European Pension Becoming More Popular, EU Prepares Major Reform

Three years after the Pan-European Personal Pension Product (PEPP) became available to citizens of the European Union, an increasing number of Europeans, including Croats, are opening their PEPP accounts, and the European Commission is currently undergoing the most ambitious reform of this instrument since its introduction.

In four markets, Croatia, Poland, Slovakia, and the Czech Republic, the European pension is used by more than 16,500 clients with total assets of around 90 million euros.

Among them is Toni Milun, the first PEPP user in Croatia and an ambassador for financial literacy.

– When I entered the data into eCitizens and saw the pension projection, I realized that I could not rely solely on the state system. I changed my status to entrepreneur, and my pension suddenly dropped by 300 euros – that is a strong signal that you must build your financial security yourself – says Milun.

More than 230 companies in Croatia use it as a benefit for their employees: contributions of up to 804 euros per year per employee reduce the tax base, making this instrument directly competitive with the 3rd pension pillar.

What is the European Pension and How Does It Work

The European pension is a voluntary pension savings product that functions as a long-term investment in a globally diversified portfolio of stocks and bonds through exchange-traded funds (ETFs). The user regularly deposits funds that are automatically invested according to the selected risk profile, and over the years, the portfolio gradually adjusts to a more conservative approach to protect the accumulated value before retirement.

The key advantage of the European pension lies in its portability: unlike national pension products, PEPP follows the user throughout the European Union. Changing countries due to work, life circumstances, or personal reasons does not mean losing or freezing pension savings. The product is available to everyone regardless of employment status: employees, self-employed individuals, students, and the unemployed, and it is particularly applicable for mobile workers who change countries of work within the EU.

For employers, the European pension represents a modern and tax-efficient benefit: contributions of up to 804 euros per year per employee in Croatia reduce the tax base while simultaneously building long-term financial security for the employee outside the state system.

Reform That Changes the Rules

On November 20, 2025, the European Commission announced a package of legislative proposals to strengthen supplementary pension products as part of the strategy for a savings and investment union. The proposal to amend the PEPP regulation is currently undergoing the legislative process in the European Parliament and brings concrete changes.

The upper limit of fees of 1 percent, which has so far restricted providers, is being abolished, and the principle of value for money is being introduced; national supervisory bodies will compare the costs and effectiveness of individual PEPPs with comparable products on the market, and providers with poorer results will have to justify their fees. Employers will have the option of automatic enrollment of employees, and the tax treatment of PEPP is expected to be equalized with national pension products, which has been one of the key structural weaknesses until now.

– The proposed changes are heading in the right direction. The abolition of price limits, auto-enrollment, and tax equalization are measures that can concretely accelerate the acceptance of the European pension in Croatia – emphasizes Emilio Gučec, an analyst at Finaxa.

Awareness Remains a Key Challenge

Despite the growth, the biggest obstacle is not trust in the product – but visibility. The European Insurance and Occupational Pensions Authority (EIOPA) has determined that the main barrier to demand is precisely the unawareness of households about PEPP, along with generally low participation in supplementary pension schemes.

Croatia is not an exception in this regard; the 3rd pillar enjoys far greater public recognition, while the European pension remains almost unknown to the general public, despite objectively more favorable investment conditions.

Concrete data speaks for itself: the eCitizens tool (option ‘My Pension’) shows that a large portion of active insured individuals can expect a pension that does not exceed 40–50 percent of their last salary – significantly below the standards they set for themselves. This realization is increasingly becoming a trigger for opening additional pension accounts.

Trends are changing, however. More and more citizens are actively seeking information about long-term investing, and the entry of new providers into the European market confirms that this segment is no longer an experiment but a developing market. Demographic pressure on state pension systems is increasing, the share of public pension rights relative to GDP is high and is expected to grow further, while citizens keep a large portion of their savings in bank accounts instead of directing it towards long-term investments.

– To be honest, relying solely on the state pension system is no longer a sustainable strategy today. Demographic trends are clear – those who ignore this consciously take on the risk of a lower standard in retirement – concludes Gučec.