Pensions Report – Overview

BETTER FINANCE is committed to ensuring pension adequacy and transparency in pension returns for EU citizens. We recognize the ongoing challenges faced by pensioners in attaining a sustainable retirement income, including the impact of ‘financial repression’ on the purchasing power of EU pensioners and the growing strain on the provision and funding of EU pensions caused by the increasing proportion of retirees relative to the working-age population. Through our advocacy for transparency, fair treatment, and comprehensive pension reforms, we strive to ensure that pensioners can enjoy a secure and adequate retirement income.

To promote the transparency of private retirement savings plans in the various EU Member States, BETTER FINANCE draws up an annual analysis of their charges, taxation, returns and other key parameters to determine whether (or not) they are really helping to achieve pension adequacy for individual, citizen contributors. BETTER FINANCE annual report “Long-term and Pension Savings – The Real Return” stands out as the sole publication that calculates real net returns (see below) and covers most voluntary and complementary pension savings plans, across 17 EU countries.

Previous findings have revealed a concerning decline in pension plans’ purchasing power, posing challenges for future pensioners. The Pension Adequacy Report prepared by the Social Protection Committee (SPC) and the European Commission (DG EMPL) have shown that almost 18.5% of people aged 65 and above in the EU in 2019 were at risk of poverty or social exclusion, with some countries’ shares reaching as high as 50%. And the depth of poverty had increased in the previous 3 years, meaning that older people who are poor are falling further behind the rest of the population. These developments require a comprehensive response from EU regulatory agencies, particularly:

• Ending the sovereign debt and fixed income biases in pension vehicles
• Stopping penalizing taxation of long-term and pension products
• Urgently improving long-term and pension reporting
• Providing simple, intelligible, and comparable reporting on long-term and pension products across the EU
• Harmonizing and reinforcing rules to curb the conflicts of interests in the distribution of long-term and pension saving products
• Improving the European Supervisory Authorities (ESMA, EIOPA) reports on cost and performance of retail investment products
• Improving the governance of collective long-term and pension schemes
• Allowing savers to defer contributions to pension products without penalties
• Introducing auto-enrolment in occupational pensions
• Urgently establishing harmonized insurance guarantee schemes in the EU
• Providing clear intelligible information on sustainability of European long-term retirement savings and investments.

Understanding Investment Returns

Nominal Return:

Nominal return refers to the percentage increase or decrease in the value of an investment without accounting for inflation or expenses.

Net Return:

Net return takes into account the impact of expenses, such as management fees and transaction costs, on the investment’s performance. It reflects the actual return received by the investor after deducting these costs.

Real Net Return:

Real net return adjusts the net return for inflation. It considers the erosion of purchasing power caused by rising prices over time. By factoring in inflation, real net return provides a more accurate assessment of the investment’s actual growth in terms of purchasing power.

Resources

Annual Pension Report (2023)
Collection of Annual Pension Reports since 2013

Guide on Pension Awareness (2022)