With the European population ageing, and birth rates remaining low, one of the EU's objectives is to develop effective ways to fund the retirement income of future generations. In its work to build a Capital Markets Union, the European Commission has underlined the importance of exploring ways to increase choices for retirement saving and build an EU market for personal pensions. As part of this work, the Commission launched a consultation on 27 July, to get input from both individuals and industry on how the market for personal pensions could be improved. The consultation will run until 31 October. In parallel, the Commission has launched a call for tender for a study on the feasibility of an EU personal pension.

Complementing public and employer-based pensions

Personal pensions are a more flexible, voluntary option for people hoping to increase their savings for retirement. Based on people's own personal savings, personal pensions complement the public pension schemes and employer-based collective pensions. They offer savers more choice about how to make their extra money work for them when they retire.

From the providers' perspective, a strong pensions market would maximise economies of scale, provide access to a larger market and increase diversification. A larger market would also support more investment by pension providers into the real economy.

Currently, the development of personal pension markets varies greatly from one Member State to another. Furthermore, it is frequently difficult for people to benefit from personal pension products from a Member State other than the one in which they live. Many people also remain sceptical about the advantages of having a personal pension, given that products are often expensive, and the net advantages are not always significant, once all the costs and fees are deducted, along with taxes and inflation.

An EU market for personal pensions

With the consultation, the Commission will be hoping to get feedback from both industry and individuals on what the impediments to the uptake of personal pensions are within the EU. It is also seeking information about what the key features of personal pension products are and on the potential benefits of a European framework for personal pensions.

The Commission is looking for the views of people in the EU on what they expect from personal pensions – for instance the type of performance or level of net return – and what would motivate them to save more for retirement. During their lifetime, individuals' preferences and needs for personal pension products might also change, and they may move between Member States for a number of different reasons (employment, retirement etc.). Following such changes in people's personal circumstances or preferences, the question of portability arises, within the same country or across borders. 

In particular, the Commission hopes to gather the views of industry and also consumer organisations on whether personal pensions could be designed in a simpler way and if costs could be kept lower, while maintaining sufficient transparency, safety and return. In this way, it hopes to support the development of personal pension products so that personal pensions deliver better results in retirement and become a more attractive investment option than they are today.

Read more on personal pensions or respond to the consultation