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Best practices and performance of auto-enrolment mechanisms for pension savings
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Best practices and performance of auto-enrolment mechanisms for pension savings

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An ageing society and higher life expectancy in the European Union (EU) have raised concerns over the adequacy and financial sustainability of existing pension systems to deliver a retirement income that would ensure decent living standards and prevent old-age poverty. Moreover, the economic and financial crisis in 2007-08 and subsequent policy response exacerbated social inequality across the EU. In 2015, the Juncker Commission acknowledged the need for upward social convergence between and within Member States and proposed a European Pillar of Social Rights (EPSR). The EPSR initiative was launched by the European Commission (EC) in 2017 with the overarching objective to deliver new and improve existing social standards for people across the EU. Of the twenty principles agreed by all Member States, there was a commitment and responsibility (at both Union and Member State level) to ensure : ‘Workers and the self-employed in retirement have the right to a pension commensurate to their contributions and ensuring an adequate income. Women and men shall have equal opportunities to acquire pension rights’, and that ‘Everyone in old age has the right to resources that ensure living in dignity.’ In the 2018 edition of the triennial Pension Adequacy Report, the Commission stressed the role of well-designed supplementary pension schemes, in addition to statutory pensions, to help achieve adequate pension outcomes. It also recognised automatic enrolment (also referred to as auto-enrolment) (AE) as a potential policy tool that may be used in combination with others (e.g., tax and financial incentives) to improve the coverage of supplementary pensions. AE is a mechanism that automatically enrols individuals into a retirement savings scheme unless they actively opt-out. Such schemes, depending on their design, may encourage regular savings in cost-effective pension products that re-invest in a diversified portfolio of assets. The purpose of this study is to set out the features and best practices of different auto-enrolment mechanisms into pension schemes. It also compares such practices across EU and non-EU jurisdictions and provides preliminary empirical evidence of the impact of auto-enrolment on pension adequacy, especially in countries where it is well established. The study contributes to one of the key objectives of the Commission’s Capital Markets Union (CMU) programme of improving the diversification of households’ financial assets and pension adequacy through capital markets.
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ISBN 978-92-76-43351-4
DOI 10.2874/03565
Numero di catalogo EV-07-21-065-EN-N
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ISSN ISBN 978-92-76-43351-4 DOI 10.2874/03565 Numero di catalogo EV-07-21-065-EN-N
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