Executive summary

It is sometimes frustrating to report, every year, on something as unfailingly disappointing as the real return of European supplementary pensions. It is a feeling akin to that of a preacher in the desert. Then, someday, you read something from the European Commission which makes you hopeful:

People need to be able to access safe, efficient, transparent and high-performing pension products in order to build up sufficient retirement savings.

(European Commission 2025e, 1)

In the early days of 2025, the European Commission issued a programmatic document—a Competitiveness Compass (European Commission 2025a)—to state how it intends to meet the challenge of the competitiveness of the European economy highlighted by a series of high-level reports published in 2024 Noyer et al. (2024). Considering the centrality of capital markets in European economies, but also their underdevelopment compared to other regions of the world, this policy activism was sure to touch financial services regulation: The Commission then adopted a communication on a Savings and Investments Union (SIU), listing a number of measures it intends to adopt or propose to European Parliament and the Council—the co-legislator of the European Union (EU)—including measures to “support further uptake of supplementary pension schemes” (European Commission 2025b, 7).

After a public consultation over the summer, to which BETTER FINANCE responded on behalf of individual investors and pension savers (BETTER FINANCE 2025), the Commission adopted a “Supplementary pensions package” on November 20th, 2025, displaying a welcome concern for improving the outcome to pension savers.¹ 2026 will then be a busy year on the pensions front for BETTER FINANCE, as the co-legislators will examine these new proposals.

Simple Table

In the meantime, we deliver today a new edition of our annual “Will You Afford To Retire?” report, where we examine the real net return of a occupational and personal supplementary pensions across the EU.

What we do in this report

In this report,

We analyse 47 categories of long-term and pension savings products across 16 Member States: 2 public funded (Pillar I-bis), 20 occupational (Pillar II), 24 personal voluntary (Pillar III) and one category that mixes occupational and personal schemes.
We adopt an investor-centric approach to measure the real net return of savings invested in long-term and pension savings products; the question we seek to answer is: “what is the current purchasing power of investments made up to 25 years ago in long-term investment and pension schemes?”
We calculate net returns, i.e, the financial performance of investment after deducting all costs and charges levied by pension product managers on contributions and, annually, on accumulated assets.
We then adjust these net returns for inflation, which erodes a little more of our savings with each year that passes, in order to determine the evolution of the purchasing power or real net return of long-term investments and pension savings.

Main findings

2024 was a rather good year overall for pension savers:

The median return before charges and inflation (nominal gross return) across the 36 categories of products we analyse reached 9.3% last year; the median return after charges but before inflation (nominal net return) across the 44 product categories for which we could collect 2024 performance data reached 8.1%.
Receding inflation across the EU—2.7% on average, down from 10.4% in 2022—means a receding gap between nominal net and real net return. The median real net return in 2024 stands at 4.8%.
Sweden’s AP7 Såfa, the default option for the country’s Pillar I-bis Premium pensions once again tops the performance ranking in our report this year, with a 27.3% nominal gross return, which translates into a 25.2% real net return. At the other end of the spectrum, Polish voluntary pension funds yield a modest 2.2% nominal net return, which becomes a 2.7% loss of purchasing power after we deduct costs and adjust for inflation.

Over the long-term, however, the situation of European supplementary pensions remain mostly unchanged by this second year in a row of good returns:

The median 10 year real net return of the 39 product categories for which we have a decade of performance data stands at a meagre 0.3%, with 5 categories of pension schemes returning a loss of purchasing power for their participants.
Although returns are much higher than the average interest banks serve on deposits, 15 of the 47 product categories we analyse fail to beat even a simple, conservative capital market benchmark made of 50% European equity and 50% European bonds.

We observe a continued performance gap between pension system pillars:

The median nominal net 10-year performance of Pillar II products in our data set stands at 3.5%, vs. 2.9% for Pillar III products. Real net returns of Pillar II and Pillar III over the same period amount to 0.4% and -0.4%, respectively.
This performance gap reflects a structural cost differential between the two pillars: Over the period 2000-2025, the median ongoing cost of Pillar III products have been, on average, 1.1% higher than the median ongoing cost of Pillar II products.
Despite the decreasing costs of Pillar III products, these remain significantly higher than those of occupational pensions, a fact that must be taken into account in the design of pension systems.

Policy recommendations

Review the packaged retail and insurance-based investment products (PRIIPs) Regulation to simplify the Key Information Document (KID) and make its contents clearer, more comparable and more reliable, to empower individual investors.
Integrate an ambitious approach to “value for money supervision” in the Retail Investment Strategy (RIS), which is being discussed by the EU co-legislator, including a comparison of performance to inflation and to a capital market benchmark. Without such an ambitious approach to ensure the cost-efficiency of PRIIPs in general, the removal of the fee cap on the Basic PEPP might be difficult to accept for individual investors.
Develop comprehensive PTSs across the EU that provide individuals with an easy access to their accumulated pension rights and assets, the cost and performance track record, risk-return profile and fundamental features of all their supplementary pension schemes.
Develop a common framework for the reporting of fundamental information on retail investment products, including pension savings vehicles, to feed reviewed KIDs, PTSs and pensions dashboard.
Adopt the European Commission’s proposals that seek to simplify the design of the Basic PEPP, which enable a reduction of its management cost as well as an easier understanding of its features for prospective investors.
Adopt a risk-based approach to the prudent person principle in the management of institutions for occupational retirement provision (IORPs) that enables pension funds to invest more of their members’ assets into equity markets, while ensuring that the appropriate safeguards are in place—in particular sufficient oversight and corrective powers for national competent authorities (NCAs)
Limit the scope of the recommendation to set up auto-enrolment schemes to occupational pensions only, and ensure that the necessary pre-conditions are in place before setting up such auto-enrolment. In particular, ensure that cost-efficient occupational pension schemes, with a strongly positive long-term financial performance, are available to be selected as eligible options for the auto-enrolment scheme, and that individual investors have access to collective redress mechanisms at national and European level.

Acronyms

EU: European Union
IORP: institution for occupational retirement provision
IORP II: Directive on Institutions for Occupational Retirement Provisions
KID: Key Information Document
NCA: national competent authority
PEPP: Pan-European Personal Pension
PRIIP: packaged retail or insurance-based investment product
PTS: pension tracking system
RIS: Retail Investment Strategy
SIU: Savings and Investments Union

The “Supplementary pension package” includes a legislative proposal to amend the Directive on Institutions for Occupational Retirement Provisions (IORP II) (European Commission 2025e), a legislative proposal to amend the Pan-European Personal Pension (PEPP) Regulation (European Commission 2025d) as well as a recommendation to the Member States on pension tracking systems (PTSs), pension dashboards and auto-enrolment (European Commission 2025c).↩︎