Prime Highlights: 

• Auto-enrolment into funded pensions can unlock Europe’s household savings, boosting both retirement security and long-term economic growth. 

• Even a small shift of savings from bank accounts into pensions could mobilize hundreds of billions of euros for investment in innovation, infrastructure, and green projects. 

Key Facts: 

• Only about 27% of EU household savings are currently invested in insurance and pension funds, leaving vast amounts idle in low-interest bank accounts. 

• Funded pensions save and invest contributions, allowing money to grow over time and provide a secure financial cushion for retirement. 

Key Background: 

Europe holds a vast pool of untapped potential. Households across the continent save trillions of euros, but much of it sits in low-interest bank accounts, generating little benefit for individuals or the economy. Simultaneously, green energy, infrastructure, and innovation investments are required in Europe.  

Funded pensions save and invest money for contributions, like with systems of the past, such as pay-as-you-go. With time, the investments will improve, and you will have a safe retirement fund. As the studies of Bruegel reveal, should more Europeans come to the table, their savings would allow them to fund long-term endeavors and enhance their retirement security. 

Currently, only about 27% of EU household savings go into insurance and pension funds. Redirecting just a small portion from bank deposits to pensions could release hundreds of billions of euros for investment. Marie-Sophie Lappe, co-author of the report, says, “Even a modest shift into pensions could mobilize over 400 billion euros into debt securities and listed shares, helping both personal finances and the wider economy.” 

Auto-enrolment makes investing the default. Workers automatically join a pension plan but can opt out if they choose. This system has greatly increased participation in the UK. Experts note that relying on individuals to invest on their own often fails, but auto-enrolment solves this problem. 

While European pension funds invest abroad, the real opportunity lies in using dormant household savings. Instead of taking the savings of savers at risk, it can be invested directly into well-controlled investments to help fund innovation, infrastructure, and a greener economy. 

To be brief, auto-enrolment might not generate much hype, but it can revolutionize Europe without much noise. This policy can empower the economy of Europe and enable it to grow sustainably by enhancing retirement security and investing savings in long-term projects. 

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