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New law

Reforming EU Pensions for a Safer Future

Published November 20, 2025

Goal: Secure better pensions

This EU resolution updates pension rules to make them safer, clearer, and easier to use across borders, requiring better authorisation, stress tests, and info for workers.

Transparency
Transparency

What problem is being addressed?
The EU’s pension system is under pressure.

  • The population is ageing, so fewer workers are paying into pensions for more retirees.
  • Many pension schemes are small, fragmented and cannot invest efficiently.
  • Retirement income is often too low, and people have to rely on short‑term bank deposits that give little return.
  • Rules for how pension funds are run, how they invest and how they protect members are uneven across Member States, creating uncertainty and limiting cross‑border activity.

How the problem is being solved here
The proposal amends two existing EU rules – the IORP II Directive (2016/2341) and Directive 2016/97 – to give pension providers a clearer, stronger, and more harmonised framework. Key changes are:

Area What the new rule does Why it matters
Authorisation All pension providers must be authorised by a competent authority, not just registered. The authority must carry out a prudential assessment and the provider must submit a 3‑year business plan. Gives regulators a better view of a provider’s financial health before it starts operating.
Multi‑sponsor schemes A single pension scheme can be sponsored by several employers. Increases scale, reduces costs and lets workers keep their pension when they change jobs.
Cross‑border activity Simplified notification and faster information exchange between home and host authorities. Makes it easier for providers to operate in other Member States.
Stress testing Providers that guarantee benefits or cover biometric risk must run a stress test at least every three years, using a baseline scenario and an adverse scenario (e.g., 40 % drop in interest rates, 30 % drop in investment returns, 10 % drop in mortality). Shows whether the provider can meet its obligations under bad conditions.
Depositary requirement If members bear the investment risk, a professional depositary must hold the assets. Protects members’ money and gives regulators a clear point of contact.
Governance & risk management Clear rules on board composition, conflicts of interest, internal controls, and a “prudent person” investment principle that includes sustainability. Improves decision‑making and reduces the chance of mismanagement.
Information to members A concise Pension Benefit Statement (PBS) that shows the level of risk, past performance, costs, and future projections. Pension tracking systems must receive all data in a standardised format. Gives workers a clear, comparable view of their pension rights.
Complaints & dispute resolution Fast, 40‑day response to complaints and a requirement to provide an independent dispute‑resolution body. Gives members a quick way to challenge mistakes.
Transparency of performance Providers must publish annual reports on costs, returns and risk profiles, and must report underperformance to members if it lasts more than three years. Helps members compare schemes and encourages better performance.
Definitions in Directive 2016/97 Adds “personal pension product” and “pension tracking system” to the legal text. Makes the rules clearer for insurers and intermediaries.

What changes as a result of this document

  1. New authorisation and prudential assessment – all pension providers must be authorised and submit a business plan.
  2. Multi‑sponsor and simplified cross‑border rules – schemes can have several sponsors and cross‑border activity is faster and cheaper.
  3. Mandatory stress tests – every three years, with defined adverse scenarios.
  4. Depositary requirement for risk‑bearing schemes – a professional depositary must hold assets.
  5. Governance and risk‑management standards – clear board composition, conflict‑of‑interest rules, internal controls and a sustainability‑aware investment principle.
  6. Pension Benefit Statement and pension tracking system – a standardised, annual statement and a digital system that aggregates all pension entitlements.
  7. Complaints and dispute‑resolution procedures – 40‑day response and an independent ADR body.
  8. Performance transparency – annual reporting of costs, returns and risk profiles; underperformance must be communicated to members.
  9. Definitions added to Directive 2016/97 – “personal pension product” and “pension tracking system”.
  10. Transposition deadline – Member States must transpose the amendments within 12 months of the directive’s entry into force.

Budgetary impact – The proposal has no material effect on the EU budget.

In short, the directive tightens rules on how pension funds are authorised, governed, and supervised; it forces better investment and risk‑management practices; it improves transparency for workers; and it makes cross‑border activity easier, all with the aim of giving EU citizens a more secure, efficient and sustainable retirement income.

Licensing: The summaries on this page are available under Creative Commons Attribution 4.0 (CC BY 4.0).

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