RETHINKING DISTRIBUTION

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Scenario Planning Pension and Insurance Markets

Figure 16

New opportunities

Limited opportunities

The AM industry will develop adequate long term solutions for pensioners offering minimum guarantees. Funds will capture a significant market share within a growing pension and insurance market as a part of the risk is transferred to individuals.

As risk is being transferred to individuals, AM products will become more relevant to the pension and insurance market. However, as the population will still rely on public pensions, the pension and insurance market will only offer limited opportunities.

Risk is transferred to Participants

Business as usual

Low penetration

The pension and insurance market (excl. pillar 1) will not expand extensively as the population will rely on public pension and insurance systems and sponsors will still have to guarantee minimum return on investment.

Despite increased pension savings in voluntary vehicles, the AM industry will not be equipped to endorse risks and hence compete directly on the pension and insurance market. However, AMs will be able to develop partnerships with other pension and insurance providers to offer long term solutions.

Savings in voluntary pension and insurance schemes

Low

High

Sponsors of

pension and

insurance vehicles

The ageing population is a trend that raises significant risks and opportunities for the fund industry. The first risk is that the flow of investment into the asset management industry will steadily decline as today’s retail investors turn into tomorrow’s retirees, with a far smaller workforce taking their place. Another threat is that the asset management industry might fail to provide the guaranteed return and income products that are increasingly required by an ageing market for retirement funding. The flip side is that the industry still has time to develop

these products and to position itself to seriously compete in a market traditionally dominated by insurance firms. According to EFAMA, a retirement plan, with unified standards across the EU and certification given by the appropriate regulatory body, could be introduced. This “Officially Certified European Retirement Plan” (OCERP) proposed by EFAMA could take a form of a wrapper and form part of both Pillar 2 and Pillar 3. This would create a level playing field for retirement plan providers across the EU (insurance companies, banks and

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