| Pension assets in CEE countries expanding at 35% per year |
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| 28/05/2007 | |
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Pension funds have become by far the most promising and fastest growing component of financial assets in Central and Eastern Europe (CEE). A UniCredit study has found that they have expanded by a yearly average of 35% between 2000 and 2006. "Clearly, the speed of accumulation in mandatory pension schemes and the relative size of asset stocks already accumulated are a direct function of the specificities of the pension reform and the timing of its implementation," concludes the report. Participation rates and the relative size of pension funds compared to GDP are the highest in Poland (11.1%), Hungary (9.9%) and Croatia (6.5%). Russia (2.2%) and Slovenia (2.2%) rank the lowest. Hungary and Poland were the first among the EU-8 countries to initiate privately managed compulsory pension savings schemes, followed by Bulgaria and more recently by Slovakia (2005). Romania plans to switch to a mandatory pay-as-you-go scheme in 2008. Czech Republic leads Accumulation of resources in voluntary pension schemes is growing fast, largely stimulated by the use of tax incentives. This is the case in particular in the Czech Republic, where the unusually high participation rate is mainly a consequence of very attractive state subsidies and uncertainty regarding the introduction of a fully funded mandatory pension scheme in the future. Another important driver contributing to the rapid growth of pension assets in the region is rapid income growth, according to Debora Revoltella, chief economist at UniCredit. "Second pillar pension assets are for the most part being invested domestically in order to help develop the country's capital markets." Poland has the highest participation rate with 82.8% of the workforce participating in the country's pay-as-you-go system. It is followed by Bulgaria (76.4%), Croatia (75.1%), Hungary (67.5%), Slovakia (58.5%), Russia (51%) and Slovenia (3.5%). In other findings, the study determines that 20% of the wealth increase in the surveyed countries is linked to pension fund contributions and that pension funds account for 9% of households' financial wealth. This wealth, however, is more than matched by growth in indebtedness, with strong demand for both mortgages and consumer credit. Overall, mortgage credit equals only 7% of GDP in the CEE region, below the 38% recorded in the EU area. On the other hand there is hardly any difference in the penetration of consumer loans over GDP, with a ratio of 6% in the CEE compared to 7% in the Eurozone. VB |
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