European pension providers need to be more aggressive if they are to reap the rewards of the growth in the market brought on by the switch from public to private retirement provision, warn Goldman Sachs (GS) and Deloitte Consulting (Deloitte) in a new report.
According to the research, the pensions market in Europe will grow from e4trn in 2010 to e11trn by 2030 as more people take out private pensions.
However, the report says that pension providers across Europe must act now in response to positive policy reforms to ensure that they “don’t miss the boat”. Currently only one in five Europeans owns a private pension, but this is set to change dramatically.
Andrew Power, principal at Deloitte’s European insurance practice says that players will need to exploit opportunities on a market basis, not a pan-European one if they are to survive the upsurge in business. “This will require the optimisation of core capabilities and outsourcing of non-core functions,” he comments.
Richard Burden, equity insurance analyst at GS, adds: “The European life and pensions market faces significant challenges. The most successful companies will be those ready to adopt new and radical business models.”
Moreover, the report suggests that life and pensions companies will face increasing competition for market share from banks and other financial institutions and this will put pressure on margins.
“Without doubt the long term savings marketplace will be contested by a variety of financial players. This could be the last wake-up call for life and pensions organisations,” comments Chris Gentle, director of Deloitte Research, Europe. Gentle believes that companies will need to change current business models to be able to provide secure, long term savings vehicles to a “new breed” of sophisticated mass market investor.
If the changes are met full on, the report concludes that the European economy could be lifted into a boom that could mirror the period of sustained prosperity that the US enjoyed in the 1990s.
Gentle believes that the European economy will be boosted if the pensions reforms in different countries are synchronised and significant parts of the economy are privatised at the same time.