Public pensions alone may not always be sufficient to maintain adequate living standards. To help people secure a more reasonable income in retirement, the European Commission has put forward a set of measures to improve access to stronger and more effective supplementary pensions. These would complement rather than replace public pensions in EU countries.
The proposals aim to strengthen both the demand for and the supply of supplementary pensions, while all the time respecting each EU country’s powers to organise their own pension systems. The measures form part of the Commission’s savings and investments union strategy, which seeks to create more opportunities for households to build their wealth through capital markets, while boosting EU economic growth and competitiveness.
Among other initiatives, the proposed measures:
- recommend EU countries to further develop comprehensive pension tracking systems to provide citizens with a clear overview of their pension rights and expected benefits across all schemes
- strengthen and modernise the Institutions for Occupational Retirement Provision (IORP) II Directive to ensure sound management and supervision of these institutions so that citizens get stronger returns on their savings
- make the Pan-European Personal Pension Product (PEPP) more attractive, accessible and cost-effective by removing requirements and design features that have hampered their uptake
- clarify the ‘prudent person’ principle which governs how IORPs and PEPP providers should invest and manage their asset portfolios to help increase investment into equity – both private and listed.
The Commission has also proposed changes to the EU’s current rules on sustainable financial disclosure, which cover financial products that integrate environmental or social aims.
The changes are designed to make the rules simpler, more efficient, and better aligned with market realities. As a result, investors will be able to make better informed choices and providers of financial products will be able to cut costs thanks to fewer disclosure requirements.
The amendments would:
- simplify disclosures with only the largest financial market participants needing to disclose their impacts on the environment and society. Product-level disclosures would also be significantly reduced, limiting them to data that is available, comparable, and meaningful;
- establish a clear categorisation system for financial products making environmental, social and governance (ESG) claims. Broadly, the categories will be:
- ‘Sustainable’: products contributing to sustainability goals
- ‘Transition’: products channelling investments towards companies and/or projects that are not yet sustainable, but that are on a credible transition path
- ‘Environmental, social, governance basics’: other products that integrate environmental, social and governance investment approaches but that do not fit in the first two categories
ESG claims in names and in marketing documentation will be reserved for categorised products – this is a key step to fight greenwashing and boost trust in sustainable investments.
The proposals on sustainable financial disclosure, to amend the IORP II Directive and PEPP Regulation will now have to be negotiated and agreed by the European Parliament and the Council.
For more information
Press release: Commission proposes to boost supplementary pensions to help ensure adequate retirement income
Questions and answers on the supplementary pensions package
Press release: Commission simplifies transparency rules for sustainable financial products
Questions and answers on the Sustainable Finance Disclosure Regulation
