The proposal is intended to provide pension providers with the tools to offer a simple and innovative PEPP, a voluntary personal pension designed to give savers more choice when they are putting money aside for old age and provide them with more competitive products.

PEPPs will have the same standard features wherever they are sold in the EU and can be offered by a broad range of providers, such as insurance companies, banks, occupational pension funds, investment firms and asset managers.

The Commission says they will complement existing state-based, occupational and national personal pensions, but not replace or harmonise national personal pension regimes. It is recommending that member states grant the same tax treatment to this product as to similar existing national products to ensure that the PEPP is attractive to savers, even if the PEPP does not fully match the national criteria for tax relief.

Currently, the Commission says the European market for personal pensions is fragmented and uneven, and only 27% of Europeans between 25 and 59 years old have enrolled themselves in a pension product.

Pension offers are concentrated in a few members states, while in some others they are nearly non-existent. This variation in supply is linked to a patchwork of rules at EU and national levels, which impede development of a large and competitive EU-level market for personal pensions. The PEPP will allow consumers to voluntarily complement their savings for retirement, while benefitting from solid consumer protection.

Providers will need to be authorised by the European Insurance and Occupational Pensions Authority (EIOPA) to provide the PEPP. The PEPP will be portable between member states and savers will have the right to switch providers – both domestically and cross-border - at a capped cost every five years.

Providers will be able to develop PEPPs across several member states, to pool assets more effectively and to achieve economies of scale, and will be able to reach out to consumers across the whole EU through electronic distribution channels.

Valdis Dombrovskis, Commission vice-president, responsible for financial stability, financial services and capital markets union, said: "The pan-European personal pension product is an important milestone towards completing the Capital Markets Union. It has enormous potential as it will offer savers across the EU more choice when putting money aside for retirement. It will drive competition by allowing more providers to offer this product outside their national markets. It will work like a quality label and I am confident that the PEPP will also foster long-term investment in capital markets.’

The PEPP proposal will now be discussed by the European Parliament and the Council.