The Top 1000 - Who counts what?

How big is Europe’s funded pensions sector? An intriguing question and the equally intriguing answers very much depend on whom you ask. Using the figure of total pensions assets, the four main sources of data yield some large numbers as you might expect. The EU-level regulatory body,  the European Insurance and Occupational Pensions Authority (EIOPA) gives us a total of €3.9trn for 2011, the latest available year, when the assets of the individual countries are added together.

PensionsEurope, the umbrella body representing European pensions fund associations, provides a 2011 figure of €4.8trn for the occupational pensions sector Europe-wide, with 67% of this attributable to its member associations.

This is the only survey of the four that tries to estimate the wider ‘occupational pensions sector’ by collecting data for book reserve and life and pension insurers, in addition to pension funds. Its Europe-wide figures include €3trn in respect of pension funds (IORPs), €1.2trn for group insurance pensions and €289bn in book reserve arrangements.

OECD has been producing international pensions figures for many years and the total for the European countries it covers is €3.9trn in 2011 and €4.2trn for 2012. Our map in this report shows 2012 OECD figures for 16 countries and for the purposes of comparison we have mainly used OECD data throughout this supplement.

The European Central Bank (ECB) beats all others in terms of timeliness of data, as it produces quarterly figures for pension fund assets. Understandably, its figures are limited to the euro-area, which explains why its totals are the lowest, coming in at €1.6trn for 2011 and €1.8trn for 2012. Its latest figure for pensions assets at 31 March 2014 is €1.9trn.

The differences between these totals can be attributed in part to the number of countries included by each complier: The OECD reports data from 32 countries, EIOPA from 30 and Pensions Europe from 25. The ECB features just 12 of the 18 euro area countries, with France, Greece and Ireland among those not included. PensionsEurope’s data is provided by its 21 member associations and four CEE countries. 

Thus, Switzerland is covered in some round-ups but not others and this will have a noticeable impact on the totals. The ECB points out that France is not covered by its survey, as pension funds as defined in the European System of Account do not exist there.

In our table we look at data for the main countries across Europe. The data is for 2011, being the latest year for which the data is available from the four compilers.

In the case of PensionsEurope, we include two figures for each country where available, the first covers pension funds/IORPs only and the second gives additionally ‘other financing vehicles’, namely book reserves and life and pension insurers.  

For a number of countries the same or approximately similar figures show up in each survey, but for other countries this is not the case, indicative of the different approach the individual survey takes on the definition of a pension fund, but it may also in part be due to the original data.

To take the latter point first, OECD says its sources of data are (regulators and supervisory authorities). EIOPA also draws its figures from the European supervisory authorities, comprising the bulk of its constituents, but it includes not only the EU supervisors, but also those from the EEA, notably Switzerland. 

As mentioned, Pensions Europe obtains its data from the member associations and the members of the CEEC Forum.

For its part, the ECB says its main national sources are existing supervisory collection systems. These are complemented with other existing national central banks data sets, such as data “from monetary financial institutions, securities issues statistics or balance of payments statistics, or in some cases existing direct reporting by insurance companies and pension funds and estimates made for the national accounts”.

So what does count as a pension fund to warrant its inclusion in each survey? The answer is somewhat elusive in that it depends on the purpose for which they are collecting the data.

EIOPA’s approach has a different objective to the others, as its figures come from its unique database of pensions plans and products in the EEA. This ambitious project lists every type of privately managed pension plan and product, even including what might be regarded as investment products provided they have “the explicit objective of retirement provision”. “All non-public pension/plans/products are in principle included, irrespective of whether they are occupational or personal”, it says.

The OECD figures come from ‘national pensions authorities’ and embrace all types of pension plans, including “occupational and personal, mandatory and voluntary, covering both public and private sector workers”. It refers to “autonomous” pension funds, which covers “trusts, foundations and corporate entities as well as a legally separated fund without legal personality managed by a dedicated provider (pension fund management company) or other financial institution”.

The ECB says that pensions funds “consist only of those pension funds that are institutional units separate from the units that create them. These funds have autonomy of decision making and keep a complete set of accounts”. It notes that non-autonomous pension funds set up, for example, by credit institutions (banks) or non-financial corporations are not covered since they are not separate institutional units. Social security schemes are not included.

The PensionsEurope survey is designed to reflect the “diversity of the European landscape for workplace pensions”.  To this end, it makes a distinction between mandatory and voluntary privately managed pension arrangements, which are in the second pillar. This mandatory classification includes not only CEE countries such as Bulgaria, Croatia, Estonia, Hungary, Latvia and Romania, but parts of the system in Finland, Iceland and Sweden. The assets in these mandatory schemes amounted in 2011 to a total of €174bn.

The bulk of the PensionsEurope figures refer to voluntary schemes linked to paid work and these are defined as “private pensions arrangements for which the ‘product characteristics’ are negotiated by social partners or at a company level within a legally defined framework”. Within the survey, it refers to these under the heading of ‘Pension fund/IORPs’. Its 2011 survey covered 132,061 IORPs.

So while the variations may be explicable by reference to these definitional factors discussed above, there is quite clearly room for more analysis. In addition to these ‘official’ sources other figures are available.  Oliver Wyman has undertaken a research project for Insurance-Europe, the European insurance association’s lobbying body in Brussels.

This study found that insurance companies in 2011 were by far the largest pool of European institutional assets with total AUM at the end of 2011 of €7,700bn, comprising 51% of the total institutional assets of €15,100bn. By the end of 2012, insurers assets had grown to €8,500bn, the study estimated.

Figure 2 shows the 2011 breakdown from the Oliver Wyman/InsuranceEurope study.

According to the IPE Top 1000 figures, which is a compilation of the leading 750 continental European Pension funds and 250 of the largest UK funds, the total assets of these funds came to €5.6trn and €5.05trn in 2013. This array covers quite a wide-ranging definition of pension funds and includes, for example, pension insurers, which are insurance companies dedicated to pension provision. In other studies these would be excluded. 

The IPE study, based on figures complied by Standard & Poor’s Capital IQ Money Market Directories, covers just 1,000 funds – albeit the largest in Europe. There are thousands of other pension funds not included, therefore the real total figure for Europe’s pensions assets may be as elusive as ever.