A 401(k) plan is a widely used retirement savings vehicle in the United States, offering individuals the opportunity to grow wealth through tax-advantaged investments. Given the benefits of a 401k plan, many US expats residing in Europe seek comparable pension structures to support their long-term financial goals. But does Europe have 401k?
This guide explores 401k alternatives and potential equivalents in Europe, particularly in the UK and Germany.
It also outlines the key differences between US 401(k) plans and European pension schemes, focusing on tax treatment, contributions, withdrawals, and investment options.
What You Will Learn
- Is there 401(k) in Europe?
- What is the equivalent of 401(k) in Europe?
- What are the main differences between 401(k) and European pension schemes?
Does Europe Have 401(k)?
There is no 401(k) in Europe or anywhere else in the world, as it is a retirement program established under US tax law and offered by US employers to their employees.
Originally introduced to supplement traditional, defined benefit pensions, 401(k) has since become the primary retirement saving vehicle for approximately one-third of working Americans.
What Is the 401(k) Equivalent in Europe?
While a direct equivalent to the 401(k) does not exist outside the United States, several European pension schemes exhibit similar features — such as tax-deferred growth, employer and employee contributions, and structured investment frameworks.
Notable examples include the UK’s Workplace Pension, Germany’s Betriebliche Altersvorsorge (bAV), and the Pan-European Personal Pension (PEPP).
Key Differences Between US and European Systems
Many European countries continue to rely on state-funded pension systems as the primary source of retirement income.
In contrast, the US Social Security system is often viewed as insufficient to fully support retirement, prompting individuals to invest in voluntary employer-sponsored plans such as 401(k)s, 403(b)s, and individual retirement accounts (IRAs).
European workplace pensions – also referred to as occupational pensions – are designed to supplement state pensions and are usually funded through salary deductions, often with employer contributions.
There are two main types of workplace pensions:
- Defined benefit schemes: The retirement benefit is based on the employee’s length of service and earnings history.
- Defined contribution schemes: Contributions from the employee, employer, or both are invested, and the eventual retirement income depends on the investment performance.y, the retirement benefit depends on the performance of these investments.
UK Workplace Pension
Following the Pension Act 2008, eligible employees in the UK are automatically enrolled in a workplace pension arranged by their employer, unless they opt out.
Eligibility criteria for automatic enrolment include:
- Age between 22 and the current State Pension age (66).
- Annual income exceeding £10,000.
- UK-based employment.
- Not already enrolled in another workplace pension.
Employers must contribute at least 3% of qualifying earnings. The legal minimum for total contributions is 8%, meaning employees typically contribute 5% unless their employer contributes above the minimum.
Additionally, pension contributions receive tax relief – typically 20% for basic-rate taxpayers.
German Betriebliche Altersvorsorge (bAV)
The bAV is a voluntary workplace pension scheme considered a German equivalent to the 401(k). Contributions to a bAV are deducted from gross salary, reducing taxable income. In 2025, individuals may contribute up to 8% of gross salary, capped at €7,728.
Employers are legally required to contribute at least 15% of the employee’s monthly contribution. Some companies enhance this benefit through higher matching rates.
Investment options are employer-determined and typically include conservative assets such as government bonds. Funds grow tax-deferred until retirement withdrawals begin.
Pan-European Personal Pension (PEPP)
The PEPP is a cross-border pension product available to residents of EU member states, regardless of employment status or nationality. It operates as a voluntary, defined contribution scheme designed to supplement existing pensions.
PEPPs are notable for their EU-wide portability—contributors may maintain the same pension plan when moving between EU countries.
Regulated by the European Insurance and Occupational Pensions Authority (EIOPA), PEPPs offer consistent standards and protections across the EU. Total fees, including investment and administration costs, are capped at 1% annually.
How Does 401(k) Compare to European Pension Schemes?
To assist you in identifying a suitable 401(k) alternative as a US expat in Europe, we’ll compare 401(k) plans with different European pension schemes and plans based on the following key aspects:
- Tax efficiency
- Withdrawals and payouts
- Investments
- Contributions
- Guarantees
- Inheritance rules
Tax Efficiency
Like the 401(k), most European private pension schemes offer tax-deferred growth, allowing investments to accumulate without immediate tax liability. In both systems, contributions are often made on a pre-tax basis, with taxation occurring upon withdrawal during retirement.
