Was 2023 the year when European retail investors finally obtained the “fairer deal” that outgoing European Commissioner Mairead McGuinness had wished for them (McGuinness, 2023)? As far as long-term and pension products are concerned, this report presents mixed results.
While European capital markets performed strongly in 2023, helping many pension funds and life insurance companies to rebound after a calamitous 2022, we find that many of the products we analyse failed to pass on the benefits of this renewed performance to pension savers. One or even two years of past performance, however, do not tell us much about the long-term performance of saving products. What matters for individuals who invest part of their income into those products is how much income they will be able to draw from them in the distant future, in particular for retirement purposes.
The objective of this report, therefore, is to provide readers with a long-term perspective on performance that aligns with an extended investment horizon. We analyse the costs and performance of a broad range of products across various holding periods spanning up to 24 years.
Over this longer period, good years supposedly make up for bad ones. Nevertheless, we observe that many of the product categories do not offer sufficient nominal returns, in the long run, to compensate for inflation, even with the moderate inflation rates of the 2000s and 2010s. This weak performance then results in a loss of purchasing power for many European savers and investors.
⬇️Check the document below to read the full report ⬇️