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ECB data show decline in assets for pension funds, insurance companies

EUROPE - Pension funds and insurance companies in Europe saw assets under management fall sharply in the third quarter of last year, with total asset value dropping by more than €13bn over the period, according to new data from the European Central Bank (ECB).

The ECB’s latest statistics on pension funds and insurance companies also found that the insurance technical reserves - the main liabilities of insurance corporations and pension funds - fell slightly from €5,987bn to €5,973bn due to valuation changes between June and September last year, with total AUM amounting to €6.9trn.

The fall in assets followed the plunge in equity markets recorded over the summer, as well as the impact of the sovereign debt crisis on the euro-zone.

The ECB also found that households in the euro-zone were holding 76.6% of their pension fund reserves in defined benefit (DB) schemes, 17.9% in defined contribution (DC) schemes and 5.5% in hybrid schemes.

The breakdown, it said, shows a slight shift toward DC and hybrid schemes over the three months to September.

In June last year, data from the ECB showed that households in the euro-zone were holding 75.8% of their pension fund reserves in DB schemes, 18.2% in DC plans and 0.6% in hybrid schemes.

The shift was borne out by the Towers Watson Global Pension Asset Study 2011, which highlighted that DC assets worldwide currently represent 44% of total pension assets compared with 40% in 2005 and 35% in 2000, illustrating a trend toward the “growing dominance of DC pensions”.

The latest example of the shift from DB to DC plans was seen last week with oil giant Shell announcing it was set to close its UK DB scheme to new members.

Shell will replace the scheme with a DC plan from the first quarter of next year, arguing that the shift to DC for new employees simply followed “prevailing market trends”.

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