* European Commission tries to defuse demographic time bomb
* Only a quarter of Europeans have personal pension products
* Proposal estimated to double growth of sector by 2030 (Adds industry reaction)
By Francesco Guarascio
BRUSSELS, June 29 (Reuters) - The European Commission on Thursday proposed establishing a pan-European pension product to increase private savings and boost the growth of a European Union industry currently worth about 700 billion euros ($800 billion).
The measure is part of policy efforts to defuse a demographic time bomb that could hit the ageing continent over the next 50 years when the ratio of retirees to working-age people is estimated to double.
As EU states' stretched public finances are struggling to cover current levels of pensions, the European Commission is trying to encourage personal savings to make up for lower pensions.
The proposed Pan-European Personal Pension Product (PEPP), if approved by EU states and the European Parliament, will give consumers a new savings option and is expected to increase the number of people subscribing to a personal pension, the Commission said.
Only 27 percent of working-age EU citizens have bought personal pensions, which complement occupational and state-funded pensions, setting aside 700 billion euros managed by banks, pension funds or insurances.
The industry is expected to double its size in the EU by 2030, but the Commission said that, with PEPP, assets under management could reach 2.1 trillion euros.
This is expected to benefit countries where there is virtually no market for personal pension products, particularly in eastern Europe. The Commission said only in Germany, Austria, Slovenia, Spain and Sweden 15 percent or more of eligible consumers made such investments.
Mobile workers, who build their pension in several EU states, could also show interest, although they may face costs for merging the capital accumulated in different countries.
EU countries will remain free to set their tax treatment of PEPP, although the Commission urged them to grant PEPP the same tax relief applied to national products.
PEPP providers will need authorisation from the EU pension regulator, the European Insurance and Occupational Pensions Authority (EIOPA).
Managers of PEPP assets will be free to invest in all assets, including derivatives, as long as they respect consumers' choices when they opt for prudent investment.
InsuranceEurope, which represents the sector's national associations, welcomed "at first sight" some of PEPP's features but said more time was needed to assess the added value of the proposal.
PensionsEurope, the body representing the pension funds industry, welcomed the proposal and urged EU states to introduce tax incentives for PEPP. (Reporting by Francesco Guarascio; Editing by Janet Lawrence)