Europe struggles with too many pension schemes - Cerulli

PensionandkeyCertain European countries are struggling with too many pension funds, but the trend towards fewer schemes should help the asset management industry, a report says.

The UK has 200,000 pension schemes which is “impractical” while asset managers also want Italy to reduce its 361 small so-called pre-existing pension schemes, says Cerulli, the US-based consultancy.

However, a trimming of pillar II pension funds – many defined benefit but also some defined contribution schemes – is well underway in Europe, Cerulli says.

Switzerland's pension landscape, for example, shrunk from more than 2,700 vehicles six years ago to about 2,100 now. Cerulli understands that in three years there will be just 1,500.

The Dutch pension watchdog has a more ambitious target of 100 funds. There were 672 pension schemes in the Netherlands in 2012.

Elsewhere, more work is required, says Barbara Wall, a Cerulli director.

"The United Kingdom has more than 200,000 schemes, which is clearly impractical. Auto-enrolment will give rise to fewer, larger pension funds known as Super Trusts. With size comes economies of scale and skills, which should result in better retirement products and improved outcomes for members."

Wall says the 361 “pre-existing" pension funds in Italy are each tied to a specific company and some are so small they cannot invest in a meaningful way.

"One likely effect of a fall in the number of pension funds in Europe is that larger asset managers could find working with the survivors easier," says David Walker, a senior analyst at Cerulli. "Mid-size and smaller rivals may be too small to absorb large allocations."

Another potential winner, in the Netherlands at least, are premium pension institution (PPI) vehicles, because “shuttering” pension funds could join them.

"This would be welcome news for a structure the Dutch pension industry hoped would take off, but has partially misfired. There are fewer than 10 PPIs," notes Walker.

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