The European Commission’s latest communication on supplementary pensions includes four critical and familiar areas: adequacy, coverage, gender equality, and consolidation. This is alongside a push for pension dashboards where they don’t exist to improve transparency.

The Commission warns that public pensions alone will not be sufficient, with Eurostat projecting that by 2070, those aged 65+ will make up 30.5% of the EU’s population, compared with 21.6% in 2024. This demographic shift will inevitably erode replacement rates.

The UK faces similar pressures. The 2024 Pension Adequacy Report cited in the EU paper shows replacement rates falling in 20 Member States, and the UK is no exception. The EU’s call to strengthen supplementary pensions echoes the UK’s own drive to improve DC outcomes through auto-enrolment, charge caps, and value-for-money assessments as well as transitioning to a more income-based system.

Coverage gaps are stark across Europe. Only 20% of Europeans participate in an occupational pension scheme, and just 18% own a personal pension product. Younger workers, women, part-time staff, and the self-employed are most at risk of missing out.

The UK has made progress here. Auto-enrolment has brought over 10 million workers into workplace pensions since 2012, dramatically improving coverage. But gaps remain: the self-employed, those earning below the £10,000 threshold, and workers with multiple small jobs often fall outside the system.

The EU document highlights a 24.5% gender pension gap, reflecting lower lifetime earnings, part-time work, and career breaks. Women are disproportionately affected by inadequate pensions, a trend visible in the UK too. Research consistently shows that women’s pension pots are smaller, with the average woman retiring on significantly less than her male counterpart.

Addressing this requires structural reform, not just encouraging women to save more, but tackling systemic issues such as childcare costs, flexible work, and employer contributions. The EU’s focus on gender equality in pensions aligns with UK initiatives like the Gender Pensions Gap Working Group.

Fragmentation is another European challenge. The Commission notes that 80% of EU occupational pension institutions have less than €1 billion in assets, and one-third have less than €25 million. Consolidation into larger master trusts or industry-wide funds is promoted as a way to achieve economies of scale, improve diversification, and lower fees.

The UK is already on this journey. The rise of master trusts, the consolidation of smaller DC schemes, and the Government’s emphasis on scale and value-for-money all reflect the same logic. Larger schemes can invest in illiquid assets, deliver better governance, and reduce costs, ultimately improving adequacy for members. Although whether the definition of large is £25bn or some other number, we can debate that in another blog.

The EC’s package is a reminder that pension adequacy, coverage, gender equality, dashboards, and consolidation are not isolated issues but interconnected. Adequacy depends on coverage; coverage must be inclusive to close gender gaps; dashboards improve transparency; and consolidation delivers efficiency. What is missing for me is the focus on income not just coverage. Other systems have income as a central pillar of any pension reform. We are getting there in the UK, and I understand it is down to the local context in a member state to develop appropriate policy, but this is a key design assumption needed in any supplementary pension reform.

For the UK, the message is clear: we are already on this reform journey. But we mustn’t let up in our efforts as an industry to make good our reform agenda.

Dan McLaughlin, UK Country Head – Festina Finance