Europe needs to build its pension reserves to handle the expected flood of retirees, warned Philip Lambert, head of corporate pensions of Unilever Group and chairman of the European Federation for Retirement Provision.
Despite having 70 million more people than the United States, European Union member states have only $1.2 trillion in pension assets compared with $3.9 trillion in U.S. pension funds, he said.
Worse, more than 80% of EU pension assets are based in the United Kingdom and the Netherlands. Other EU states, with about the same population as the United States, have a mere $224 billion, he said.
Meanwhile, state pay-as-you-go systems cannot bear their projected burdens, as the ratio of retirees to workers is expected to double in the EU between 1990 and 2040. French and German pension experts have said their nations will have to bring in massive numbers of immigrants, delay the retirement age or lower pension benefits to cover their liabilities, none of which is politically acceptable.
Mr. Lambert and the EFRP believe dramatically more funding is needed to take the burden off of the pay-as-you-go systems. To cover roughly half of the working population, "funded plans will have to quadruple from the present 6% of total payout to the 25% level," he told the National Association of Pension Funds' European investment conference.
Greater efficiency will be needed to lower costs, he added. In particular, Mr. Lambert urged regulators from being restrictive and discouraging private pension plans, and that pension funds be given total freedom of investment.