Brussels,

Pensions

Pensions aim to maintain the living standards of older people and protect them from poverty. They are the main source of income for about one quarter of the EU population.

The European Pillar of Social Rights stresses in its Principle 15:

• the right of workers and the self-employed to a pension commensurate with contributions and ensuring an adequate income
• the right to equal opportunities to acquire pension rights for both women and men
• the right to resources that ensure living in dignity in old age

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The situation in the EU

The share of older people in Europe's population is increasing along with life expectancy. European pension systems will need to adapt to remain able to provide future generations of retirees with an adequate income.
Pensioners in most EU countries are more likely to be poor than those who work and inequality among pensioners persists:
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• There are significant country differences in poverty risk and pension income.
• Older women face a higher risk of poverty or social exclusion than older men do, and women's pensions are almost a third lower on average.
• People in non-standard or self-employment often face less favourable conditions for accessing and accruing pension rights than those in open-ended, full-time job contracts.

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Policy responses
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While pension policy and legislation is decided and implemented predominantly at national level, EU legislation protects the pension rights of people who move between EU countries. Social security coordination ensures cross-border protection of state pensions, while the right of mobile workers to supplementary pensions is protected by special rules.

Furthermore, the EU supports national efforts to ensure a high level of social protection, including pension adequacy, by facilitating mutual learning and exchange of best practices.

This support includes:
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• The triennial Pension Adequacy Report of the Commission and the Social Protection Committee provides an overview of pension policies, focusing on the adequacy of old-age incomes today and in the future. Volume II provides a description of the pension system and pension adequacy in each of the 27 Member States. The key conclusions of the 2021 report were endorsed by the EU Council on 14 June 2021 and discussed with policy mmakers, social partners, stakeholders and experts at the international conference Pension adequacy in an ageing society.

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• The High-level group of experts on supplementary pensions analysed the potential contribution of supplementary (occupational and personal) pensions to adequate old-age incomes and adopted its final report in December 2019.
• The Commission provides financial support to projects that aim to boost policy-making at national level or to help citizens access information on their pension rights, such as the European Tracking Service for pensions.
• Addressing broad population ageing challenges, the Commission also fosters Active Ageing, via its guiding principles for active ageing , the Active Ageing Index, a policy advocacy and monitoring tool, the European Innovation Partnership for Active and Health Ageing, which fosters innovation, and provides funding. It also support the work of partner organisations, for instance the social partner autonomous agreement, and the covenant on demographic change.
• In 2022 the Social Protection Committee approved a benchmarking framework on pension adequacy to support the implementation of principle 15 of the European Pillar of Social Rights.

The EU also provides country analysis and guidance, including on pension policies, within the European Semester economic coordination cycle. Support to national pension reform measures is available from the Recovery and Resilience Facility and the Technical Support Instrument.

Supplementary Pensions

Supplementary pensions are a crucial income source for many Europeans, particularly mobile workers who move between EU Member States. Since social security coordination doesn't cover most supplementary pension schemes, the EU has established rules to protect the pension rights of these workers. These rules focus on occupational pensions linked to employment.

Importance of Protecting Supplementary Pension Rights

Protection is necessary because certain pension schemes have conditions that can cause workers to lose their pension rights if they move to another Member State before meeting specific criteria, such as a minimum employment period. Even if pension rights are vested, their value may decrease over time due to inflation if not properly preserved.

Equal Treatment and Cross-Border Payments

Directive 98/49/EC was the first step in addressing barriers to free movement related to supplementary pensions. Key provisions include:

• Preserving vested pension rights for those who move to another Member State, ensuring they are treated the same as those who remain.
• Allowing beneficiaries to receive their pension benefits in any Member State.

Acquisition and Preservation of Pension Rights

Directive 2014/50/EU, adopted on 16 April 2014, established minimum standards to protect the pension rights of mobile workers. Member States were required to implement these standards by 21 May 2018.

The directive includes:

• Acquisition: Pension rights must be vested after no more than three years of employment. Employee contributions are always returned if rights aren't vested, and the minimum vesting age is set at 21.
• Preservation: Workers leaving a pension scheme retain their vested rights unless they choose a capital payment. The value of these rights must be fairly preserved compared to current workers, with adjustments based on inflation, salary levels, or investment returns.
• Information: Workers and former workers (and their survivors) have the right to information on how mobility affects their pension rights and the treatment of these rights.

The directive mainly covers workers moving between Member States, though Member States can extend these protections to internal job changes. It does not address the transferability of supplementary pensions across different schemes.

The Commission adopted a Report on the application of Directive 2014/50/EU on 6 July 2020.