Pension gaps should be addressed now to avoid a future pension "crisis” that could be much harder to manage than today’s challenges, European Insurance and Occupational Pensions Authority (EIOPA) chair, Petra Hielkema, has said.

Speaking at the Croatian Financial Services Supervisory Agency (Hanfa) Conference, Hielkema noted that, currently, over 18.5 million seniors across the EU face the risk of poverty or social exclusion.

Furthermore, due to past inequalities, women’s pensions are nearly 30 per cent lower than those of men, placing them at a 35 per cent higher risk of poverty.

She also pointed out that Europeans are aging and living longer, meaning that the old-age dependency ratio will rise drastically over the coming years.

Hielkema highlighted these statistics as a “serious wake-up call”, warning that "if we fail to address pension gaps now, we face a future pension crisis that will be much harder to manage than today’s challenges".

And whilst addressing a Croatian audience, she emphassied that this is an issue that impacts every EU member state.

“When we consider that we live on an ageing continent with the majority of citizens relying on state pensions for their future, it becomes clear that this gap is not just a national concern but a European one—one that carries a potential systemic risk,” she stated.

“This is precisely why addressing pension gaps has been a core focus for EIOPA in recent years. With the new commission now forming, we see a timely opportunity to pick up momentum and bring new wind into this important work.”

Hielkema argued that the industry must look at pensions in a holistic way, suggesting that getting the pension gap under control means finding a balanced approach to strengthening all three pillars.

In particular, she stressed the need for to increase the uptake of Pillar II and III schemes so that citizens have a diversified and stronger income at retirement, emphasising the need for greater awareness as part of this.

“That is, we must convey the urgency of saving for the long term, especially to younger generations. Many people do not prioritize retirement savings early in their careers, and by the time they recognize its importance, there’s often too little time left to build a sufficient pension,” she stated.

“But even more fundamentally, people need clarity about their future entitlements.

“EIOPA has long advocated for pension tracking systems. With tools that show real entitlements, citizens can make more informed spending and saving choices, and it could positively influence their financial behaviour.”

Hielkema also argued that it is not only European citizens that need a clear overview, stating that policymakers too need a clearer picture of the full, multi-pillar pension systems at the national level.

“While some member states already have these tools, they are needed more widely to better inform decisions on additional measures to reduce pension gaps,” she continued.

“EIOPA has long advocated for the development of both pension tracking systems and comprehensive dashboards for each member state to display all existing pension schemes across all three pillars.

"We expect renewed attention to this topic once the new commission is in place and will continue to convey the message on the importance of these tools in first capturing and adequately addressing protection gaps.”

However, she argued that while pension tracking systems are one solution, there is room to do more.

“With the shift from defined benefit to defined contribution schemes, citizens are increasingly responsible for managing the risks and costs of retirement planning and investment performance,” she stated

“That’s why our advice to the commission was for IORPs to perform long-term risk assessments focused on members and beneficiaries in defined contribution (DC) schemes. This approach will help address their specific needs more effectively.”

However, Hielkema argued that the shift from defined benefit to defined contribution schemes requires not just a focus on the design of the accumulation phase but also on the payout phase.

Given this, she confirmed that, next year, EIOPA will start working on a blueprint for the design of DC pensions, including the payout phase, drawing on existing best practices to develop a blueprint to assist member states in developing their own DC pension systems.

A shift in mindset is also needed, according to Hielkema, who noted that the prevalent trends in Europe is to save, but not to invest.

“The savings are there. The potential for increased direct retail participation in capital markets is there. What we are lacking is an investment culture,” she stated.

“Encouraging a shift in behaviour towards private pension products requires better incentives. Consumers must see the value in investing differently.

“And a precondition for this is consumer trust, which we must continue to build.

“And this means ensuring that products offer value for money, that there is independent advice in the interest of the consumer, and that consumers are protected, particularly when purchasing across borders.”

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