Table of Contents
- EXECUTIVE SUMMARY
- Market context
- The European Wealth Market
- Occupational Pensions
- Private Pensions
- Market Development
- Alternative Retirement Saving Solutions
- INTRODUCTION
- What is this report about?
- Who is the target reader?
- How to use this report
- CHAPTER 1 MARKET CONTEXT
- Europe sees increasing demand for supplementary retirement provision
- High net worth clients require specialized products and advice
- CHAPTER 2 THE EUROPEAN WEALTH MARKET
- Introduction
- Key findings
- The High Net Worth market in Europe continues to grow
- The structure of the market influences the choice of retirement
solutions
- CHAPTER 3 OCCUPATIONAL PENSIONS
- Introduction
- Key findings
- Occupational Pensions offer a partial solution to the challenge of
building an adequate retirement fund
- The UK has, by far, the most highly developed market for occupational
pensions
- Specialist occupational pensions have been established for high income
earners
- A-day reforms have eliminated the necessity to purchase an annuity at
retirement
- EPPs and Group AVCs dominate the market for occupational pensions for
high income earners
- HNW individuals are restricted by basic company schemes in Germany
- Five options for occupational pension plans exist in Germany
- German occupational pension schemes allow limited scope for choice
- Article 39 contracts, Article 83 contracts and PERCO schemes are
available for French executives
- Article 39 and Article 83 contracts represent the traditional
retirement plans for French executives
- The 2003 reforms provided new alternatives
- Article 39 contracts continue to be the preferred alternative
- There is limited usage of occupational pensions in Italy
- Company schemes take the form of closed and open pension funds
- Spanish occupational pension plans are largely unsuitable for high
income earners
- Occupational pension options in Spain include company and associate
schemes
- Limits on contributions to Spanish pensions are restrictive
- CHAPTER 4 PRIVATE PENSIONS
- Introduction
- Key findings
- Private Pension Plans - Closer To High Net Worth Retirement Targets
- Greater flexibility is required for the development of the private
pensions market
- Private pension options for wealthy UK clients include SIPPs, Section 32
Transfers and FSAVCs.
- Self Invested Personal Pensions continue to be the most popular
product for HNW individuals in the UK
- The nature and intensity of competition in the UK HNW retirement
market are changing
- A-day reforms encourage new market entrants and new products
- New regulations will be introduced to protect SIPP investors
- Riester pensions supplement state and occupational provisions in Germany
- The German government incentivises the use of Riester contracts
- The uptake of Riester pensions has been gradual
- PERP plans are set to become increasingly popular in France
- Madelin contracts are the traditional private pensions vehicle
- Legislative reform in 2003 introduced the PERP
- PERP plans are expected to become increasingly popular over the next
few years
- Italy' s private pensions market is limited in size and scope
- Open pension funds and piani individuali pensionistici (PIPs) provide
private pensions in Italy
- PIPs are the preferred option for private pensions
- There is scope for development of the Italian private pensions market
- Private pensions in Spain are a mix of insurance products and pension
funds
- Private pensions in Spain are available as individual pension plans or
individual life insurance policies
- Private pensions are widely used, but contributions remain low
- CHAPTER 5 MARKET DEVELOPMENT
- Key findings
- The UK Government is keen to encourage the use of annuities
- The Treasury objects to the use of ASPs to avoid inheritance tax
- ASPs will become a less attractive option
- A call for increasing flexibility, efficiency and transparency in Germany
- Germany' s BVI sees a need for more flexible occupational pensions
- Wealthy Germans require more sophisticated pension alternatives
- Enactment of the EU Occupational Pensions Directive will create new
market opportunities in France and across Europe
- EU legislation opens up the market for occupational pensions
- Providers will see new product and market development opportunities,
pending enactment across Europe; but legal and regulatory complexity will
persist
- Expansion of the occupational and private pensions markets is
anticipated in Italy
- Upcoming legislative changes will create opportunities for more funds
