Europe created PEPP. So why can't most Europeans access it?

The European Union has a pension product, the Pan-European Personal Pension Product, or PEPP. It is, on paper, available across all 27 Member States. In practice, it is available in only five member states (Croatia, Cyprus, the Czech Republic, Poland and Slovakia), offered by only two providers.

Two years after the PEPP Regulation entered into force, most Europeans have never heard of it, and those who have cannot access it. And the financial industry, which was supposed to bring it to market, has shown little interest in doing so.

This is not a branding problem or a communication gap. It is a market failure that is costing European savers real money.

What is PEPP and why does it matter?

PEPP is the EU’s attempt to give every European worker a simple, affordable way to save for retirement. Unlike existing national pension products, PEPP is designed to travel with you. As you make use of the single market by moving country, changing jobs, or even restarting your career, with PEPP, your pension is intended to follow.

But what makes PEPP so different from other pension products in the market? A fee cap of no more than 1% of accumulated capital per year. That ceiling exists for a reason.

According to EIOPA data, existing personal pension products across the EU charge average fees of 1.5% to 2.1% per year. After those charges, many deliver negative real returns. In 2022, unit-linked personal pension products posted average nominal net returns of -11.5%. Capital-guaranteed products returned -0.2% on average.

Similar bleak results are noted in BETTER FINANCE’s annual, pan-European pension study “Will You Afford to Retire?”. The report tracks pension savings across 16 EU Member States, and its 2025 edition noted a 0.3% median net return over a 10-year period. Over 25 years, the cumulative ongoing costs of the median personal pension product consumed 43.3% of assets. Meanwhile, 32 out of 47 analysed product categories failed to beat a simple benchmark of European equity and bonds.

PEPP was designed to do better. The question is whether it will ever get the chance.

If it’s a perfect solution, why can't savers access it?

On the supply side, two years after the PEPP Regulation entered into force, the financial industry refuses to offer it. Its reasoning is that the 1% fee cap makes it commercially unviable.

EIOPA does not accept that argument, and neither does BETTER FINANCE. Providers of comparable products in Australia, the United States, and the United Kingdom operate at similar or lower cost levels. So, if they can make it work, why can’t European providers?

Providers currently profit from a market crowded with expensive, underperforming pension products. Introducing PEPP means competing against their own offerings. It means accepting lower margins. It means, in industry language, the risk of product cannibalisation.

The numbers illustrate the stakes. BETTER FINANCE calculations based on Italian individual pension plan data show that, had a 1% fee cap applied to all such contracts since 2008, total costs paid by savers would have been at least 49.7% lower. This percentage represents billions of euros that currently flow to providers rather than to savers’ retirement accounts.

On the demand side, most Europeans have never heard of PEPP, and that too is no accident. Awareness of pension products comes almost entirely from distributors. If providers are reluctant to offer PEPP, they will not advertise it either. So, rather than being a supply problem, PEPP faces a system designed to keep it out of sight.

Unless policy mandates change, there is little commercial incentive to do so.

What needs to change?

The obstacles to PEPP’s success are real, but they are not insurmountable. Five reforms would go a significant way towards making PEPP the product it was designed to be.

Drop the “mandatory advice” requirement for sales of PEPP

The current requirement to provide advice before every PEPP sale treats the product like a complex financial instrument, which it needs not be. The Basic PEPP should be designed to be simple, transparent, and standardised, as the Commission suggests in its latest legislative proposal on the PEPP. Removing this requirement would allow the Basic PEPP to be distributed digitally, reaching younger savers through the same channels they already use for ETF savings plans and neobrokers.

Allow PEPPs without second sub-account

PEPP currently requires providers to open sub-accounts in different Member States. For most EU citizens who never move abroad, this cross-border feature is irrelevant. Yet it adds significant operational complexity for providers, effectively making PEPP a niche product built around the needs of a small minority of mobile workers.

Create an occupational version of the PEPP

An occupational PEPP, one that employers can set up and contribute to on behalf of their staff, would dramatically expand the product’s reach. It could, in the future, serve as the default option for an EU-wide auto-enrolment framework, with a clear opt-out right. Evidence from the UK shows that auto-enrolment significantly boosts pension participation, particularly among lower-wage and early-career workers.

Enable transfers from existing pension products

Only 6 out of 21 Member States that had implemented PEPP legislation by the end of 2023 allowed transfers from national pension products into PEPP. Enabling such transfers would give millions of savers currently locked into expensive, underperforming products the right to make a different choice, one that could secure a better income in their retirement.

Grant PEPP equal tax treatment

In most Member States, PEPP does not benefit from the same tax incentives as national pension products. This gives biased advisers an easy argument to steer clients away from it. Member States must commit to granting PEPP the most favourable tax treatment available to any comparable personal pension product in their jurisdiction. Without this, the playing field remains tilted against the very product that could most benefit savers.

Finally, reform the market, and mean it

Even with all the reforms outlined above, PEPP will struggle if the broader retail investment market remains unreformed. As long as biased distribution practices persist, low-cost products will continue to be crowded out. The EU’s Retail Investment Strategy was an opportunity to address this. It was largely squandered.

Europe created PEPP and its regulatory framework. The evidence for why it matters is overwhelming. The only missing piece of the puzzle is political will.

For millions of Europeans saving for retirement, every year without a low-cost alternative is a year of unnecessary fees and lost returns. The EU set out to change that. Failing to deliver PEPP means leaving savers in exactly the expensive, underperforming market PEPP was designed to challenge.

EU policymakers face a choice: either give PEPP a genuine second chance by committing to the reforms it needs, or accept that the market will continue to work against the very people it is supposed to serve.