Retirement Readiness OECD/IOPS GLOBAL FORUM ON PRIVATE PENSIONS - Sydney Nov 2-3 Brigitte Miksa, Head of International Pensions, Allianz Global Investors AG November 2010
New funded pension schemes shape the global retirement markets Paradigm shift is occurring on the system level 1950s 1980s 1990s 2000+ Singapore (1955) Chile (1981) Australia (1992) Hong Kong (2000) Austria (2003 & 2005) Peru (1993) Japan (2001) Belgium (2004) Thailand (1997) Bulgaria (2002) France (2003) Hungary (1998) Croatia (2002) Germany (2001) New pension reserve funds - China - South Korea - France - Spain - Sweden - Poland (1999) China (2004) Ireland (2003) India (2004) UK (2001 & 2012) Taiwan (2005) Slovakia (2005) South Korea (2005) Romania (2007) Thailand (2010) Source: Allianz Global Investors Copyright Allianz Global Investors AG 2010 - Sept 2010-2
Pension Sustainability Index Sub-indicators Status Dynamics Demographics Old-age dependency ratio* Change in elderly dependency ratio* until 2050 Design of pension system Public finances replacement rate 1st pillar** Legal retirement age Strength of funded pillar (as % of GDP) Pension payments/gdp Public indebtedness/gdp Taxes and social security contributions/gdp change in replacement rate Reforms passed change of pension payments/gdp until 2050 * Ratio of 65 years of age to 15 to 64 years of age ** In Asian countries, includes coverage within the workforce Copyright Allianz Global Investors AG 2010 - Sept 2010-3
Sustainability of public pensions Allianz Pension Reform Pressure Gauge - Scale from 1-10: 1 minor need for reforms, 10 high need for reforms IN CN GR THSI ES RO JP SK BE HU PT AT IE BG IT Lux CZ SG FR KR LT DE US HR FI NO PL TW EE UK CH NL LV DK NZ HK SE AU Source: Allianz Global Investors, International pensions 2009. 0 2 4 6 8 Copyright Allianz Global Investors AG 2010 - Sept 2010-4
Total retirement income adequate? International Pensions Diversification across pension pillars is a key requirement for the sustainability of pension systems Pension pillars Function Risks Design options Public pillar Redistribution Insurance Political Inflation Demography Pay-as-you-go Tax-financed Occupational pillar Accumulation of savings Capital accumulation& financial market development Inflation Employer insolvency Longevity Mandatory/voluntary Defined Benefit/ Defined Contribution Investment Personal pillar Additional savings for financial security Inflation Investment Longevity Tax advantages Guaranteed/not guaranteed products Stable and reliable pension systems need several pillars to balance out risks of the respective and arrive at an acceptable level of overall risk Copyright Allianz Global Investors AG 2010 - Sept 2010-5
Retirement income mix differs substantially across countries Importance of retirement income sources in % of retirement income Public transfers Capital Work Korea United States Australia Netherlands Japan United Kingdom Denmark Sweden Spain Italy Germany Poland Austria Belgium France 15 36 44 48 48 49 26 56 69 70 72 73 79 80 81 85 30 7 36 59 42 39 32 5 4 34 44 22 15 1 2 7 20 25 24 21 19 8 10 12 12 10 12 12 7 0 10 20 30 40 50 60 70 80 90 100 What is an optimal composition of income sources? Sources: OECD, Pensions at a Glance 2009. Copyright Allianz Global Investors AG 2010 - Sept 2010-6
Understanding adequacy of pensions and retirement income US UK Germany Other National Retirement Risk Index (Boston College); EBRI FED: Wealth adequacy comprehensive measure of income McKinsey PPI (Pensions Policy Institute): Retirement income and assets project DIW-SOEP: Analysis of wealth distribution extended by vested old age provision ZEW: Analysis of poverty risk with inclusion of financial assets Fidelity: REAL Index (Renten- und Alterssicherungs-Index) derived from survey results to evaluate customers future income gap HSBC (survey); BBVA Moving towards comprehensive approach of retirement income measures Copyright Allianz Global Investors AG 2010 - Sept 2010-7
Retirement Readiness Indicator (OECD / AGI) Components Sub-components Sub-groups Income Sources Public pensions Occupational pensions Private pensions schemes Financial wealth (Housing) Total resources > <? Indicator Total needs Average population Income groups (5) Cohorts (3) Expenditure needs Basic consumption Various consumption groups Health care Income groups per cohort (15) Copyright Allianz Global Investors AG 2010 - Sept 2010-8
