Second pillar pensions grow fivefold by 2020
Europe’s second pillar pensions market will grow from its current level of E3.5trn to E17trn by 2020, at the expense of the first pillar market, amid inevitable structural change and with dramatic implications for European capital markets, says Commerzbank.
It believes that, as part of the growth, asset allocation strategies will change as more funds go for European rather than local equities, for corporate rather than government bonds and from debt to equities. It predicts inflows over the next eight years of E274bn into equities and E191bn into fixed income.
Commerzbank estimates that alternative investments will account for as much as 10% of Europe’s pension funds’ value by 2020, with private equity exposure doubling to 4.5%.
Commerzbank says that in some cases, PAYG liabilities will be three times GDP by 2040.