EUROPE - Defined contribution (DC) schemes have witnessed an almost uninterrupted increase in assets over the last five years and now account for almost a third of all European pension assets, according to Cerulli Associates.
Since 2004, DC schemes have grown by an average of 6.3% a year.
Six years ago, the schemes accounted for just 29% of European assets, but by 2008 this had increased to 31.7%.
Shiv Taneja, Cerulli’s managing director in London, said the growth in DC schemes offered fund managers the chance to access new clients.
He said the two markets with the biggest potential for growth were the UK and France, followed by Germany and Italy.
“However,” he added, “fund managers are proceeding cautiously, targeting one or two countries at a time, rather than developing a pan-European program.”
Yoon Ng, senior analyst at the company, added that growth in the sector would give way to different investment approaches.
He said lifecycle funds had been the “typical default” in DC plans to date.
“However,” he added, “observers believe a more dynamic and sophisticated approach is required”, with target-date funds suggested, as they allow for micro adjustments.
Overall, total European DC assets have grown from €1trn to €1.5trn between 2004 and 2009, with the only slump in growth being in 2008, when assets decreased by 5% compared with the previous year.
Looking at a cross-section of European countries, consisting of Denmark, Switzerland, the UK, Germany, France, Italy and the Netherlands, Cerulli found the Danes contributed a majority of their pension savings to DC schemes and, despite an 11 percentage point decrease between 2004 and 2008, still led overall with 59%.
However, the Netherlands witnessed with biggest growth overall.
While in 2007 only 1% of all pension assets was paid into DC schemes, by 2008 this figure had risen to 9%, increasing from only €8bn to €62bn.
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