Europe’s pension system is becoming increasingly unsustainable, Eiopa chair Petra Hielkema warned. She highlighted that women, self-employed workers and people with limited financial literacy are the most vulnerable, stressing the need for structural reforms to ensure long-term retirement security.

The European Union’s pension system is “no longer sustainable” in its current form and must undergo urgent reform to prevent millions of retirees from falling into poverty, Petra Hielkema, chairperson of the European Insurance and Occupational Pensions Authority (Eiopa), stated in a keynote speech at the Netspar Anniversary Conference on 1 April 2025. Hielkema emphasised that an ageing population and an increasing pension gap posed significant financial risks to the region, requiring immediate action to strengthen occupational and personal pension schemes.

Pension poverty

Hielkema revealed that 20.2% of senior citizens in Europe–approximately 18.5m individuals–were at risk of poverty. She mentioned that many Europeans still relied on statutory first-pillar pensions, but this system was becoming unsustainable due to fewer workers contributing towards a growing number of retirees. She asserted that strengthening second and third-pillar pensions, which include occupational and personal pension schemes, is necessary to ensure financial security in retirement.

Vulnerable groups

Hielkema highlighted that certain demographic groups faced disproportionate pension challenges. Women, for instance, had a 35% higher risk of poverty in retirement than men. She stated that this disparity resulted from career breaks and lower lifetime earnings, which reduced pension contributions. Self-employed workers were particularly vulnerable, as they often lacked access to occupational pension schemes and had irregular incomes, making long-term financial planning difficult.

Additionally, individuals with limited financial literacy or digital skills struggled to navigate pension systems, which affected their ability to save adequately for retirement. Hielkema stated that these gaps in knowledge and access have left many people financially unprepared for old age.

Policy recommendations

To address these issues, Hielkema recommended several key policy changes. She stated that auto-enrolment in occupational pension schemes could significantly improve pension coverage across EU member states. Flexible pension schemes, which accounted for career breaks and irregular income, could provide better long-term financial security for individuals with non-traditional employment patterns. Furthermore, she mentioned that tax incentives for personal pension savings could encourage individuals to prepare for retirement more effectively.

Improving financial literacy and ensuring access to digital tools are crucial for helping individuals make informed decisions about their pensions, she said. In addition, pension tracking systems (PTS) and pension dashboards could provide clearer insights into future retirement income, benefiting both individuals and policymakers.

EU initiatives

The European Commission recently published its savings and investments union (SIU) initiative, which aims to increase retail participation in capital markets and channel more savings into long-term investments. Hielkema welcomed this initiative, stating that it aligned with Eiopa’s objective of developing a more comprehensive pension framework. Eiopa is also supporting legislative reviews of the Institutions for Occupational Retirement Provision (IORP II) directive and the Pan-European Personal Pension Product (Pepp) regulation, she noted, with new proposals expected by the end of 2025.

Pension funds

Hielkema argued that pension funds and insurers had a crucial role to play in the EU’s economic competitiveness. European pension funds invested a significant portion of their assets outside the region, particularly in the US, raising concerns about missed investment opportunities within the EU. She mentioned that increasing pension fund investments in European assets, particularly in technology and innovation, could support long-term economic growth. However, pension funds need to balance these investment strategies with their fiduciary duty to ensure financial stability for their beneficiaries.

Pension reforms

The Eiopa chair concluded that policymakers must act swiftly to implement pension reforms, focussing on practical and achievable solutions. Momentum around pensions in the EU policy debate is providing an opportunity for meaningful change, she said, emphasising that collaboration between national governments, regulators and financial institutions would be essential in developing a more sustainable and inclusive pension system for the future.

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