Complementary pensions in the European Union

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In some countries of the European Union (EU) complementary pension schemes represent a major part of pension provision, whereas in others they play a relatively marginal role. An important factor is whether the social security scheme provides earnings‐related benefits and whether the ceiling on eligible earnings for social security purposes leaves room for there to be a demand for supplementary pensions arrangements, in particular for the higher paid. Pressures on the financing of social security, especially with the expected ageing of the population in the first 30 years of the next century, are encouraging many countries to develop complementary provision, and a number of new pension laws have been passed in recent years. However, important though the growth of complementary provision is, it should not be forgotten that investment markets are also likely to be affected by the ageing of the population. There are increasing pressures for greater investment freedom for complementary pension schemes, but little progress has been made by the EU in harmonisation of the regulatory regimes for complementary pensions. If mobility of labour between the countries of the EU is to become a reality, progress needs to be made soon on these pensions issues.