European Commission Proposes Measures to Strengthen Supplementary Pensions and Simplify Sustainable Finance Rules

Context and Objectives

On 20 November 2025, the European Commission introduced a comprehensive proposal aimed at enhancing supplementary pension schemes and simplifying the regulatory framework for sustainable financial products in the EU. These initiatives are part of the broader savings and investments union strategy, designed to promote household wealth accumulation and stimulate EU economic growth and competitiveness.

Enhancing Supplementary Pensions

Rationale

Public pensions alone may be insufficient to maintain adequate living standards post-retirement. To address this, the Commission seeks to boost access to stronger and more effective supplementary pensions, which complement public pension systems without replacing them.

Key Measures Proposed

• Pension Tracking Systems: EU countries are encouraged to develop or improve comprehensive systems that provide individuals with a clear overview of all their pension rights and expected benefits across different schemes.
• IORP II Directive Modernization: Strengthening and updating the Institutions for Occupational Retirement Provision framework to ensure robust management and supervision, thereby enabling better returns on pension savings.
• Pan-European Personal Pension Product (PEPP): Making PEPP more attractive and cost-effective by removing existing regulatory requirements and features that have limited product uptake.
• Investment Principles Clarified: Refining the ‘prudent person’ principle for IORPs and PEPP providers to foster increased investments in equities, both private and listed, promoting portfolio growth.

Simplifying Rules on Sustainable Financial Products

Background

The Commission also addressed the EU’s rules on sustainable finance disclosures, which aim to promote financial products with environmental and social objectives.

Proposed Amendments

• Disclosure Simplification: Only the largest financial market participants will need to disclose environmental and social impacts. Product-level disclosures will be streamlined to focus on data that is available, comparable, and meaningful.
• Categorisation System for ESG Claims: Introducing a clear system to classify financial products making environmental, social, and governance (ESG) claims into three categories:
  • Sustainable: Products that actively contribute to sustainability goals.
  • Transition: Investments in companies or projects on credible paths toward sustainability.
  • Environmental, Social, Governance Basics: Products using ESG approaches that do not fit into the first two categories.
• Combatting Greenwashing: ESG terminology in product names and marketing will be reserved for categorized products only, boosting transparency and investor trust.

Next Steps

The proposals will undergo negotiations and approval by the European Parliament and the Council before becoming law.

For further details:

• Commission press release on supplementary pensions
• Q&A on supplementary pensions package
• Press release on sustainable finance transparency
• Q&A on Sustainable Finance Disclosure Regulation

This initiative marks a significant advancement in securing better retirement incomes for European citizens while fostering trust and efficiency in sustainable investment markets.

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