The UK will become Europe's first €1 trillion defined contribution (DC) pensions market by 2021, consulting firm Cerulli Associates has forecast.
The Boston-headquarterd firm said it expects DC assets to grow by 142.2% from the 2016 estimate of €471.4 billion to €1,141.9 billion.
UK DC schemes now have more active members than UK defined benefit (DB) schemes and, with many locked into growth phases for years to come, DC offers the most significant growth opportunity in the country’s pension system.
The size of the UK pensions market and the fact that auto-enrolment has not yet been completed are factors in its pensions growth potential, Cerulli said.
European asset managers identified Germany, Ireland, and - to a lesser extent - Italy as the markets with the next-best growth potential. But there have as yet been no concrete moves towards auto-enrolment legislation in Ireland.
Justina Deveikyte, associate director of European institutional research at Cerulli, said: "The managers we spoke to consider the UK, Ireland, Switzerland, and Germany the most profitable DC markets.
“However, with fees under constant downward pressure, only a minority consider any of Europe's markets 'extremely profitable.' The Swedish and Italian markets are worlds apart in sophistication, but both are suffering intense pricing pressure."
In Sweden, the Nordics' biggest market, the growing influence of insurers over the past decade has forced fees down. Managers told Cerulli it is getting harder for boutique firms to prosper due to the combined challenges of fee pressure, competition, increasing governance demands, and growing pressure for managed solutions, as well as the shift of new asset flows into low-cost passives.
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