Europe’s annual "pensions gap" stands at €1.9 trillion, according to the results of the first comprehensive analysis of the region’s retirement landscape by leading European insurer Aviva.
- Analysis confirms that saving more and earlier will have a significant positive impact on retirement income.
- Europe’s current workforce faces a seriously reduced standard of living once they retire unless they increase their pension saving. The alternative is to rely on non-pension assets, retire later or work in retirement.
- Despite the size of the pensions gap, individuals can make a significant positive impact to their retirement income by saving more and saving earlier.
- Aviva calls for a robust partnership between the insurance industry and Government to create a stronger savings culture and improve consumer confidence in planning for retirement.
- Aviva makes four recommendations to build a more secure platform for individuals to plan for retirement: create a European Quality Standard for Pensions, review measures for encouraging saving, governments to issue regular individual pension statements and establish a Pensions Savings Target at national levels.
Europe’s annual "pensions gap" stands at €1.9 trillion, according to the results of the first comprehensive analysis of the region’s retirement landscape by leading European insurer Aviva. The pensions gap is equivalent to 19% of the European Union’s 2010 GDP and indicates that unless individuals increase their saving for retirement the majority will face a seriously reduced standard of living once they retire. At a country level in absolute terms, the UK, France, Germany and Spain have the largest national pensions gaps.
Aviva’s research assessed the gap between the savings that people retiring between 2011 and 2051 will need in order to maintain their standard of living in retirement* and actual provision available across the 27 EU member states. It indicates that without action today to save more many EU citizens will be forced to accept a combination of:
- Relying on non-pension assets. Aviva estimates that non-pension assets, such as property, held by EU citizens may fund as little as 20% of the pensions gap
- Retiring later. Increasing the retirement age by 10 years would reduce the pensions gap to €841billion. It will help, but it will not solve the problem on its own
- Working in retirement. Already, some countries such as the UK expect to see the number of people working beyond retirement age double in the next 10 years. This trend looks set to continue
- Accepting a significantly reduced standard of living. However, living on 50% of pre-retirement income in retirement still leaves a €669 billion pensions gap.
Aviva’s analysis also shows that:
- The pensions gap is most severe for those within 10 years of the state retirement age. These individuals will not have time to build up adequate savings to close the pensions gap before retirement and will need to consider drawing on non-pension assets, working longer or lowering their expectations in retirement.
- The picture is brighter for younger savers. For example, a 40 year old in the UK will need to increase annual savings by an average of €3,700 to close their personal pensions gap. A 40 year old in Spain must save €2,900 a year to close their pensions gap yet this figure falls by more than half to €1,200 a year for a Spanish 20 year old, equivalent to just 6% of their average disposable income.
- There are important differences between European countries. Western European countries tend to have higher pensions gaps due to larger populations and higher levels of pre-retirement income. By contrast in Central and Eastern Europe the research demonstrates that individuals require a lower increase in annual savings, partly explained by lower salaries and wide ranging reform to pension systems over the last two decades.
Aviva’s research outlines recommendations to address the pensions gap
Aviva calls on European policy-makers to work in partnership with the private sector to create a greater savings culture across the region and build a more secure platform for individuals to plan for their retirement through:
- The creation of a European Quality Standard for Pensions to demonstrate the quality and security of products, facilitate comparability and increase consumer confidence.
- Establish a European Pensions Savings Target, variable by country.
- Issuing of regular pension statements to all citizens to encourage consumers to consider the state pension as only part of a mixed strategy for providing for their retirement.
- Governments review the effectiveness of existing incentive schemes for pensions saving, their impact and visibility and whether they are appropriately communicated and targeted.
Andrea Moneta, chief executive of Aviva EMEA, said: “We cannot ignore the fact that longer life expectancy brings with it new challenges for governments, individuals and industry. All relevant stakeholders should ensure that life is not just longer, but richer in every sense.
“Individuals and governments face a pensions gap challenge but saving more and saving earlier will significantly help increase retirement income.
“It’s time for a fresh approach – a partnership between the European Commission, national governments and the insurance industry to develop a stronger savings culture. Measures taken recently by national governments and the publication of the Pensions Green Paper by the European Commission are positive steps but we need more and to turn new ideas into actions quickly.
“Adopting Aviva’s four recommendations - creating a European Quality Standard for Pensions, reviewing national measures for encouraging saving, issuing regular pension statements and establishing a Pensions Savings Target at a national level - will help build a more secure platform for individuals to plan for their retirement.
