23 January 1998

MUTUAL FUNDS ARE IDEAL INSTRUMENT TO SOLVE EUROPEAN PENSION CRISIS

The European Federation of Investment Funds and Companies (FEFSI) has published a report on Mutual Funds in European Old-Age Provision. FEFSI has filed the report with the European Commission as part of its submission in response to the EU’s Green Paper on Supplementary Pensions in the Single Market. The Green Paper proposes a number of broad areas of reform in order to encourage more flexible structures for supplementary pensions to meet the challenges of changing demographic trends and to develop a single European market in pension funds.

FEFSI supports these objectives and in its report makes a strong case for using individual accounts invested in mutual funds as ideal vehicles for 2nd pillar (occupational) and 3rd pillar (personal) pensions throughout Europe. The main advantages of mutual fund based systems as described in the report are:

• Transfer-neutrality: Payments to future pensioners would be made on the basis of their own contributions;
• Full funding: Such systems would allow international diversification;
• Portability: Through ownership of the assets by the contributor, the system would ensure portability across employers and national borders;
• High standard of protection: Like investment funds, the system would afford contributors protection against risks.

The report describes examples of such systems currently in usage across the world such as the new Austrian Pensionsinvestmentfonds, the proposed German Pension Mutual Funds Sondervermogen, the Belgian Fonds d’Epargne Pension and the United States’ IRA and 401 (k) accounts.

Adam Lessing, Vice-Chairman of FEFSI and Chairman of the Pensions Committee, commented,

"The current European pension crisis can only be solved through the introduction of funded supplementary pension systems. As our report demonstrates, mutual fund based systems are optimal in this context."

He continued,

"There are now a number of national systems, both within and outside Europe, using mutual funds for supplementary pensions. In the US alone over US$ 1,000 Billions of retirement assets are invested in mutual funds. We urge the EU and the European Governments to look at these systems as a solution."

Philip Warland, Director General of the UK’s Association of Unit Trusts and Investment Funds (AUTIF), added,

"The UK often sees itself as in the lead in private pensions provision but this paper shows that a number of European countries are overtaking us in the design of simple, personal pension vehicles based on investment funds."

For further comment please contact:

Philip Warland, Director General AUTIF 0171 831 0898

Notes to Editors:

The European Federation of Investment Funds and Companies (FEFSI) represents the investment funds industry of the 15 EU Member States, the Czech Republic, Hungary, Norway and Switzerland. The Federation represents through national associations about 850 management companies and 16,000 funds with nearly ECU 1,700 billion of investment assets.

The members of FEFSI’s Pensions Committee are as follows:

Dr. Adam Lessing Managing Director OIG (Creditanstalt Group), Vienna (Chairman)

Marc Bayot Strategic Advisor, Generale de Banque, Brussels

Claude Hoffmann Chef du Service Commercial, Departement Fonds d’Investissement, Banque Generale, Luxembourg

Dr. Manfred Laux Hauptgeschaftsfuhrer, Bundesverband Deutscher Investmentgellschaften e.V., Frankfurt/M.

Alain Leclair Vice-President, Paribas Opportunites, Paris

Angel Martinez-Aldama Director, Inverco, Madrid

Steffen Matthias Secretary General, FEFSI, Brussels

Franco Mugnai Amministratore e Direttore, La Centrale Fondi, Milan

Lasse Ruud Managing Director, Norwegian Funds Association, Oslo

Philip Warland Director General, Association of Unit Trusts and Investment Funds (AUTIF), London

The report’s publishing details are as follows:
Adam Lessing/European Federation of Investment Funds and Companies - Pensions and Investment Funds Committee (Ed.): Mutual funds in European Old-age Provision
Wien, Braumuller 1997.
ISBN 3-7003-1211-3