europe needs to fill its tech gap vis-à-vis the US. This was one of the main recommendations of the report by Mr Draghi. Europe should invest in technology, including artificial intelligence, and create new opportunities for growth and development, thereby also ensuring that the EU remains a competitive and attractive market for investors. 

Improving EU competitiveness also backs efforts in preserving Europe’s values and principles in the current international environment. Approximately 55% of IORPs' total investments are direct investments in Europe, excluding those made through funds. In today's complex geopolitical landscape, pension funds are increasingly being called upon to support EU competitiveness by investing in European assets—including tech, innovative and often riskier companies. Yet, they must balance this imperative with their fiduciary duty to adhere to the prudent person principle, which priorities the financial security and stability of their beneficiaries. This balancing act is for pension funds and their portfolio managers to do, not for politicians or supervisors. But why aren’t EU pension funds investing in EU companies as much as they do in US ones is matter of debate. Is it only about profits? How do you balance the need to generate higher returns with managing risks? What if pension funds could buy into retailers' interests by investing in their local communities? What long-term opportunities are there to invest? What can (EU) policy makers do to improve the situation? These are all questions I encourage you to discuss today. 

The EU pension sector has untapped potential, and it's time for us to tap into it. By creating more investment opportunities for investors within the EU, we can stimulate a virtuous cycle of growth. By channeling more savings into retail investments, we can generate higher returns for individuals while also providing a boost to the economy. This, in turn, will have a positive impact on EU’s economic growth and prosperity.
In particular, this holds true if the investments are sustainable. I welcome the Commission’s commitment to a steady path towards not only a Savings and Investment Union, but also to a more sustainable economy. Being conscious of ESG risks and acting accordingly is fully in line with the long term character of pensions and has the full support of EIOPA. In this context EIOPA closely follows development of the Omnibus Directive being conscious of the need for data for pension funds  to deliver on this important goal.

[Conclusion] 

Let me now conclude. The pension gap is a pressing issue that requires immediate attention and action. Europe should prioritise the development of second and third pillar pensions, raising awareness and promoting financial literacy and digital tools. EU initiatives that encourage savings and investment, including for retirement, and that are targeted at retail investors should have the consumer in mind. 

Currently, a momentum has been building: pensions took a centre stage in the EU debate around capital markets, including in the SIU, and this is a very welcome development. It is time to seize the opportunity and turn this agenda into action: let’s take a pragmatic approach and keep solutions simple to ensure rapid implementation. While most of the actions that can be taken in the pension space rely on Member States’ willingness to act, we need to work with our current means. By bringing together national, regional, and European stakeholders, we can create a thriving ecosystem that promotes cooperation, innovation, and investment nationally, regionally and Europewide, all ultimately benefiting the EU as a whole. 

As the Netherlands' history shows, building a pension culture can take decades before it gets where it is today. Yet, it started somewhere. And this conference, bringing together researchers, supervisors, industry and social partners, is a good way to start. Other EU countries can refer to Dutch best practices, and we can all benefit from that. By working together and sharing our experiences, we can create a more comprehensive and sustainable pension system that provides adequate income for all retirees. Thank you for your attention, and I wish you a productive discussion today.