Bolstering the still underdeveloped second and third pillars of retirement provision is unavoidable. Expanding occupational and private pensions via pension funds and insurers would not only help shrink – or even close – the private savings gap, but also ease the strain on public budgets by stabilising or even reducing transfers to the state pension system. And not least, it would mobilise additional capital for investment through contribution funds channelled into capital markets.

The new CDU/CSU/SPD coalition government, however, appears to have no ambition to revive these plans. The conservatives are pushing for an „early start pension“ for children under 18, with the state contributing 10 euros per child per month. But key questions remain unresolved: Should parents be allowed to make top-up contributions? If so, should there be a cap? Would further subsidies be available? And how should the scheme be treated for tax purposes?

Uncertainty also surrounds what happens when children reach adulthood. According to the coalition agreement, the scheme is then meant to transition into regular retirement provision, but without further detail. Its practical feasibility is also in doubt: the draft federal budget allocates only around 90 million euros to the plan, barely enough to cover a single age cohort. That is far too little for a sustainable strengthening of retirement provision.

The German Savings Banks Association (DSGV) views the early start pension positively. „It can be one building block in the urgently needed reform of old-age security, by introducing children early to capital markets and contributing to financial literacy“, says DSGV managing board member Karolin Schriever. But she stresses that it is crucial to allow additional contributions to significantly build up the capital stock.

At the European level too, there have been efforts to bolster retirement provision. The pan-European Personal Pension Product (PEPP), introduced in 2019, has so far been a flop because of its complexity, and has been scarcely offered either in Germany or elsewhere in the EU. In September 2024, the EU’s insurance watchdog EIOPA, together with the European Commission, proposed an overhaul.

The plans include greater flexibility on cost caps, scrapping the obligation to offer the product in multiple countries, allowing transfers from other retirement products into PEPPs, and granting tax incentives. PEPPs would also be open not only as a private but also as an occupational pension product. Regulators also advocate automatic enrolment, requiring EU citizens to join a PEPP as soon as they turn 18 or begin work.

The Commission has adopted and broadened these proposals, adding changes to overly strict risk-reduction strategies, excessive guarantees, and burdensome transparency rules that have made PEPPs inflexible and costly.

The PEPP, however, is only one small piece of a broad set of European initiatives to strengthen the second and third pillars of retirement provision. With its Savings and Investment Union, the Commission is aiming far higher, with private pensions meant to play a central role.

The first step is better information about existing pension entitlements. Every EU citizen would gain access to a pension tracking system via a simple, transparent dashboard, showing accumulated assets, projected retirement income, and starting age. Some countries already offer elements of this, but no binding, comprehensive, and continuously updated system covering all three pillars exists. Germany is currently building such a digital pension overview.

The German financial sector welcomes the Commission’s initiative. The National Association of German Co-operative Banks (BVR) supports the Savings and Investment Union, arguing that international – and especially European – capital markets should be tapped for retirement provision. „An EU savings account could play an important role and should be implemented by the German government in a national pension depot“, BVR spokesperson Cornelia Schulz told Börsen-Zeitung.

She also commented on the „Finance Europe“ label, presented in June 2025 by seven EU member states. Products carrying the label would have to invest at least 70% of assets in European securities, such as equities, European Long Term Investment Funds (Eltifs), bonds, and mutual funds. The BVR believes the label could build trust and strengthen Europe as a financial centre, but warned that "it should not be tied to retirement provision, as it would unnecessarily restrict the global investment universe available to savers.“

For Thomas Richter, Chief Executive of the German Investment Funds Association (BVI), the goal of bringing more people into capital markets, and financing Europe’s economy, is beyond dispute. But, he argues, the label cannot target inexperienced savers since it includes illiquid investments. Like the BVR, the BVI sees the label as unsuitable for pensions: „A narrower investment universe leads to lower long-term return prospects", he says. Richter also questions whether EU countries would provide the necessary tax incentives, since the proposal leaves that to each member state.

For him, reforming Germany’s private pension system takes priority: „New EU label products can at best play a supplementary role", he states.

Unsurprisingly, the insurance industry views the Finance Europe label more favourably. By channelling private capital into European products, „competitiveness and retirement provision can be strengthened“, says Jörg Asmussen, head of the German Insurance Association (GDV), in an interview with Börsen-Zeitung.

The EU Commission has also made proposals for occupational pensions. To improve returns – which it criticises as averaging just 0.9% for beneficiaries over the past decade – it suggests allowing investments in unlisted securities and alternative asset classes, while at the same time tightening risk-management rules and expanding supervisory powers. It also points to the small scale of many pension funds, which hampers risk diversification and long-term investing, though it offers no remedies.

The Commission sought feedback on these issues in June 2025, with submissions closing on July 21. It plans to publish its recommendations in the fourth quarter. But given the EU’s modest track record so far, it is doubtful whether this route will quickly or sustainably strengthen retirement provision. National initiatives remain indispensable. The new German government’s lack of ambition in this area is disappointing – and, given demographic realities, untenable.