Global retirement assets are set to enjoy robust
growth over the next decade and will soar by two-thirds from €22trn
($28trn) at the end of 2009 to €36trn in 2020, predicts Allianz.
The European insurer sees a higher level of private retirement
savings underpinning its forecast, which demands a CAGR of
4.7%.
“We expect the escalation in
retirement savings to be the driving force for the development of
the monetary wealth in many countries in Europe, Asia-Pacific and
the US,” said Allianz senior pension analyst Renate Finke.
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Predicted growth will be coming off
a depressed base. Though, according to Allianz, thanks in large
measure to the equity market recovery global retirement assets
ended 2009 €2trn higher than a year earlier, they still remained
below the peak of €23.2trn in 2007.
In order to recoup these losses,
Allianz argues that private households will have no other option
than to save more for their retirement. This will not only occur in
countries with mature funded pension systems, such as the US, the
UK, the Netherlands and Switzerland. In countries where reforms of
pay-as-you-go systems will lead to lower pension levels, this will
have to be compensated for by a build-up of private capital to
preserve an adequate standard of living.
Allianz stressed that the same
holds true for emerging markets in Central and Eastern European
(CEE) countries and Asia where households have just started to save
and build up wealth in keeping with their increasing
prosperity.
Emerging markets to
lead
Leading the growth in retirement assets will be emerging
markets, said Finke, with the markets of Asia developing the most
dynamically.
“By 2020, these markets are
expected to grow by 16.8% a year, reaching a total volume of
€2.2trn or the size of the UK’s current market,” she predicted.
The big growth-driver in Asian
emerging markets will be a shift away from the traditional, main
component of retirement income – family support. This model,
explained Allianz, is under serious pressure from the rapid
economic development and increasing mobility of people in Asia.
Allianz predicts that in the two
most populous Asian countries, China and India, retirement asset
growth will be upwards of 20% annually. Growth in Thailand is
predicted to exceed 20% annually, while in Korea a 20% annual pace
is expected.
The growth momentum in emerging
Asia’s retirement asset market was evident during the 2008
financial crisis. While the two major retirement asset markets in
the region, Australia and Japan, saw declines in assets of 11% and
18.7% respectively compared with 2007, emerging Asia recorded a 17%
increase. Allianz noted that the discrepancy in growth rates is
largely because in emerging Asian systems net inflows make up a
vastly larger proportion of accumulation while investment
performance does not contribute as much.
“Similar dynamics [to emerging
Asia] are expected in Central and Eastern European economies, where
most countries have established a mandatory funded pension pillar
over the last decade,” said Finke.
“Central and Eastern Europe are
anticipated to realise an annual growth rate of 15.5% until
2020.”
This would take total retirement
assets from €78.4bn in 2009 to €384bn in 2020.
The major contributors to growth,
predicts Allianz, will be Poland, Hungary and Czech Republic, which
combined are expected to generate 77% of the anticipated total
market volume even though they represent only 55% of the CEE
population. Following them are expected to be Slovakia and Croatia
while Bulgaria and Romania, the two new European Union member
states, are likely to show the highest growth rates.
Australia sets the
pace
Among developed economies, Allianz sees Australia setting the
growth pace. Australia’s retirement savings will power ahead over
the next decade at a CAGR of over 8%, predicts Allianz. If correct,
the growth of Australia’s retirement assets will exceed those
predicted by Allianz until 2020 for all but one other developed
country, Greece, with a CAGR of 9.7%, though this is coming off a
very low base.
Specifically, Allianz estimates
that Australian retirement assets will grow from A$1.23trn
($1.12trn) in 2009 to $2.92trn in 2020, a CAGR of 8.2%. Australia’s
share of world retirement assets in 2009 was 3.5%, which exceeded
the shares of Japan (3.2%), Northern Europe (3.1%) and Southern
Europe (3.0%).
Allianz Australia MD, Terry Towell,
said: “Many countries are realising that an ageing population can
shatter the sustainability of public pay-as-you-go systems and are
implementing reforms to strengthen the privately-funded segment of
their retirement systems. In Australia, such reforms began more
than two decades ago and we continue to reap the benefits of these
reforms in terms of the strong ongoing growth of Australia’s
superannuation assets.”
He noted that Australia’s predicted
growth in retirement assets over the next decade will see it
overtake Germany and the Netherlands and move from having the
world’s sixth-largest pool of retirement assets in 2009 to fourth
place by 2020, behind the US, the UK and France.
US slow to
recover
Retirement assets in the US took a severe beating in 2008,
falling 22% from their all-time high of €13.1trn in the third
quarter of 2007. Despite a strong rebound in 2009, retirement
assets still lagged well behind their peak to end the year at
€11.1trn, according to Allianz which does not see the 2007 level
being attained until 2013.
Overall, Allianz predicts that US
retirement assets will grow at a CAGR of 3.6% to reach €16.3trn by
2020, reducing its total share of global retirement assets from
50.5% in 2009 to 45% in 2010.
However, despite this comparatively
slow growth pace, Allianz noted that it would produce a net
increase of €5.2trn in retirement assets, an amount equal to the
total volume of continental Western Europe’s retirement assets at
present.
Over the next 10 years Allianz
predicts that Western Europe will see retirement assets grow at a
CAGR of 4.7%, taking them from €8.26trn at the end of 2009 to
€13.66trn by 2020.
Leading in terms of growth rates
among major Western Europe countries will, predicts Allianz, be
Austria, Sweden, Spain, Italy with CAGRs of between 6% and
7.5%.
Overall, if Allianz’s predictions of growth are realised it will
represent a significant growth opportunity for insurers. Finke
believes the winners will be those insurers who identify the
changing needs of consumers and besides pure capital management
offer holistic advisory concepts and additional assistance
services.
