A famous quote, often attributed to Albert Einstein, describes compound interest as “the eighth wonder of the world”. Whether or not he said it, the principle remains true. Time is the greatest driver of long-term wealth creation. Yet Europe still underuses one of its greatest assets: its citizens' savings.

 Europe does not suffer from a shortage of savings but from a shortage of long term investment. It faces unprecedented investment needs for the green transition, digitalisation, defence and strategic autonomy. Yet European households already save substantial sums. The challenge is not generating more savings but ensuring a larger share is channelled into productive long-term investment. Supplementary pensions should be viewed not only as retirement policy but also as investment policy.

Better pension systems improve retirement adequacy while providing the patient capital needed to finance innovation, infrastructure and Europe's future growth. Pension assets represent around 32% of EU GDP, compared with 142% in the United States and 100% in the United Kingdom. More revealing, 62% of EU private pension assets are concentrated in just three Member States: the Netherlands, Denmark and Sweden.

Though they represent only a small share of the EU population, they have built highly successful supplementary pension systems. The lesson is clear: the challenge is not European; it is primarily national. Rather than inventing new models, Europe should replicate what already works. Retirement savings are well suited to financing long-term assets because their investment horizon is measured in decades, not months. Long-term liabilities naturally match long-term assets, while Europe's future investment needs increasingly lie in infrastructure, innovation, energy and defence. These investments need patient capital.

Promoting them requires the right incentives. Behavioural economics shows that people tend to procrastinate, avoid complexity and postpone decisions whose benefits lie years ahead. Europe often focuses on designing better financial products, but the design of the choices people face may matter even more.

Automatic enrolment schemes show participation can increase dramatically without restricting choice. Stable tax incentives are equally important. Long-term retirement saving benefits society by reducing future fiscal pressures while increasing the pool of long-term capital available for productive investment. Employers also have a crucial role to play. Expanding occupational pension schemes should remain a European priority.

Financial literacy is another essential ingredient. Improving financial capability is not simply about teaching financial concepts but helping citizens make better long-term decisions. Making future retirement outcomes more visible would help turn an abstract challenge into a concrete financial decision. Santander's global study, “The Currency of Learning”, based on almost 20,000 interviews across ten countries, revealed a striking gap between confidence and knowledge. Most respondents considered themselves financially knowledgeable, yet only a minority answered basic questions on inflation, diversification and compound interest. Behavioural economists would recognise the Dunning-Kruger effect: people who overestimate their financial knowledge are often the least likely to seek information or professional advice. Improving financial literacy should help citizens recognise the limits of their understanding and make better long term financial decisions.

This is where banks play a particularly important role. They already enjoy trusted relationships with millions of European households and are well placed to combine financial education, personalised advice and access to long term savings products. Together with appropriate tax incentives and simpler products, this trusted distribution network can become a key driver of Europe's Savings and Investments Union.

Against this background, the Commission's proposals to develop the supplementary pension sector are welcome. A simpler and more attractive Pan-European Personal Pension Product, together with auto-enrollment, pension tracking systems and pension dashboards can foster a genuine European market for supplementary pensions. However, no pan-European product will succeed alone. Its long-term success will depend on complementary national reforms, particularly tax incentives, stronger occupational pension systems and behavioural policies that make long term saving the easy and natural choice.

Europe already possesses one of its greatest strategic assets: its citizens' savings. The challenge is no longer encouraging Europeans to save more but helping them save and invest better. If Europe creates the right incentives, institutions and confidence, time itself will become one of its greatest allies. The power of compound returns has transformed retirement systems elsewhere. There is no reason it cannot do the same for Europe.