A “frank discussion” needs to be had with the pensions industry on the costs of products, according to European Commission DG FISMA, director, horizontal policies, Marcel Haag.

He made the comments during a panel session to launch European Retirement Week 2024 yesterday, 25 November, which was on exploring solutions to Europe’s pensions challenges.

The panellists stressed the need to increase coverage of second- and third-pillar pensions, as the first pillar feels the burden of ageing populations and low fertility rate.

Haag said: “We have to make sure that citizens get a good deal. We need an adequate framework to protect citizens when they decide to engage in capital markets…. That also includes the simplicity of products. Products have to be easy to understand, easy to grasp and that is a key requirement.

“Simplicity also includes costs: The cost of the products that are being offered is a key consideration and here I think we have to a frank discussion with the industry about the cost of the products that are being offered.”

Another panellist, European Commission DG EMPL, director general, Mario Nava, reiterated the need for simpler products in the third pillar. He argued that if there was more uptake in the third pillar then it would ease the burden on the first pillar.

“The products need to be much simpler than they are today… the products are far too complicated to be exciting for young people,” he said.

In addition, he said there needs to be more incentives offered today to entice people to save, rather than tax incentives upon retirement.

Speaking about the third pillar, European Insurance and Occupational Pensions Authority (EIOPA) chair, Petra Hielkema, told delegates there is “significant untapped potential” to complement first and second pillar pensions.

“As we have seen, it is not happening at a level that it should be. The broader context here gives us reason for optimism. Initiatives like the European Savings and Investment Union aim to mobilise bank deposits, increase retail investor participations and a key focus of this is to encourage long-term savings for retirement,” she said.

---