Better Finance has raised concerns about the long-term impact of pension fees on retirement savings in its response to the European Commission’s supplementary pension package.

Although it welcomed the proposed measures in the package, including reforms to IORPs, the Pan-European Personal Pension (PEPP), and new recommendations on pension-tracking systems, dashboards, and auto-enrolment (AE), it argued that “key gaps” remain.

In particular, the organisation highlighted the “continuing lack of awareness” among savers about the long-term impact of pension fees, warning that even small annual charges can significantly reduce retirement income.

For example, annual fees of around 2 per cent could cut final pension returns by nearly half over a working lifetime compared with low-cost alternatives, according to Better Finance.

As a result, it “broadly welcomes” stronger EU efforts to improve transparency, including clearer pension benefit statements and better disclosure of cumulative costs and long-term performance.

“People deserve to know how much of their retirement savings is being eaten away by charges,” said Better Finance senior research and policy officer, Sébastien Commain.

It also supported the proposed introduction of a Prudent Person Principle and an explicit duty of care for pension fund managers in the revised IORP framework.

This, it said, could give pension schemes more freedom to invest for long-term returns, rather than relying on “overly conservative strategies” that may fail to deliver adequate pensions.

However, Better Financed argued that greater flexibility must be matched with stronger accountability and meaningful oversight, including better supervision and clearer information for savers.

“Retirement systems cannot rely solely on ultra-safe, low-return investments if they are to deliver adequate long-term real returns for savers,” Better Finance managing director, Aleksandra Mączyńska, said.

It also raised concerns about pension participants having too little influence over how their money is managed and described European pension systems as “overly paternalistic”.

Therefore, Better Finance called for pension savers to have a stronger voice in governance and greater ability to influence investment choices, including whether their savings support European industry, the green transition, or defence-related projects.

The organisation also called for stronger legal protection for savers, including easier access to collective redress when pension providers fail to act in their best interests.

On the PEPP, it welcomed the simplification of the product but questioned whether the proposed value-for-money rules would be strong enough to ensure that the PEPP remains a genuinely low-cost and competitive pension option across the EU.

It expressed disappointment with the European Commission’s recommendations on pension tracking systems and dashboards, as it warned they may “fall short of delivering truly comprehensive and user-friendly tools to help citizens plan for retirement”.

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