Withdrawals and Payouts
Access ages and conditions differ across jurisdictions. In the United Kingdom, workplace pensions and self-invested personal pensions (SIPPs) may be accessed from age 55 (rising to 57 in 2028), while the State Pension age is currently 66.
In Germany, access generally begins at age 65. In the United States, while there is no official retirement age, penalty-free withdrawals from a 401(k) are available from age 59½, subject to specific exemptions for earlier access.
However, withdrawals you make before you’re 59½ are subject to a 10% early access penalty, except in specific cases, such as:
- Loss of job at the age of 55 and older
- Personal emergency
- Financial hardship
European workplace pensions and 401(k) both offer lump sums and annuities as payment options, while personal pensions also have flexible drawdown options. For example, a SIPP offers a tax relief that allows you to withdraw 25% of your savings tax-free.
Investment Options and Management
Funds within private and workplace pension schemes are typically invested across various asset classes. In European workplace pensions, investment decisions are generally managed by the employer or scheme trustee.
Conversely, 401(k) participants may select from a range of investment options designated by the employer.
Private pensions offer greater autonomy. Self-Invested Personal Pensions (SIPPs) allow individuals to manage their portfolio and invest in a broad range of UK and international assets.
The Pan-European Personal Pension (PEPP) enables policyholders to reallocate their portfolio every five years if performance does not meet expectations.
Contributions
Both 401(k)s and European workplace pensions typically operate on a salary-based contribution model, where contributions are made pre-tax.
In the UK and Germany, employers are required to match a portion of employee contributions – 3% in the UK and at least 15% for bAV schemes in Germany. In contrast, employer contributions to 401(k) plans are optional and vary widely between companies.
Guarantees
Most defined contribution pensions—including 401(k)s, SIPPs, and workplace DC schemes—do not provide guaranteed retirement benefits.
The final pension value depends on investment performance. Defined benefit schemes, while less common, provide fixed income based on salary and service, without investment growth potential for the individual.
Inheritance rules
Upon death, any remaining balance in a 401(k) can be passed to a named beneficiary, with the inherited amount generally subject to US tax rules depending on the beneficiary’s relationship to the account holder.
European workplace pensions are also typically inheritable, but the conditions and tax treatments vary by jurisdiction.
For example, in Germany, beneficiaries may include spouses or dependants, but the inheritance may be taxed under succession law.
In the UK, Self-Invested Personal Pensions can currently be passed to beneficiaries free of inheritance tax if the account holder dies before age 75, provided the funds are designated within two years and remain within the Lump Sum and Death Benefit Allowance.
However, from 6 April 2027, SIPPs will be included in the deceased’s estate for inheritance tax purposes, potentially subjecting them to a 40% tax depending on the total estate value and available nil-rate bands.
The table below summarises the main differences and similarities of 401(k) and common pension plans in Europe:
| Aspect | 401(k) | European Workplace Pensions | SIPP |
|---|---|---|---|
| Tax efficiency | Tax-deferred growth; contributions reduce taxable income. | Typically tax-deferred growth; contributions may reduce taxable income depending on structure. | Tax-deferred growth with tax relief on contributions, usually at the individual’s marginal tax rate. |
| Access age | Withdrawals permitted from age 59½ without penalty; earlier access incurs a 10% penalty (with exceptions). | Varies by country; typically from 65, though some allow earlier access (e.g. 55–57 in the UK) | Accessible from age 55 (rising to 57 from 2028). |
| Payout options | Lump sum or annuity. | Lump sum or annuity. | Lump sum, annuity, or phased withdrawals. |
| Investments | Employee selects from options provided by the employer. | Employer or scheme provider manages investments; limited employee choice or default fund used. | Full investment control; broad access to global and UK assets. |
| Contributions | Primarily funded by the employee; employer contributions are discretionary. | Funded by both employee and employer; employer matching is often mandated (e.g. 3% in UK, 15% in Germany). | Fully funded by the individual. |
| Guarantees | No guarantees; benefits depend on investment performance. | No guarantees for defined contribution plans; guaranteed payouts with defined benefit plans. | No guarantees; benefits dependent on investment performance. |
| Inheriting rules | Inheritable by designated beneficiaries. | Varies by jurisdiction; typically inheritable, though may be subject to succession/inheritance tax. | Inheritable; currently exempt from UK inheritance tax if death occurs before age 75. Subject to IHT from April 2027 onward. |
| Enrolment | Employer automatically enrols eligible employees. | Employer arranges the plan and automatically enrols eligible employees. | Individual enrols via a private pension provider. |
Cross-Border Tax Considerations for US Citizens
For US citizens residing in Europe, contributing to local pension schemes involves navigating complex tax obligations in both the host country and the United States. Unlike most nationalities, US citizens are subject to citizenship-based taxation, meaning they must file annual returns with the Internal Revenue Service (IRS) regardless of residency.
