Workers are willing to pay higher fees in exchange for the ability to move their pensions among different countries in the European Union, according to research by the EU-funded Project WeLaR.
The study aimed to understand how EU citizens engage with the pan-European Personal Pension Product (PEPP), a voluntary retirement scheme that complements state-based and occupational systems. PEPP’s unique portability scheme allows workers to maintain their pension plans and provider even after relocating to another EU member state.
“The idea behind PEPP was to address growing mobility and the rise of atypical jobs,” says Mikkel Barslund of KU Leuven, a co-author of the study. “Our data shows that people who work in an EU country other than the one where they were born are less likely to save in voluntary pension plans.”
New data indicates a significant increase in mobility within the EU27, with projections suggesting a continued rise in mobile workers. Increasing numbers of EU citizens spend more than five years employed in another country, which highlights the need for accessible portable pension products.
The WeLaR researchers used data from European surveys such as SHARE, EU-SILC, and HFCS, along with their own survey of workers in Luxembourg, including cross-border employees. The WeLaR questionnaire found that respondents are willing to accept an additional 3.6% reduction in pension benefits in exchange for portability. Additionally, mobile sub-groups, such as non-homeowners and younger participants, demonstrated a higher tolerance for increased management fees.
“Our study aims to inform policymakers on how to design these schemes effectively,” says Thuc Uyen Nguyen-Thi of the Luxembourg Institute of Socio-Economic Research, a co-author. “As people become increasingly mobile and hold temporary jobs with limited access to national pension schemes, it is crucial to ensure they can save for their retirement.”
The research also revealed varying levels of investment in voluntary pensions across member states, dependent on the national development of voluntary pension systems. Austria, Belgium, Germany, and Luxembourg reported the highest shares of voluntary pension contributions, while Lithuania, Malta, Poland, and Slovakia exhibited the lowest shares of contributions.
Among the key factors influencing workers’ decisions to contribute to supplementary pension plans, the researchers identified age, gender, nationality and occupational skill level. The study also reveals a complex relationship between technological change and participation in voluntary pension plans, and shows that the impact of technological change on women’s financial decisions is not uniform. Women tend to reduce their contributions to voluntary pension plans when they perceive that technology is modifying their job tasks. However, when technology actually replaces their tasks, they are more likely to increase their voluntary contributions. This suggests that women view task-altering technological changes as threats to their job security, prompting them to seek financial security for the future through pension planning. The researchers did not find significant evidence of a similar effect among men.
“Income is the main determinant of additional pension contributions, so we need to have pension products that will be affordable for people such as those in lower-paying occupations, part-time workers, and workers on temporary contracts,” says co-author Aleksandra Anić of the University of Belgrade. “This will allow Europe to respond effectively to population ageing in the context of increasing automation and mobility of workers between EU countries.”
Anic, A., Barslund, M., Ivkovic, I., Martin, L., Milinkovic, A., Nguyen-Thi, U., Olivera, J. (2004). Pan-European pension plans as a way to cope with the risks of ageing, automation and new forms of work, 2024. (Deliverable D6.1). Leuven: WeLaR project 101061388–HORIZON.
The paper is available here.
