Ageing demographic renders Europeans’ long term savings provision unfit for purpose
* Janus Capital European Consumer Finance Survey reveals alarming deficits in European consumers’ long term savings provision
* Credit crunch / low interest environment has eroded consumer savings with majority deterred from taking any risk with their money
* Expectations of retirement age / provision cannot be met without a radical rethink
Europe’s approach to long-term savings provision is fundamentally flawed and can no longer meet the needs of its ageing population. That is the stark warning coming from advance findings of the Janus Capital European Consumer Finance Survey, the first annual study of the European household balance sheet.
Due to be published later this month, the study of 6,011 European adults, conducted by TNS and authored by leading financial strategist David Bowers for Janus Capital pinpoints alarming deficits in levels of personal savings and retirement provision across Europe. It also suggests that while consumer aspirations regarding retirement age and lifestyle expectations are unchanged, the collective ability to set aside adequate funding to meet these aims has fallen behind, threatening a major shortfall in public finances.
Across the six nations surveyed - United Kingdom, France, Germany, Netherlands, Germany, Spain and Italy – only 63% of people questioned were actively investing in savings vehicles. Moreover, 11% of savers admit to being forced to raid these funds as the recession has taken hold. The credit crunch also appears to have fostered a culture of risk aversion among potential investors deterring 55% of them from taking out stock market investments under current market conditions. Further to this, 60% said they were not prepared to take any risks at all with their savings. This trend would need to be reversed if capital lost in the downturn is to be recouped going forward.
Worryingly, the belief that the state will meet requirements for retirement provision, still comes out strongly across our panel. But with an ageing population and increasing pressure on the public purse, sustaining even a basic state pension will be increasingly hard to achieve without a strong element of self provision.
Key research findings:
Attitude to savings:
* 34% of Europeans currently save. Dutch are most likely to be savers with 61% either claiming to save a little or a lot. This compares to just 25% of Italian respondents. 32% of UK respondents save.
* An average of 58% across European countries surveyed considered they had inadequate savings. This rises to 69% among French respondents. However, just 39% of Dutch respondents felt they had a shortfall.
* At a pan European level 54% had a deposit account, 21% had stock market investments, 10% had bond investments and 10% had property investments. Shockingly 31% had no exposure to any savings vehicle.
Attitude to investments:
* 60% of investors claimed that they were unprepared to take any risk with their savings. French (63%), Spanish (63%) and Dutch (64%) were most likely to be risk averse.
* British investors have the most adventurous attitude to risk with 26% of the sample claiming they are prepared to accept occasional losses / take substantial risks.
* When asked at what age they plan to retire, the average age given was 62. This was pretty consistent across all countries surveyed.
* When asked how they planned to fund their retirement, almost half (47%) expected some form of state provision – rising to 73% in Germany – 36% expected a corporate pension – 68% of Dutch and 45% of UK respondents.
* Alarmingly, 15% admitted to have no pension provision.
* Interestingly, 55% of those questioned claimed that the stock market was not a good way to invest for their retirement. This rises to 67% among French respondents.
Commenting on the findings David Bowers, Joint Managing Director, Absolute Strategy Research said: “The Janus survey brings home the scale of the saving shortfall in Europe. Hopes of early retirement remain at odds with current attitudes toward saving and with the range of investment vehicles that are available. There is widespread skepticism of stock-market investments, with most people relying on traditional bank savings account to fund their retirement.”
Ric van Weelden, Co-CEO, Janus Capital International, the international arm of Janus Capital Group, added: “Advance findings from the first annual Janus Capital European Consumer Finance Survey clearly demonstrate how our consumer finances are singularly failing to keep step with our current long term savings needs.
“Specifically, the report highlights how insufficient responsibility for personal savings, risk aversion and a widespread belief that the state will provide is fast creating a retirement time bomb for Governments where costs of providing adequate provision for an ageing population could become unsustainable very soon. Establishing a strong collaborative relationship between Government and the financial services sector will be essential if we are to reverse this damaging trend.” he concluded.
Notes to editors:
Research was conducted in June 2009 by TNS among nationally representative samples of adults aged between 25 and 65 and living in each of the following countries: the UK, France, Germany, Netherlands, Italy and Spain. A total of 6,011 interviews were achieved (around 1,000 interviews per surveyed country). Interviews were conducted 17th June to 28th June 2009, using the TNS 6th Dimension on-line panels. Details of full research methodology are available on request.
About Janus Capital Group
Janus Capital Group (Janus) enables access to a group of three specialist investment managers that offer growth, risk-managed and value investment strategies through one global organisation. Janus Capital Management LLC, INTECH Investment Management LLC (INTECH) and Perkins Investment Management LLC (Perkins) each adopt a distinct investment style with their sole focus on investment management. As of September 30 2009, Janus managed $151.8 billion in assets for more than four million shareholders, clients and institutions around the globe.
Based in Denver, Janus also has offices in London, Milan, Munich, Tokyo, Hong Kong, Singapore and Melbourne. Janus Capital Group consists of Janus Capital Management LLC, INTECH Investment Management LLC (INTECH), formerly known as Enhanced Investment Technologies, LLC and Perkins Investment Management LLC (Perkins), formerly known as Perkins, Wolf, McDonnell and Company LLC.
TNS, who recently merged with Research International, is the world’s largest custom research agency delivering actionable insights and research-based business advice to its clients so they can make more effective business decisions. TNS offers comprehensive industry knowledge within the Consumer, Technology, Finance, Automotive and Political & Social sectors, supported by a unique product offering that stretches across the entire range of marketing and business issues, specialising in innovation & product development, brand & communication, stakeholder management, retail & shopper, and qualitative research. Delivering best-in-class service across more than 75 countries, TNS is part of Kantar, the world’s largest research, insight and consultancy network. Please visit www.tnsglobal.com for more information.
About the author:
David Bowers is joint managing director of Absolute Strategy Research (ASR), a consultancy he co-founded with Dr. Ian Hartnett in June 2006. ASR provides independent investment-strategy advice to institutional clients around the world as well as specialising in creating and analysing financial surveys.
With more than 25 years in the financial services industry, David is one of the most experienced and well known investment strategists working out of London. He has built up an extensive knowledge of financial markets and of the macroeconomic forces that help shape them. Previously David was chief investment strategist for Merrill Lynch, where he worked for eleven years. There he ran the firm’s highly respected Global Fund Managers’ Survey and developed it into a powerful tool for understanding how investors view the world.
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