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Retirement solutions for the European wealthyPublished by: Datamonitor Published: Jan. 8, 2007 - 80 Pages Table of ContentsTABLE OF CONTENTS EXECUTIVE SUMMARY 4 Market context 4 The European Wealth Market 4 Occupational Pensions 4 Private Pensions 6 Market Development 7 Alternative Retirement Saving Solutions 8 INTRODUCTION 19 What is this report about? 19 Who is the target reader? 19 How to use this report 19 CHAPTER 1 MARKET CONTEXT 21 Europe sees increasing demand for supplementary retirement provision 21 High net worth clients require specialized products and advice 22 CHAPTER 2 THE EUROPEAN WEALTH MARKET 23 Introduction 23 Key findings 23 The High Net Worth market in Europe continues to grow 23 The structure of the market influences the choice of retirement solutions 25 CHAPTER 3 OCCUPATIONAL PENSIONS 27 Introduction 27 Key findings 27 Occupational Pensions offer a partial solution to the challenge of building an adequate retirement fund 27 The UK has, by far, the most highly developed market for occupational pensions 28 Specialist occupational pensions have been established for high income earners 29 A-day reforms have eliminated the necessity to purchase an annuity at retirement 30 EPPs and Group AVCs dominate the market for occupational pensions for high income earners 30 HNW individuals are restricted by basic company schemes in Germany 32 Five options for occupational pension plans exist in Germany 32 German occupational pension schemes allow limited scope for choice 33 Article 39 contracts, Article 83 contracts and PERCO schemes are available for French executives 34 Article 39 and Article 83 contracts represent the traditional retirement plans for French executives 34 The 2003 reforms provided new alternatives 35 Article 39 contracts continue to be the preferred alternative 36 There is limited usage of occupational pensions in Italy 37 Company schemes take the form of closed and open pension funds 37 Spanish occupational pension plans are largely unsuitable for high income earners 39 Occupational pension options in Spain include company and associate schemes 39 Limits on contributions to Spanish pensions are restrictive 40 CHAPTER 4 PRIVATE PENSIONS 42 Introduction 42 Key findings 42 Private Pension Plans - Closer To High Net Worth Retirement Targets 42 Greater flexibility is required for the development of the private pensions market 43 Private pension options for wealthy UK clients include SIPPs, Section 32 Transfers and FSAVCs. 44 Self Invested Personal Pensions continue to be the most popular product for HNW individuals in the UK 44 The nature and intensity of competition in the UK HNW retirement market are changing 46 A-day reforms encourage new market entrants and new products 46 New regulations will be introduced to protect SIPP investors 47 Riester pensions supplement state and occupational provisions in Germany 47 The German government incentivises the use of Riester contracts 47 The uptake of Riester pensions has been gradual 48 PERP plans are set to become increasingly popular in France 49 Madelin contracts are the traditional private pensions vehicle 49 Legislative reform in 2003 introduced the PERP 50 PERP plans are expected to become increasingly popular over the next few years 51 Italy’s private pensions market is limited in size and scope 52 Open pension funds and piani individuali pensionistici (PIPs) provide private pensions in Italy 52 PIPs are the preferred option for private pensions 53 There is scope for development of the Italian private pensions market 55 Private pensions in Spain are a mix of insurance products and pension funds 55 Private pensions in Spain are available as individual pension plans or individual life insurance policies 55 Private pensions are widely used, but contributions remain low 56 CHAPTER 5 MARKET DEVELOPMENT 58 Key findings 58 The UK Government is keen to encourage the use of annuities 58 The Treasury objects to the use of ASPs to avoid inheritance tax 58 ASPs will become a less attractive option 59 A call for increasing flexibility, efficiency and transparency in Germany 60 Germany’s BVI sees a need for more flexible occupational pensions 60 Wealthy Germans require more sophisticated pension alternatives 60 Enactment of the EU Occupational Pensions Directive will create new market opportunities in France and across Europe 61 EU