Double Taxation Risks
While European countries typically offer tax relief on pension contributions and tax-deferred growth, these benefits may not be recognised by the IRS. For example:
- Contributions to foreign pensions (e.g. UK workplace pensions or German bAV plans) are generally not deductible on a US tax return.
- Employer contributions to European pension plans may be treated by the IRS as additional taxable income.
- Growth within the pension fund may also be treated as foreign passive income, potentially triggering US tax unless an applicable treaty provides an exemption.
To mitigate double taxation, the Foreign Earned Income Exclusion (FEIE) and Foreign Tax Credit (FTC) may be applied, but neither fully resolves the mismatch in pension treatment. Furthermore, pensions must be considered in estate and trust reporting obligations.
Reporting Requirements
US citizens must also comply with extensive reporting regulations for foreign pension assets, including:
- Form 8938 (FATCA): Required for reporting foreign financial assets, including most European pension plans, if thresholds are met.
- FBAR (FinCEN Form 114): Required if the aggregate value of foreign financial accounts exceeds $10,000 at any time during the calendar year.
- Form 3520/3520-A: May apply if the IRS classifies the pension scheme as a foreign trust – this is particularly relevant for SIPPs and other personal pension plans.
Failure to meet these requirements can result in substantial penalties, even where no tax is due.
Professional Tax Advice is Essential
Given the potential for misclassification, underreporting, or unintentional non-compliance, professional cross-border tax advice is critical.
At Titan Wealth International, our qualified cross-border advisers specialise in helping internationally mobile clients:
- Structure pension contributions for optimal tax efficiency.
- Navigate US and local reporting obligations (FBAR, FATCA, Form 3520).
- Assess treaty protections and mitigate double taxation.
- Plan for inheritance and estate tax implications across jurisdictions.
Speak to a Titan adviser today to ensure your retirement and tax strategies remain compliant, coordinated, and internationally optimised.
Get Your Complimentary European Pension Review as a US Expat
In just 15 minutes with Titan Wealth International’s cross-border retirement specialists, you will:
- Discover your European pension options as a US expat, including UK, German, and EU-wide schemes.
- Learn how to structure contributions and withdrawals to minimise double taxation.
- Identify key reporting obligations and planning strategies to stay compliant with US and local tax authorities.
Key Takeaway
This guide has clarified that the 401(k) is an employer-sponsored retirement savings plan established under US tax law and is not available in Europe.
However, several European pension schemes – such as the UK’s workplace pension and Germany’s Betriebliche Altersvorsorge (bAV) – offer comparable features to a 401(k) in Europe, including tax-deferred growth and employer contributions.
We have compared these 401(k) alternatives across key factors, including taxation, contribution rules, investment control, and inheritance treatment. Understanding these differences is critical for selecting the right pension structure as a US expatriate.
Choosing the most suitable pension vehicle is a vital part of long-term retirement planning and tax optimisation.
For US expats in Europe, this requires navigating dual tax systems, complex reporting obligations, and shifting regulatory environments.
The cross-border specialists at Titan Wealth International provide expert guidance to help you manage foreign pensions, minimise tax exposure, and ensure full compliance across jurisdictions.