Retirement Readiness Indicator (OECD/AGI) Main challenges Access to detailed survey data in different countries Modeling the first and second pillar accruals according to the OECD replacement rate model for new entrants Analysis of voluntary pension schemes and modeling the accumulation phase Analysis of general savings behavior and asset formation; modeling the accumulation phase Modeling the decumulation phase for assets and funded schemes Analysis of consumption patterns to derive expenditure benchmarks for subgroups Copyright Allianz Global Investors AG 2010 - Sept 2010-9
About us Copyright Allianz Global Investors AG 2010 - Sept 2010-10
AllianzGI International Pensions: Multiplying investment and retirement knowledge Understanding pension systems and market trends - Analysis of global pension & retirement markets and trends - Analysis of pension regulation and investment policies - In cooperation with the OECD and other partners Identification of pension-related client needs and market demands for product solutions - Surveys on client demand in specific markets - Initiation of products and solutions for old age provision in accumulation and pay-out phase - In cooperation with risklab, AllianzGI entities globally and regional Allianz life insurance companies Communication of expertise and informed dialogue with decision makers - Client seminars and conferences - Inhouse training and education - Publications and magazine PROJECT M - Support of lobbying Activities Comprehensive pension market studies on Western Europe (2003, 2005, 2009), Central and Eastern Europe (2004, 2007), Asia (2005, 2007) and U.S.A. (2009) Pension Paper Series on specific issues Conferences and client seminars in Istanbul, Bejing, Shanghai, Taipeh, Seoul, Paris, London, Amsterdam, Vienna, Frankfurt, Munich http://publications.allianzgi.com Copyright Allianz Global Investors AG 2010 - Sept 2010-11
Which markets and regions do we target? Who are our research partners? Markets covered 45 markets world-wide updated annually Regions in focus EU (Western Europe, CEE) Asia-Pacific United States of America Research partners and network Professional market research firms, e.g. Research International (2007), ZEW/ Center for European Economic Research (2009) for primary market and client research OECD (Organisation of Economic Cooperation and Development) sponsoring of Global Pension Statistics Project of the OECD, research cooperation with the Private Pensions Unit* (and International Organisation of Pension Supervisors IOPS) Partners for research, communication and marketing within AllianzGI and Allianz SE, amongst others Allianz Dresdner Economic Research, Allianz Social Opportunities, economic and financial research entities within AllianzGI, risklab germany Copyright Allianz Global Investors AG 2010 - Sept 2010-12
Thank you for your attention! The presentation is intended for general information purposes only. The presentation is based on publicly available sources and own sources verified at the time of release. However Allianz Global Investors AG does not warrant the accuracy, reliability or completeness of any information contained in this presentation. Neither Allianz Global Investors AG nor its employees and deputies will take legal responsibility for any errors or omissions. Further Allianz Global Investors AG assumes no obligation to update or revise publicly any forward-looking information contained herein. None of the information should be interpreted as a solicitation, offer or recommendation of any kind. Certain of the statements contained herein may be statements of future expectations and involve known and unknown risks and uncertainties that may cause actual results, performance or events to differ materially from those expressed or implied in such statements. Please contact for further information Brigitte Miksa, Head of International Pensions, Allianz Global Investors AG Seidlstr. 24-24a, D-80335 Munich email: brigitte.miksa@allianzgi.com phone: +49 89 1220 7478 or international.pension@allianzgi.com Copyright Allianz Global Investors AG 2010 - Sept 2010-13