Pension resilience

Ensuring Europeans have adequate retirement provision





Effective, affordable and sustainable pension systems are a mainstay of developed economies. But Europe is ageing. Driven by medical advances and other health-related factors, as well as by falling birth rates, the age profile of Europe — and the world — is changing dramatically.

Ensuring European citizens have an adequate income in retirement was already a huge challenge for governments, even before the COVID-19 pandemic landed its dual hit on public finances and the economy. The worsening dependency ratios underscore the increasing fiscal pressures that many countries face in the coming decades.

2013 4 EU citizens of working age to 1 retiree

2019 Just over 3 EU citizens of working age to 1 retiree

2100 Fewer than 2 EU citizens of working age to 1 retiree

In the EU, there will be fewer than two people of working age (15-64) for each person aged 65+ by 2100. This dependency ratio (57%) is almost double that of 2019 (31%).

(Eurostat, July 2020)

Many European states had already started to reform their national, traditionally pay-as-you-go, pension systems, but that alone is not enough, and it often means that people will get a lower income in retirement. Citizens therefore need to be encouraged to contribute more, and for longer periods, to have an adequate income in retirement.


The challenge of having an adequate income in retirement is particularly acute for certain groups and they have primarily been the ones whose ability to save has been most hit by the effects of the pandemic. For instance, women on average receive pension benefits that are 37% lower than men. And those who are self-employed, have temporary jobs or work part-time often have limited access to social protection and occupational pension schemes.

All these factors result in an increasing gap between the amount people need for a comfortable retirement and the amount at their disposal.

“Women on average receive pension benefits that are 37% lower than men.”


Multi-pillar pension systems, which complement state provision with occupational and personal pensions, are widely seen as the most sustainable and effective systems. And life insurers are major providers of those occupational and personal pensions.

Traditional insurance pension products play a key role in building up a retirement income: they can provide a minimum return guarantee, so offer peace of mind and incentivise risk-averse individuals to save for their retirement. Insurers also use innovative risk-sharing mechanisms, such as collective pooling and smoothing, based on the principles of long-term investment and risk diversification, to ensure a good income in retirement.

What also marks out insurers is their ability to provide services that increase the scope of protection:

  • Protection for dependants/beneficiaries (mortality risk)
  • Protection if savers are unable to pay contributions due to invalidity/disability (morbidity risk)
  • Protection if savers live longer than expected, to avoid them outliving their savings (longevity risk)

Given the protection insurers offer in difficult moments, several countries have made some of these features mandatory.

Insurers also provide different decumulation options, so beyond lifetime annuities, which protect against longevity risk, lump sums and other innovative solutions are also available for people with different preferences.

Looking ahead, the insurance industry will need to develop flexible and innovative retirement savings products that suit the diverging needs and changing requirements of different sectors of the population. They will also increasingly be looking at the types of pension products they can offer in an environment in which low interest rates are expected to persist.

What Insurance Europe is doing


Insurance Europe will soon carry out its second European Pension Survey, looking at how Europeans are preparing financially for retirement and what they expect from their pension savings. The Survey will be carried out every two years to build up a clear picture of changes in citizens' preparations for retirement.

The first Survey, of 10 000 people in 10 countries in August 2019, showed:

A staggering 43% were not saving for retirement, which included more women than men, more younger people and more people with lower educational qualifications. And, worryingly, 42% of those not saving felt they could not afford to.

Contributing to the debate

As well as contributing to EU-level discussions and actions on pension-related issues, such as the new pan-European personal pension product or PEPP (see box below), Insurance Europe, together with other European financial services federations, plans to host the first European Retirement Week.

European Retirement Week, which will run from 29 November to 3 December 2021, will seek to promote the issue of pensions and retirement savings on policy agendas by facilitating dialogue between policymakers and others involved in the field of retirement saving on actions that could be taken at both European and national level to encourage a greater number of citizens to save for retirement. It will also serve to boost people's awareness of the need to save for retirement by contributing to occupational pension schemes and personal pension products.

“Insurance Europe's first European Pension Survey showed that a staggering 43% were not saving for retirement.”


Insurance Europe's Pension Survey confirmed the diversity of retirement saving across Europe. Pensions come in different forms and are influenced by a broad range of factors. As there is no single approach that solves all the challenges, a combined effort by national and EU policymakers is needed for all Europeans to enjoy a financially secure retirement.

At EU level

The European Commission, notably through its Capital Markets Union (CMU) project, recognises the role of personal pensions in closing the savings gap, but further action is needed.

Adjust Solvency II

The Solvency II regulatory framework that applies to insurers was designed to ensure a high level of protection for consumers, including for their long-term savings and pension products. However, it overstates the long-term liabilities and exaggerates balance-sheet volatility and the risks faced by insurers when they invest, resulting in capital requirements that are too high. This unnecessarily and adversely affects how insurers can invest, as well as the cost and availability of long-term products.

The review of Solvency II that is currently underway should address the mismatch between the current regulatory approach and insurers' real exposure to risk and volatility. The right improvements to Solvency II will help insurers play an even bigger role in the provision of safe and well-performing long-term savings products, including PEPPs.

Raise awareness

European citizens must be made more aware of the need to take responsibility for planning and managing their financial future. EU-wide initiatives are needed to raise levels of financial literacy and inform citizens of different retirement saving options.

At national level

To increase the effectiveness of multi-pillar systems, member states should encourage participation in complementary occupational and personal pension schemes.

Introduce appropriate tax incentives

Tax treatment can incentivise citizens to save for retirement. And tax incentives — such as credits, reliefs or subsidies — can be targeted at different sections of the population. It is important that tax incentives remain stable to foster trust in private pension savings. Conversely, taxes that would reduce people's saving for retirement should be avoided. A financial transaction tax (FTT) would be a case in point: should it ever be introduced, Insurance Europe believes that all pension products should be exempted from its scope.

Provide information on pension entitlements

Information on expected retirement income is currently not widely available in many countries. States should provide citizens with appropriate information on their expected benefits, which would encourage people to save. Digital solutions, such as tracking services and dashboards, can encourage people to think about their retirement savings.

Boost uptake of supplementary pensions

Member states should use the most appropriate enrolment systems for their national market to stimulate the uptake of supplementary pensions. For instance, workplace auto-enrolment mechanisms are proving effective in an increasing number of states, while still allowing individuals to opt out. Such mechanisms have the added benefit of helping to achieve the critical mass necessary for providers to benefit from economies of scale.