More information about the research
A summary of the savings and retirement income gap for individuals retiring 2011-51 per person and country totals.
|
|
| Country total (€bn) |
| Average Per Person (€000) | |||||
| Country |
| Annual pensions gap | Annual pensions gap as a % of 2010 PPP GDP |
| Annual pensions gap (all individuals retiring 2011-51) | Age in 2010 | Pension gap as a % of disposable income (all individuals retiring 2011-51) | ||
| 20 | 40 | 50 | |||||||
| France |
| 243.5 | 17% |
| 7.9 | 3.4 5.2 % | 5.2 | 7.5 | 32% |
| Czech Republic |
| 25.3 | 14% |
| 4.6 | 0.9 | 2.1 | 4.0 | 43% |
| Germany |
| 468.8 | 24% |
| 11.6 | 1.7 | 4.7 | 9.8 | 49% |
| Hungary |
| 9.5 | 7% |
| 1.9 | 0.8 | 1.4 | 1.6 | 28% |
| Ireland |
| 20.2 | 17% |
| 9.1 | 1.7 | 3.9 | 6.9 | 34% |
| Italy |
| 97.6 | 8% |
| 3.1 | 0.4 | 1.0 | 2.0 | 14% |
| Lithuania |
| 5.0 | 13% |
| 3.0 | 0.8 | 2.1 | 3.6 | 33% |
| Poland |
| 68.8 | 14% |
| 3.4 | 1.3 | 2.3 | 4.3 | 43% |
| Romania |
| 40.2 | 23% |
| 3.7 | 1.3 | 2.9 | 4.8 | 58% |
| Spain |
| 170.5 | 18% |
| 7.0 | 1.2 | 2.9 | 5.7 | 35% |
| UK |
| 379.0 | 26% |
| 12.3 | 1.5 | 3.7 | 7.4 | 56% |
| Russia |
| 401.7 | 27% |
| 5.8 | 1.6 | 3.7 | 6.1 | 78% |
| Turkey |
| 91.0 | 14% |
| 2.4 | 0.5 | 1.5 | 3.2 | 34% |
Copies of Aviva’s report “Mind the Gap – Quantifying the Pensions Gap in Europe”, a selection of individual country reports and technical details can be found at www.aviva.com/europepensionsgap.
Aviva’s research consists of three elements:
- Quantification of the pensions gap, conducted in association with Deloitte. The work is a detailed analysis to quantify the annual retirement income gap and the capital shortfall at retirement.
- Calculation of levels of non-pension assets. Data to size non-pension assets was sourced from a global model of personal financial assets developed by Aviva in conjunction with Oliver Wyman.
- Investigating consumer attitudes to saving. Aviva’s Consumer Attitudes Survey, undertaken for Aviva by The Futures Company and now in its seventh year is a global quantitative study of consumer attitudes to topics including risk, advice, investment and retirement. The most recent report concludes that significant work is required to change consumer behaviour over regular saving for retirement. More than half of those surveyed in Aviva’s report still expect to rely on their State pension, other non-pension assets or working beyond retirement age rather than saving regularly or taking a personal pension plan.
* a figure set as 70% of final salary by the Organisation for Economic Co-operation and Development.
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Enquiries:
Jon Bunn, Corporate Affairs Director, Aviva Europe
+44 (0)20 7662 3101
Andrew Reid, head of group media relations, Aviva plc
+44 (0)20 7662 3131
Notes to editors:
About Aviva
- Aviva is the world’s sixth largest** insurance group, serving 53 million customers across UK, Europe, North America and Asia Pacific.
- Aviva's main business activities are long-term savings, fund management and general insurance, with worldwide total sales of £45.1 billion and funds under management of £379 billion at 31 December 2009.
- We are the largest insurance services provider in the UK and one of the leading providers of life and pensions products in Europe.
- Aviva operates in Europe with a clear two part strategy to capture the considerable opportunity in the region: firstly Aviva Europe’s "Quantum Leap" which is transforming the previously federated system of 12 companies into a single, effective and efficient pan-European business (Aviva Europe SE) and, secondly, the strategic development of our 58% holding in Delta Lloyd following the IPO in November 2009.
- In 2009, Aviva Europe generated £16.3 billion of sales (36% of group total) through its retail and Bancassurance distribution channels making a significant contribution to value creation and delivering £797 million IFRS operating profit.
- The Aviva media centre at www.aviva.com/media includes images, company and product information and a news release archive.
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** based on gross worldwide premiums at 31 December 2009