Aviva's European Pension Gap Study
In its September 2010 European pension gap study, Aviva warns of an impending European pension crisis addressing issues such as:
- What is the size of the pensions gap in Europe?
- How much more do individuals need to save to provide an adequate income in retirement?
- What can be done by pension providers and governments working in partnership to help encourage saving for retirement?
Size of the pensions gap in Europe
According to Aviva’s European pension gap study, the pensions gap for individuals retiring between 2011 and 2051, in the next 40 years, across the 27 EU member states stands currently at EURO 1.9 trillion annually.
At the country level, the United Kingdom, France, Germany and Spain have the biggest pension gaps. The UK has the second largest pension gap at EURO 379 billion compared to Germany’s EURO 469 billion
Commenting on these figures, Andrea Moneta, Aviva’s chief executive of Aviva EMEA, said in the video presentation:
“It’s the first time this figure has been measured at a pan-European level and it reveals the full extent of the gap between what we need to save for our retirement and what we actually put aside”.
The study indicate that the pensions gap is most severe for those within 10 years of the state retirement age. The picture appears to be brighter for younger savers.
Saving more and saving earlier or
face the consequences!
Aviva’s European pension gap study comes with a stark warning:
”Until Europe’s workforce starts to save more and earlier, it faces a seriously reduced standard of living once they retire or they will be forced to rely on other measures such as non-pension assets like property or they must retire later or they must work in retirement. Or a combination of the above.”
If EU citizens do not save more and start earlier, according to Moneta, they will have to accept a combination of the following:
- relying on non-pension assets, such as property, may fund as little as 20% of the pensions gap
- retiring later; Aviva estimates that increasing the retirement age by 10 years would reduce the pensions gap to €840 billion, which is not enough to cover the pensions gap
- working in retirement; Aviva expects to see the number of people working beyond their retirement age doubling in the next ten years
- ; living on 50% of pre-retirement income still leaves a gap of almost €700 billion
What is Aviva proposing?
To increase consumer confidence in their pension provisions, Aviva’s European pension gap study comes with four recommendations in order for European policy-makers to work in partnership with the private sector, including:
- the creation of a European Quality Standard for pensions that would allow comparisons on the quality and security of the various pension products
- a review of the effectiveness of existing schemes for pension savings and measures for encouraging savings
- a call on governments to issue regular individual pension statements to their citizens that would allow them to see exactly where their pension provisions stand, and
- the creation of national pensions savings targets
Aviva believes “Each recommendation will help build a more secure platform for individuals to plan for their retirement.”
For the video interview with Andrea Moneta, Aviva’s chief executive of Aviva EMEA, regarding Aviva’s European Pension Gap Study.
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