legislation opens up the market for occupational pensions 61 Providers will see new product and market development opportunities, pending enactment across Europe; but legal and regulatory complexity will persist 61 Expansion of the occupational and private pensions markets is anticipated in Italy 62 Upcoming legislative changes will create opportunities for more funds to be allocated to pension schemes and for innovative products to be developed in Italy 62 Innovative product development is anticipated 62 The revised tax regime in Spain will further reduce the appeal of pension plans to the wealthy 63 Lower overall contribution limits will restrict investment by HNW individuals 63 The Spanish government favors annuitization 63 A new long-term savings plan will compete with life insurance and pension funds 64 CHAPTER 6 ALTERNATIVE RETIREMENT SAVINGS SOLUTIONS 65 Introduction 65 Key findings 65 UK High Net Worth Investors add SRIs, Venture Capital Trusts, property and hedge funds to their portfolios 65 Tax treatment of funds in excess of the Lifetime Allowance heightens the need for alternative investments 65 SRI funds and REITs provide additional long term investment options 66 The UK High Net Worth segment favours investment in hedge funds to reduce volatility; VCTs are used for tax optimization 67 There is tempered demand for insurance-based products in Germany 67 German wealth managers recommend managed solutions, including investment in mutual funds and equity 67 Risk aversion in Germany will sustain demand for with-profits funds and guaranteed products 69 Legislation creates a more complex operating environment, but ultimately benefits investors 70 There will be consolidation in the market and providers will need to reconsider their operating strategies 71 Life insurance, property and equity investments supplement pension provisions in France 72 Life insurance is a popular option for retirement savings 72 Commercial real estate offers a viable option for retirement planning 73 PEAs provide a platform for investment in equity 73 Italian High Net Worth clients rely on a wide range of instruments 73 Italian aversion to risk limits investors’ use of equity investments 74 Property and Variable Annuities may offer more predictable alternatives 74 Wealthy Spaniards select among mutual funds, equity investment, Sicavs and property 74 Despite a traditional aversion to its inherent risks, wealthy Spaniards are willing to invest in the stock market 75 Sicavs are appropriate for some HNW investors 75 Demand for property investment remains strong 75 Spanish HNW individuals pursue innovative solutions 76 Amendments to the tax code will have implications for long term investments 76 APPENDIX 77 Definitions 77 Further reading 79 SPP writing team 81 LIST OF TABLES Table 1: Gross Replacement Rates of 1st Pillar Pensions 20 Table 2: High Net Worth Individuals 2005 24 Table 3: UK Occupational Pension Plans - Total New Business H1 2006 30 Table 4: France: Occupational Pension Plans - Annual Contributions 2005 36 Table 5: Italy: Occupational Pension Plans H1 2005 & 2006 38 Table 6: Spain: Occupational Pension Contributions Jan - Sep 2006 40 Table 7: UK: Private Pension Plans - Total New Business H1 2006 44 Table 8: New Riester Contracts 2000-2005 48 Table 9: France: Personal Pension Plans Annual Contributions 2005 51 Table 10: Italy: Personal Pension Plans - Contributions Q1 2006 53 Table 11: Spain: Personal Pension Plans & Retirement Insurance Contracts Jan - Sep 2006 56 LIST OF FIGURES Figure 1: High Net Worth Individuals 2005 23 Figure 2: High Net Worth Individuals 2005 - Total Net Worth 23 Figure 3: UK: Occupational Pension Plans - Total New Business H1 2006 30 Figure 4: France: Occupational Pension Plans - Annual Contributions 2005 35 Figure 5: Italy: Occupational Pension Plans HI 2005 & 2006 37 Figure 6: Spain: Occupational Pension Contributions Jan - Sep 2006 39 Figure 7: UK: Private Pension Plans - Total New Business H1 2006 44 Figure 8: Germany: New Riester Contracts 2000-2005 47 Figure 9: France: Personal Pension Plans Annual Contributions 2005 50 Figure 10: Italy: Personal Pension Plans - Contributions Q1 2006 53 Figure 11: Spain: Personal Pension Plans & Retirement Insurance Contracts Jan - Sep 2006 56 AbstractIntroductionScope Highlights Reasons to Purchase Get Full Details About This Report >> |
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