EUROPE – European second and third pillar pension markets are expected to grow at an annual rate of 7.5% until 2010 - taking assets to 510 billion euros, says Allianz Dresdner Asset Management (ADAM).

The research, ‘European pensions: reform trends and growth opportunities’, looks at the second pillar pension market, and investment assets of Europe’s life assurance companies - which account for the largest portion of third pillar pensions business. Fifteen of the European Union countries plus Switzerland and Norway were surveyed. Luxembourg and Greece were not included.

The best growth rates are being forecast for those markets where pension reform has lagged. France, Italy and Germany are cited as being the most exciting markets to watch over the next few years. ADAM believes that market penetration of company savings schemes in France will continue apace, that Italy will shortly kick-start its pension fund market. It saw increasing Riester reform in Germany. The French and German markets “will generate, in absolute terms, around half the inflow of new pension money expected in Europe,” says the report.

The UK is expected to see a below-average annual growth rate of 5% due to the sheer size of the market. Moderate growth is forecast for Switzerland and the Netherlands as the pension fund markets are already highly developed.

Such strong growth in the second and third pillar pension markets in Europe is inevitable given the demographic problems facing countries. In the European Union, the most common way of addressing the issue is by reducing first pillar benefits. Austria, Belgium, France, Germany, Ireland and the UK have already agreed proposals to lower future pension levels. “The amount by which first pillar benefits reduce will be reflected in a corresponding requirement for additional pension provision, creating potential for providers of private pension products,” explains ADAM.

The expansion of occupational pension provision is likely to be the focus for many counties as it is cheaper to implement and administer than private provision, says the report. Nonetheless, individual provision will also be in greater demand, since increasing numbers of people are themselves taking charge of ensuring they have an income in old age – a trend which will benefit life insurers in particular.

Topics