The estimated penetration rate of iorps continues to be low, apart from the Netherlands, according to a new report from the European Insurance and Occupational Pensions Authority (EIOPA).

Its 2023 report on the cost and past performance of retail investment products in its remit covered more than 200 personal pension products (PPPs), accounting for a total of €29bn gross written premium (GWP). It also looked at more than 1,400 iorps holding AUM of around €2.5trn.

“The estimated penetration rate of IORPs continuous (sic) to be low, when compared to the country GDP. The Netherlands, whose holdings represent more than 153 per cent of the country’s GDP, emerged as an outlier as a result of a strong dependence on iorps as the vehicle for occupational pensions. The vast majority of those employed in the NL participate in an occupational pension scheme via schemes provided by iorps, and this form of savings is also attractive for as it is tax favoured,” EIOPA stated.

“For other countries, nevertheless, the occupational pension system can rely on other providers, such as insurance companies, banks and/or asset managers.”
In terms of the data on iorps, EIOPA said the information available has become more stable over the past year but reporting issues persist preventing a more granular analysis. Total assets of iorps decreased to € 2,486bn in 2022, from € 2,799.8bn, in 2021.

However, DC pension schemes totalled € 527.6bn in 2022, up from € 423.7bn in 2021, reflecting a continuous gradual transition towards DC schemes (+25 per cent), although they represent only 21 per cent of total iorp assets. It said the increase in DC assets was mainly due to the increase of iorps in France and the continuous gradual transition from DB schemes towards DC.

Iorps in six out of 18 member states hold more than 50 per cent in investment funds/shares, six out of 18 hold between 25 per cent and 60 per cent in government bonds.

“This might flag some lack of diversity in the asset allocation, which might pose future issues in case one of distress of one of those markets,” EIOPA noted.

In regard to personal pension products, the authority said that the wide diversity amongst markets continues to limit the comparability of personal pensions but they tend to follow insurance-based investment products (IBIP) trends. For example, financial market stress led personal pension products without guarantees to post negative returns on average in 2022.

Personal pension products similar to unit-linked policies experienced losses of 14.1 per cent, while personal pension products similar to profit participation products generated a slightly positive return of 0.7 per cent.

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