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Report Says Politics Slowing World Retirement Reform

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Report Says Politics Slowing World Retirement Reform


World financial services companies managed $11.9 trillion in “addressable” retirement assets in 2001, down 3% from 2000, according to a new global retirement market report from Cerulli Associates Inc., Boston.

Reformers throughout the world are promoting defined-contribution retirement savings programs that could dramatically increase the amount of retirement assets flowing into privately managed funds. But Cerulli analysts warn in their report that local politics are slowing the reform efforts.

“Inherent in pension reform is the message that individuals must invest for their retirement as the level of state provision is set to decline,” the analysts write. Nevertheless, in spite of the obvious need for reform, “the appetite for reform varies from country to country, as does the success of various initiatives.”

In Australia, for example, the government has required employers to contribute a portion of workers salaries to private pension funds for the past 10 years. This year, the Australian government increased the contribution requirement to 9%.

For now, though, employers choose the funds, and the Australian government is still debating how much choice, if any, employers ought to offer the employees, the Cerulli analysts write.

In the United Kingdom, officials are worrying about whether the new defined-contribution programs, known as “money purchase schemes” can really make up for the loss of the old defined-benefit “final salary schemes.”

Meanwhile, the countries that belong to the European Union have just reached an “agreement to agree” on a general plan for developing “pan-European” pension programs.

Cerulli analysts say many officials on the European continent are worried about an onslaught by the “Anglo-Saxon financial services industry.”

“Distrust in the ability of foreign authorities to meet the same standards as domestic supervision or the fear of smothering red tape are the other main concerns,” the analysts write.

Reproduced from National Underwriter Life & Health/Financial Services Edition, August 19, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.


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