Lesson 7.4 · 4 of 5 · Tax, pensions and protection where you live
Private pensions in the EU: PEPP, workplace pensions and tax relief
Most EU countries have three layers of pension: the state pension, workplace pensions and personal pensions you choose yourself. Tax relief on pension contributions is set by each country. The EU adds a common product, the PEPP, which you can keep if you move, but its tax treatment still depends on where you live.
Terms in this lesson
- Compound interest
- You earn on your past earnings too, not just on the amount you started with.
- ETF
- A fund listed on the stock exchange that buys dozens or hundreds of companies at once.
- Asset allocation
- How much of your money goes into stocks, how much into bonds and how much stays in cash.
Opening question
What is a PEPP?
The pan-European personal pension product is a voluntary personal pension sold by authorised providers under an EU regulation. It comes on top of state and workplace pensions, and the EU does not pay it.
It does not matter if you get it wrong: trying first helps you remember.
State, workplace and personal pensions in the EU
Paid by your country from social contributions. The rules and amounts are entirely national.
Set up through your employer, compulsory in some countries and optional in others. EU rules (the IORP II directive) cover how these pension funds are run and supervised.
Voluntary and chosen by you: a national pension plan, an insurance product, or a PEPP.
Countries mix these layers very differently. In some, workplace pensions cover most employees; in others, the state pension does almost all the work. In November 2025 the European Commission recommended that countries consider automatic enrolment in workplace pensions, with the right to opt out, and better tools to see all your pension rights in one place.
Check yourself
Your employer pays into a pension fund for you every month. Which layer is that?
A pension arranged through your employer is a workplace pension, the second layer. A PEPP is a personal pension, although under the current rules an employer can also pay into one if agreed.
What is the PEPP, the pan-European personal pension?
Definition
How does a PEPP work?
One personal pension you can take with you.
The PEPP has existed since 22 March 2022 under Regulation (EU) 2019/1238. You pay in during your working life and take the money at retirement. If you move to another EU country, you can keep paying into the same PEPP through a separate part, or sub-account, for the new country, if your provider offers one there; otherwise you can switch provider. The Basic PEPP, the default investment option, has its costs capped at 1% of your savings a year under the current rules.
Myth or fact?
“A PEPP gets the same tax relief in every EU country.”
Myth. The PEPP has common product rules, but tax stays national. Each country decides whether contributions get relief and how the pension is taxed when you draw it.
Check yourself
As of October 2026, what is true about the 1% yearly cost cap on the Basic PEPP?
This exercise is in the free account, where we also save your progress.
Create a free accountTax relief on pension contributions: deductions and limits
Most countries encourage pension saving with tax relief, each in its own way. Two broad models are common:
Relief now, tax laterwidely used for pensions
- What you pay in reduces your taxable income today
- The money grows without tax on the gains
- The pension is taxed as income when you draw it
- A yearly limit on how much counts
Tax now, tax-free laterused less often
- What you take out in retirement is tax-free
- No relief on what you pay in
- The rules may change before you retire
Work it out
Suppose your country lets you deduct pension contributions from taxable income, and your top income tax rate is 30%. You pay €2,000 into a pension this year, within the limit. How much income tax does the deduction save you, in euros?
This exercise is in the free account, where we also save your progress.
Create a free accountCompare
You pay €1,000 into a pension. Your top tax rate is 40% now, and you expect it to be 20% in retirement. Ignoring growth, which model leaves you better off?
This exercise is in the free account, where we also save your progress.
Create a free account- Which pensions do I already have?State, workplace and any personal plan; some countries have an online tracker for all of them.
- Is there tax relief on contributions?A deduction, a tax credit or a state top-up, and up to what limit.
- How is the pension taxed later?As income, at a reduced rate, or tax-free.
- When can I take the money?The minimum age, and whether part can be taken as a lump sum.
- What if I move country?Whether the plan follows you, as a PEPP can, and how the new country taxes it.
What would you do?
You are 30. Your employer offers to add to your workplace pension if you pay in too, up to a set percentage of salary. What do you do?
This exercise is in the free account, where we also save your progress.
Create a free accountWhat you learned
- Pensions in the EU come in three layers: state, workplace and personal.
- Tax relief on pension contributions is national; often you get relief now and pay tax on the pension later.
- A PEPP can follow you between EU countries; the Basic PEPP’s 1% cost cap may go under a proposal still being negotiated in October 2026.
One more time
The questions you got wrong, asked a different way.
Check yourself
You choose a pension plan yourself and pay into it from your own account. Which layer is that?
A plan you choose and fund yourself is a personal pension, the third layer. It may be a national product or a PEPP.
You reached the end
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Save your progress with a free accountLessons are educational. They are not a recommendation to buy or sell. Investing involves risk and you can lose money. Sources: European Commission (PEPP page; supplementary pensions package and recommendation of 20 November 2025); Regulation (EU) 2019/1238 on the PEPP (EUR-Lex); Council of the EU (PEPP negotiating position, 24 June 2026; IORP II position, 26 June 2026); EIOPA (consumer FAQs on the PEPP); all checked on 29 October 2026.