Pension Savings: The Real Return - 2018 Edition
Better Finance Research Papers Series, 2018
500 Pages Posted: 1 Jul 2019
Date Written: October 8, 2018
In June 2013, BETTER FINANCE published a research report entitled “Private Pensions: The Real Return” which evaluated the return of private pension products after charges, after inflation (“real” returns) and – where possible – after taxation. This first report furthermore identified the factors affecting these returns in Denmark, France and Spain, including an indepth description of the pension savings vehicles available in these countries.
In September 2014, BETTER FINANCE published the 2014 edition of the "Pension Savings: The Real Return" research report, which included data updates for the three countries covered in the initial study, as well as new in-depth evaluations of pension savings for five new countries: Belgium, Germany, Italy, Poland and the United Kingdom.
The 2015 edition of the BETTER FINANCE research report was aimed at updating the existing country cases and expanding the coverage to 15 European Union countries with the addition of Bulgaria, Estonia, Latvia, the Netherlands, Romania, Sweden and Slovakia. With the inclusion of these countries the research report reached a coverage of approximately 85% of the EU population.
The 2016, 2017 and 2018 editions are updates of the 15 existing country cases, with this year’s edition also expanding the geographic scope to include Lithuania. The report is based on the most recent data available at the time of print and includes a wider range of available pension vehicles with the aim of encompassing all financial savings products actually used by EU citizens to save for retirement. Furthermore, overviews on recent trends in the respective long-term savings and pension markets are provided.
The entire series of research reports has illustrated over the years that real returns of retirement savings have been, and still are on average, very low once charges, inflation and taxes have been taken into account. Measuring the impact of all these elements (inflation, charges and taxes) is especially important in a low interest rate environment because the real return for savers can be substantially negative. Since a comprehensive approach to provide this indispensable information to savers is not provided for the time being by Public Authorities or other independent bodies, this research report aims to improve transparency on the real returns of long-term and pension savings in Europe. This is in line with the European Commission’s current “Action” to improve the transparency of performance and fees in this area (as part of its Capital Markets Union – CMU - Action Plan). This CMU Action was proposed by BETTER FINANCE in 2015.
Keywords: Pension Savings, Real Returns, Cross Country Analysis, Retirement System, Performance, Costs
JEL Classification: G19, J26, J32
Suggested Citation: Suggested Citation