Europe’s pension crisis looms large in discussions of the region’s future. Suggestions of sweeping structural redesign—like raising the retirement age—are often met with fierce public resistance, leaving many countries facing a fiscal cliff.

The good news: Europe can achieve meaningful progress by reforming the financial architecture of pensions so that a greater share of retirements will be paid for with invested assets. Shifting more of Europe’s retirement systems toward funded schemes won’t be easy to implement across the board, but a strong argument can be made for the long-term benefits of doing so.

What’s more, the money invested would be a boon for Europe’s underfunded capital markets. According to our modeling, the introduction of three reforms—national pension funds, individually funded first‑pillar accounts, and universally funded occupational pension plans—could cumulatively build up to €4.1 trillion in assets by 2040 across Germany, France, Italy, and Spain. Of that sum, as much as €2 trillion would likely be invested in Europe—or up to 28% of the incremental investment called for by the Draghi Report.