The majority (59 per cent) of European pensions industry experts believe government incentives or reforms would improve savings and pension sustainability for future generations the most.

At a session titled, Simpler savings and sustainable pensions, at the European Insurance and Occupational Pensions Authority’s (EIOPA) Annual Conference in Frankfurt last week, delegates were asked what would most improve savings and pension sustainability for future generations.

More than a quarter (28 per cent) of delegates said that better financial education and literacy would most improve savings and pension sustainability for future generations. In contrast, 12 per cent said digital tools and automation to facilitate easier savings. Only 1 per cent said an increased focus on environmental, social and governance (ESG) requirements.

Speaking during the panel session, PensionsEurope secretary general, Matti Leppälä, noted that in Europe progress has been made in pensions, particularly in social security pensions during the last 25 years.

However, he acknowledged that the level of pension people receive in some European countries has “drastically dropped” and the gap needed to be filled for European savers to have adequate and sustainable retirement income.

Leppälä emphasised the growing role of supplementary pensions, such as occupational, workplace, and private pensions, which he argued had not been sufficiently prioritised.

“There hasn’t been that much emphasis on that and that stems from the fact that occupational pensions are part of the wage package that employers offer,” he added.

Leppälä said that Europe has the strongest occupational pensions and well-developed systems, offering the Netherlands as an example of having a “very good” collective pension.

He pointed to occupational pensions as an integral part of employee wage packages, though their availability varies across countries. For instance, while countries like the Netherlands boast strong occupational pension systems, many others lack such structures.

He proposed measures such as government-led auto-enrolment systems, citing the UK’s implementation as an example.

He also highlighted the “crucial” role employers play in supporting long-term savings products, stating that successful pension systems cannot function without employer participation.

Leppälä also stressed the need for well-designed default options to simplify decision-making for individuals.

“What is important is to design a good enough, maybe not perfect, but good enough default option. As the whole system in Europe is moving towards defined contribution (DC) then the decumulation phase issues become much more important for the pensioners as they have much more risks and much more to decide,” he said.
He suggested that issues such as how much to save, avoiding outliving one’s savings, or over-saving pose significant challenges.

Given that many countries already use DC pensions and people are coming to the point where they retire on this type of pension, Leppälä argued this was a very “crucial” issue that should be taken seriously, needing “good solutions sooner than later”.

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