Prepared by Jordi Gutiérrez Curos, Jürgen Herr, Rafael Quevedo, Mirna Valadzija and Me-Lie Yeh
1 Introduction and relevance of pension funds
- The new pension fund[1] statistics combine data on the different pension schemes in euro area countries in one harmonised set of statistics.
- They offer a much enhanced set of information, essential for monitoring the development of pension funds from the perspective of monetary policy, financial stability and financial structures.
- The first public release of the pension funds dataset took place on 31 July 2020 on the ECBs Statistical Data Warehouse (SDW)[3] platform.
- Pension funds have grown substantially in the euro area over the past two decades in terms of their financial assets and as a percentage of GDP.
- [4] Chart 1 Total assets of euro area pension funds (left-hand scale: total assets, EUR billions; right-hand scale: percentage of euro area GDP)
- Since the financial crisis pension funds[5] have represented a dynamically growing financial sector in the euro area.
- Chart 2 shows how fast pension funds grew as a financial sector between the 2008 financial crisis and the first quarter of 2020, when euro area pension funds had around 75 million members.
- In the euro area, pension funds are highly diverse in terms of their legal and regulatory set-ups, corresponding to their different roles in social protection systems from country to country.
- Depending on the nature of the contributor, pension schemes are usually classified into three pillars (World Bank, 2008[6]) (see Figure 1).
- Second-pillar pensions are occupational pension arrangements linked to employment, most of which are associated with a specific employer, group of employers, economic sector or social partner.
- [9] The roles, size and nature of private pensions are also highly diverse across euro area countries.
- [10] Occupational pension funds in the Netherlands make up around two-thirds of all such pensions in the euro area.
- Occupational pension plans are often negotiated by employers and social partners and are frequently subject to national social and labour law, which has an impact on the pension funds governance structures.
- Another characteristic of the pension fund sector in the euro area is the disparity in the number of reporting institutions, as in some countries there are large reporting populations made up of small pension funds (for instance Ireland and Cyprus[11]) while in other countries there are just a few pension funds.
- Pension funds assets have grown in most euro area countries since 2008.
The type of assets most commonly held by euro area pension funds are investment fund shares followed by debt securities (see Chart 4). Other investments, on a smaller scale, comprise equity, financial derivatives, currency and loans. Chart 4 Assets held by euro area pension funds (EUR billions; Q2 2020)
- The main liabilities for pension funds (making up more than 95% of the total for the euro area) are insurance technical reserves/pension entitlements.
- In the euro area, defined benefit[12] schemes represent more than 85% of total pension entitlements.
- Chart 5 Pension entitlements by country and type of scheme (EUR billions; Q2 2020)
2 ECB Regulation on pension fund statistics
- The legal requirements for the harmonised pension fund statistics are laid down in Regulation ECB/2018/2.
- [14] The Regulation defines the statistical standards to be met by pension funds when reporting information on their assets and liabilities.
- The Regulation is complemented by Guideline ECB/2019/18[15], which sets out the procedures national central banks must follow when reporting pension fund statistics to the ECB.
- The ECB Regulation aims to improve the availability and quality of data reported by pension funds and to increase harmonisation and data comparability across countries.
- A few examples of the use of the new pension fund statistics are detailed in Section 3.
- About 76% of total pension entitlements are pension fund liabilities[18] according to the euro area accounts (see Chart 6).
- Only those pension funds that are institutional units separate from the units that create them are included in pension fund statistics.
- In some countries employers can create pensions schemes for their employees without involving a pension fund or insurance corporation.
- These non-autonomous schemes are not included in pension fund statistics.
- Where pension commitments are recognised on the balance sheet of the employers, they are covered in the euro area accounts.
- Pension fund statistics are an important source for the euro area accounts, not only for data on the pension fund sub-sector, which is presented separately in the financial accounts[21], but also for information on households financial investments with pension funds.
- [24] In 2017 the ECB launched a public consultation[25]on the draft regulation on statistical reporting requirements for pension funds.
- In line with the pension funds reporting scheme, national central banks report to the ECB end-of-quarter stock data[26] and quarterly reclassification and revaluation adjustments.
3 New euro area data on pension fund statistics
- Euro area pension funds obtain capital from resident members.
- Chart 7 Geographical distribution of euro area pension entitlements by scheme residency of beneficiaries (percentages; Q2 2020)
- Euro area pension funds assets are more widely geographically distributed than their liabilities, with only about 55% of assets invested domestically.
- Investment fund shares are invested mainly in domestic investment funds, while debt securities, for example, tend to be invested in issuers in other euro area countries (i.e.
- In the case of equity, the largest holdings are from issuers resident outside the euro area (see Chart 8).
