EUROPE - The size of European pension markets will more than double over the next 10 years, a leading European asset manager predicts.
A report by Allianz Global Investors (AGI) says western European pension markets are expected to grow from €7.4m trillion in 2004 to €16.4 trillion by 2015, an annual growth in pension assets across Europe of 7.5%.
Asian-Pacific pension markets re expected to almost treble over the same period from €1.1 trillion to €2.9 trillion.
Johann Goldbrunner, a member of the board of AGI, said Asia faced even more dramatic demographic changes than western Europe. The old age dependency ratio is expected to treble for 10% today to 27% by 2050.
“This puts an enormous burden on the traditional family support which until recently represented the most important old age provision in Asia.”
Dorothee Franzen, head of pension research at AGI, said that the factors driving the growth of pension assets in Europe and Asia were entirely different: “In western Europe the aim is to curb the generosity of the state pensions system and close the pension gap by increasing coverage of the private funded pension system.
“Asian Pacific governments, on the other hand, face the challenge of increasing pension coverage in all pension systems.”
The report says that Asian governments have avoided western Europe’s mistake of waiting too long before launching pension reforms.
They have leapfrogged the pay-as-you-go (PAYG) state pension system favoured by western European governments and moved straight to funded pension systems, both voluntary or a mandatory.
Franzen said that AGI was optimistic about growth in some European pension markets. The Italian pension market, boosted by Tfr contributions, is expected to grow by 10% annually until 2015.
In the UK, Europe’s largest pension market, asset growth is expected to double to €5 trillion by 2015,driven an annual growth in equities of 7.5%.
“If the remaining regulations are implemented as expected, the Italian pension market will be one of the most exciting places for asset managers to be I western Europe in the years to come,” the report concludes.
The AGI report is part of the OECD's Global Pensions Statistics Project in which AGI is a partner.
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