10/11/2011
By Ilonka Oudenampsen
Total European DC assets reached €1.6trn in 2009, or 39 per cent of total European pension assets, and Cerulli Associates estimated that the European DC market will grow at a compound annual growth rate of 10.8 per cent over the next five years to push assets to €2.8trn by 2015.
Despite DB plans still offering a larger pool of assets, DC pension assets are growing fast, and Cerulli cautioned fund managers to expand their thinking about product design and distribution, as this is an integral part of pension provision in both the accumulation and decumulation phase.
Yoon Ng, a senior analyst at Cerulli Associates, said that, although fund managers have been working on improving default DC funds by introducing a multi-asset approach or target date funds, many European savers do not yet have access to them.
"At the same time, retirement is moving beyond pension funds into other savings vehicles that offer tax advantages, such as the plan d'epargne actions (PEA) in France or the investment savings account (ISA) in the United Kingdom, and fund managers need to enlarge their thinking accordingly," Ng said.
This creates opportunities for fund managers not yet involved in the pensions market and many fund managers are developing new solutions for the pay-out phase, which is currently dominated by insurance companies. However, changing regulations should allow fund managers to capture a greater share of business.
Occupational DC platforms are already big in the United Kingdom and the Netherlands, but will soon be rolled out in other markets too.
"The greatest growth potential for DC pension provision lies in the United Kingdom, France and the Netherlands," Ng said. "However, establishing a presence in markets where structural reform, including that of unfunded state schemes, is most urgent also makes sense - even if the political motivation for change currently looks weak."
Cerulli’s latest report, Cerulli Quantitative Update: European Defined Contribution Markets 2011, examines the current opportunities and challenges facing the European pensions landscape, specifically those pertaining to DC plans. The research company believes DC will start playing an increasingly important role in retirement provision moving forward.
It builds on the inaugural European Corporate DC report published in 2010 and gives more insight into the opportunities present in six key European markets: the United Kingdom, the Netherlands, France, Germany, Sweden and Poland.
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