to be allocated to pension schemes and for innovative products to be
developed in Italy
- Innovative product development is anticipated
- The revised tax regime in Spain will further reduce the appeal of
pension plans to the wealthy
- Lower overall contribution limits will restrict investment by HNW
individuals
- The Spanish government favors annuitization
- A new long-term savings plan will compete with life insurance and
pension funds
- CHAPTER 6 ALTERNATIVE RETIREMENT SAVINGS SOLUTIONS
- Introduction
- Key findings
- UK High Net Worth Investors add SRIs, Venture Capital Trusts, property
and hedge funds to their portfolios
- Tax treatment of funds in excess of the Lifetime Allowance heightens
the need for alternative investments
- SRI funds and REITs provide additional long term investment options
- The UK High Net Worth segment favours investment in hedge funds to
reduce volatility; VCTs are used for tax optimization
- There is tempered demand for insurance-based products in Germany
- German wealth managers recommend managed solutions, including
investment in mutual funds and equity
- Risk aversion in Germany will sustain demand for with-profits funds
and guaranteed products
- Legislation creates a more complex operating environment, but
ultimately benefits investors
- There will be consolidation in the market and providers will need to
reconsider their operating strategies
- Life insurance, property and equity investments supplement pension
provisions in France
- Life insurance is a popular option for retirement savings
- Commercial real estate offers a viable option for retirement planning
- PEAs provide a platform for investment in equity
- Italian High Net Worth clients rely on a wide range of instruments
- Italian aversion to risk limits investors' use of equity investments
- Property and Variable Annuities may offer more predictable alternatives
- Wealthy Spaniards select among mutual funds, equity investment, Sicavs
and property
- Despite a traditional aversion to its inherent risks, wealthy
Spaniards are willing to invest in the stock market
- Sicavs are appropriate for some HNW investors
- Demand for property investment remains strong
- Spanish HNW individuals pursue innovative solutions
- Amendments to the tax code will have implications for long term
investments
- APPENDIX
- Definitions
- Endowment Policy
- High net worth (HNW)
- New business
- Pension product definitions
- Additional Voluntary Contributions (AVCs)
- Controlling directors
- Defined contribution pensions scheme
- Defined benefits pensions scheme
- Executive Pension Plans (EPPs)
- Free Standing Additional Voluntary Contributions (FSAVCs)
- Funded Unapproved Retirement Benefit Schemes (FURBs)
- Personal Pensions
- Section 32 Transfers
- SIPPs (Self Invested Personal Pensions)
- Small Self Administered Schemes (SSAS)
- Unfunded Unapproved Retirement Benefit Schemes (UURBs)
- Further reading
- Life and Pensions SPP
- Related Global Wealth Service SPP Reports
- Market Reports
- Strategic Insight Reports
- SPP writing team
- List of Tables
- Table 1: Gross Replacement Rates of 1st Pillar Pensions
- Table 2: High Net Worth Individuals 2005
- Table 3: UK Occupational Pension Plans - Total New Business H1 2006
- Table 4: France: Occupational Pension Plans - Annual Contributions 2005
- Table 5: Italy: Occupational Pension Plans H1 2005 & 2006
- Table 6: Spain: Occupational Pension Contributions Jan - Sep 2006
- Table 7: UK: Private Pension Plans - Total New Business H1 2006
- Table 8: New Riester Contracts 2000-2005
- Table 9: France: Personal Pension Plans Annual Contributions 2005
- Table 10: Italy: Personal Pension Plans - Contributions Q1 2006
- Table 11: Spain: Personal Pension Plans & Retirement Insurance
Contracts Jan - Sep 2006
- List of Figures
- Figure 1: High Net Worth Individuals 2005
- Figure 2: High Net Worth Individuals 2005 - Total Net Worth
- Figure 3: UK: Occupational Pension Plans - Total New Business H1 2006
- Figure 4: France: Occupational Pension Plans - Annual Contributions
2005
- Figure 5: Italy: Occupational Pension Plans HI 2005 & 2006
- Figure 6: Spain: Occupational Pension Contributions Jan - Sep 2006
- Figure 7: UK: Private Pension Plans - Total New Business H1 2006
- Figure 8: Germany: New Riester Contracts 2000-2005
- Figure 9: France: Personal Pension Plans Annual Contributions 2005
- Figure 10: Italy: Personal Pension Plans - Contributions Q1 2006
- Figure 11: Spain: Personal Pension Plans & Retirement Insurance
Contracts Jan - Sep 2006
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