It should be easier for European consumers to invest in the capital markets and save for their retirement, according to a plan launched by the European Commission on Wednesday.

The idea behind the ‘savings and investment union’ strategy is to tap into the €10 trillion savings that European households hold in bank deposits to provide higher returns and help finance European businesses.

The concept has already been backed by Dutch finance minister Eelco Heinen who told officials in Brussels this week that the Dutch have more than €600 billion in savings, usually held at banks at low returns, “and the assets that are invested are largely invested outside Europe, particularly in the US”.

The letter also mentions a recent analysis by the Dutch financial watchdog AFM warning that “this combination of saving a lot and investing little in the EU results in too little venture capital being available in Europe.”

Officials estimate Europe needs an additional €750-800 billion per year by 2030 to develop sectors such as advanced technologies, green energy, and defence.

But the current fragmentation of the European financial market, with countries having their own rules, does not help companies to “raise the funds they need to scale up and grow”, the commission says.

Vast amounts in bank deposits

“Europeans are some of the best savers in the world, but many of their savings are sitting in low-yield deposit accounts. At the same time, Europe is struggling to meet its investment needs,” said EU commissioner for financial services Maria Luís Albuquerque.

Currently, 70% of European savings are kept in back deposits, which “are safe and easy to access, but … usually earn less money than investments in capital markets,” the commission argues.

The plan is therefore to make it easier to invest in capital markets, providing a wider range of investment opportunities and saving products, making recommendations to EU countries on their taxation, and improving “financial literacy”.

A 2023 Eurobarometer survey showed that 82% of EU citizens, especially women, young people and older adults, lack a high level of financial skills.

Private pensions

The strategy will also seek to encourage investments in products that complement state pensions, revising existing rules for occupational pensions and the Pan-European Personal Pension Product (PEPP), and promoting auto-enrolling into savings plans.

“We have a pension crisis around the corner so these proposals are quite positive and should help consumers to be able to invest more easily and save for their retirement,” said Agustín Reyna, director general of European consumer organisation BEUC, of which Consumentenbond is a member.

“The commission has shown greater awareness and willingness to act on these issues than most national capitals… If national governments continue to defend their incumbent financial industry de facto opposing the creation of a proper single market of retail investment products, we will not only continue harming consumers but also the European economy,” he added.

The commission also intends to better integrate EU financial markets, reducing inefficiencies and removing barriers to cross-border operations. This will be accompanied by stronger supervision.