European pensions potential
After spending three days intently listening to acre upon acre of data on European demographics, I guess it leaves you kind of attuned to the subject. So it didnít surprise me at the end of last week when a new report on retirement provision from Deutsche Bank leapt off the screen at me while I was out on my usual pensions surf around. In the report, the bank concludes that ďRetirement provision, and thus asset management, are the business lines that will profit most from the ageing process in the G3 countriesĒ*. Well, Iíll go along with that. Itís always seemed a no-brainer to me.
The report notes that in Germany something like 95% of the average pensionerís income is financed by the state, which is high compared to the United States where the corresponding figure is 59%, and the much-maligned UK where it is only 43%. Stats like this, by the way, have always made me wonder why the UK pensions and fund management industries donít get the odd pat on the back sometimes for having done a good job over the years, but I suppose thatís too much to ask.
The report I read also makes the obvious point that, since state pensions in Europe are likely to be much less in future, the need for private pensions is bound to increase. Tell me about it. Iíve just listened to three days worth of this stuff, and anyone doing the same would be similarly convinced.
Since getting back from Germany I notice the Government over there is just about to cut pensions for the first time since the war. According to the newspapers, Gerhard Schroder, the German Chancellor, is going ahead with the cuts even though his own mother will be among those hit hardest by the changes. These cuts and others that will follow them across the whole of Europe are clearly going to be high on the political agenda for much of the beginning of this new century as European Governments that were wedded to the idea of pay-as-you-go funding eventually come to terms with the fact that the people who were supposed to pay for todayís workers pensions were never born. Itís a massive issue and one that will need to see unprecedented spread of private pensions throughout the whole of Europe. If Iím any judge, that will turn out to have quite a bit to do with employers and worksite pension distribution. Something weíre pretty good at in the UK.
5 November 2003
* Ageing calls for further internationalisation in banking by Karin Gruber, Deutche Bank 28 October 2003
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