“The European Commission today adopted a set of measures to help citizens ensure adequate retirement income by improving access to more effective and higher quality supplementary pensions. The proposed actions aim to complement — not replace — public pensions, which form the backbone of pension systems in all Member States,” announced the executive body.
The focus is on “stronger and more efficient supplementary pension systems,” which “can also contribute to Europe’s economic growth and competitiveness by mobilizing long-term savings for productive investment,” according to the institution.
Brussels argues that due to “demographic changes and labor market dynamics,” pension systems require adaptations.
The Portuguese system, which is largely based on the public pension from Social Security, faces challenges similar to other EU countries, such as the rapid aging of the population, potentially lower future pensions, low adherence to supplementary plans, and irregular contributory careers.
In addressing these issues, Brussels is urging Portugal and other European countries to implement automatic enrollment in supplementary pension plans, with the option for free exit. This would involve companies offering such plans and workers contributing small percentages of their salaries to these savings.
Additionally, the executive wants each EU country to have a system that allows every citizen to view all pension rights in one place. For Portugal, this would mean that Social Security would have a tracking system for public pensions, as well as professional funds, private funds, and the Retirement Savings Plan (PPR).
This would allow individuals who worked in other EU countries to see everything centralized, including future projections.
The institution also wants national pension panels, enabling governments to monitor the system’s sustainability, pension adequacy, and the adherence rate to supplementary plans.
Today, a reform of professional pension funds is also proposed, noting that in Portugal, they exist in limited and small scale.
The proposed changes aim for greater consolidation, diversified investments, and reduced bureaucracy to encourage companies, especially large employers, to create more competitive supplementary plans.
At a time when the Pan-European Personal Pension is sparsely utilized in the EU, the European Commission also wants to make this package simpler and cheaper, so it is an alternative to traditional PPRs if it were, for example, more beneficial in fiscal terms.
Additionally today, the EU is clarifying the prudent investor principle to facilitate pension funds investing more in equities, historically more profitable.
The proposals would allow younger workers to automatically join supplementary savings systems and enable self-employed workers to access simpler and cheaper products.
People who have worked in multiple countries would see their rights clarified and integrated, and there would be greater equality between men and women in pensions, when the average gap still hovers around 24.5% in the EU.
It is now up to the Parliament and the Council to negotiate and approve these proposals.
