Legislative changes across Europe are increasing the flexibility and simplicity of workplace retirement plan design, changes that put money managers in a better position to compete with market dominating insurance companies.
Insurers have about 80% of the retirement savings markets in Europe compared with 20% that is in the hands of money managers, according to sources.
Now regulators, in efforts to reduce what they see as a fragmented market with an excessive number of defined contribution arrangements, are making more categories of retirement savings plans available to money managers, while at the same time condensing the influence of insurers.
In Germany, for example, legislators in 2017 opened three sources of assets to money managers that previously were available only to insurers. And starting this year, the Irish and French defined contribution markets will see a reduction in insurance-based retirement offerings. Sweden and the Netherlands witnessed similar changes in the past few years.
Money managers said they expect to take some business away from insurance companies or to partner with insurers to provide investment management services.
Michael Hennig, head of workplace investing, Germany, investment and pension solutions at Fidelity International in Kronberg, Germany, said, "Where the asset managers won't set up their own (retirement plans) they will partner with an existing insurance provider."
With regulators opening up markets to money managers' strategies, some sources said those firms offering lifecycle strategies could be in a sweet spot, as those approaches are better prepared to weather the current investment conditions than insurers' guarantee-based insurance products because they don't depend on fixed-income returns and offer better diversification.
"Multinational companies are moving their employees to DC plans away from individual insurance policies," said Christian Lemaire, global head of retirement solutions at Amundi in Paris. "This means more corporations are using lifecycle strategies instead of low-yielding insurance products."
In Germany — the most recent DC market to open up and the most carefully watched European market — the government last year did away with guarantee-based arrangements by introducing workplace defined contribution plans for the first time. Aimed at giving the workers in collectively organized industries with unions access to non-private collective defined contribution arrangements, the reform introduced occupational DC plans and opened existing categories of individual workplace DC plans to money managers.