The corporate defined contribution (DC) market in Europe will grow by 11.5% a year to 2014, Cerulli has predicted.

In its latest issue of The Cerulli Edge: Europe Edition, the research company said asset managers should take a serious look at the DC opportunity. “While DC plans have become more sophisticated, offering (in some cases) a wider range of investment options and/or solutions that are better targeted to savers' needs, [the corporate DC market] is an area where more work still needs to be done,” Cerulli said.

The vast majority of savers (80%) will end up in the default fund, which has therefore received a great deal of attention recently. Key developments in this area include lifestyling, dynamic asset allocation, absolute return strategies, target-date funds, and a certain move away from passive investment, according to Cerulli.

Corporate DC funds are also beginning to include a wider range of assets, such as real estate and hedge funds, which were previously only seen in defined benefit (DB) plans. This shows a move toward absolute return as opposed to relative return strategies.

"Although the move toward more complex and better planned DC schemes has largely been confined to more mature markets, such as the Netherlands and the United Kingdom, the future must surely lie in this direction," said Barbara Wall, editor of this quarterly publication dedicated to the European marketplace. "In the meantime, asset managers must ready themselves in both mature and less mature markets to make the most of business opportunities as they arise."

Cerulli has found that the shift to DC is not uniform across Europe, although growth in occupational DC pension markets is expected to continue. The shift to DC has been slow in France, with only 25% of schemes being defined contribution, while in the Netherlands hybrid schemes are likely to dominate.

In Sweden all schemes are defined contribution, and Spain and Switzerland also have a high percentage of DC schemes, 71% and 60% respectively. In the UK, Germany and France the majority of schemes are still DB (60%, 65% and 75% respectively), while with only 6%, the Netherlands has very few DC schemes. In Europe as a whole, the majority of schemes are still DB, with only 30% of schemes being defined contribution.

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