DC assets in Europe look set to reach a figure of €2.5 trillion by 2014, opening up significant opportunities for fund managers who are prepared to create innovative and viable solutions for this market.

Recent findings from research firm, Cerrulli Associates, found that total DC assets in Europe have risen from just over €1 trillion in 2004 to €1.3 trillion in 2008, representing an annual growth rate of 6.3%, while indicators imply that growth will continue and even accelerate across a number of key pension markets in Europe.

The market with the most immediate potential is the UK, states the report. This is because, even though this is the largest occupational pension market in Europe, the proportion of active DC plan members stands at just 30%. As such, UK pension consultants expect this figure to at least double over the next five years.

France was also identified as a contender for growth in the DC space as the Plan Partenarial d”Epargne Salaire Volontaire (PERCO) gains popularity; while opportunities in the German corporate DC market are set to expand through Riester and Pensionfonds. Italy is regarded by some managers as a potentially attractive market with one report suggesting that Italy’s small invested pension market would grow at a compound annual growth rate of about 30% to 2015.

The primary opportunities in the DC marketplace, according to the findings, lie in offering open-architecture DC plans and multi-asset solutions; while the default fund area is where there is the greatest scope for innovation and for adding value. “Lifecycle funds have been the typical default fund to date in DC plans, however observers believe a more dynamic and sophisticated approach is required” said Yoon Ng, the report’s lead analyst.

Cross-border pensions were also highlighted as a growing theme, with evidence to support the conclusion that the market for cross-border pensions will now expand in Europe. Ng continued: “The cross-border market is almost non existent at this moment; there is pressure on the fund managers to create the supply and the pension funds/plan sponsors who want the ease of operating pension plans across the board especially for multi-nationals."

The barriers to growth, however, lie in the fact that while plan sponsors would like to see more players in the market before using a single provider or multi-country solution, fund managers would like there to be more business available before they develop solutions to support this.

For full details of The Cerrulli Report: Opportunities in European Corporate DC Pensions, visit www.cerulli.com

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