A report by the New Financial think tank, supported by Vanguard, put forward recommendations to encourage greater retirement savings in the EU, including alternatives such as partially funding state PAYGO pensions, establishing automatic enrollment in occupational pension plans, or generating more incentives for voluntary savings. Among other issues, the report points out that:

• Large long-term capital funds, such as pension and insurance assets and retail investment, are the starting point for creating deep and efficient capital markets, although capital funds in the EU (accounting for 184% of GDP) are smaller than in the US, UK, Japan or Australia. There is too much money in unproductive investments in the EU, with negative consequences for households and the European economy.
• The level of pension assets in the EU is particularly low, with almost two-thirds of assets concentrated in just three Member States. A (partially) funded pension system that encourages people to accumulate retirement savings is a key element in securing the financial future of EU citizens and providing the economy with a large potential supply of capital.
• Households across the EU have 34% of their financial savings in cash, on average. This figure increases to more than 40% in countries such as Austria and Germany, and to more than 50% in Poland, Malta and Greece. Reducing fees and providing easier access to EU retail investment markets would be a good start to help people get their money out of bank accounts.
• There is a danger that EU policymakers will miss the big picture by only addressing retirement savings and retail investment. Neither pensions nor increased retail investment can resolve this issue on their own. Measures to scale up retail investment have to be combined with more structural reforms of pensions and retirement savings to really change the situation in the EU, and there is evidence in Denmark and Sweden that, at best, they can mutually nurture one another.
• It may be politically complicated for the EU to draw inspiration from the UK or the US, but there are some examples of EU member countries that have large long-term capital reserves. Denmark’s partially funded state pension, Ireland’s introduction of workplace retirement savings with automatic enrollment, or Sweden’s tax treatment of savings, can serve as the basis for gradual or more radical reforms in other member states.
• It is estimated that the transition of EU pension systems to individually funded models (at least in part) and the shifting of savings from bank accounts to capital markets, could release some €11 billion. Even investing one third of this money in European assets (in line with the average asset allocation of UCITS equity funds), would give the European economy a significant boost.