BF Guest Lecture ; a brief introduction to pensions

pension system → bestaat uit 3 pijlers

public pensions

occupationale pensions / aanvullend pernsion

personal pensions

public pensions - first pillar

pension provided by the state : sociale zekerheidsbijdrage

biggest retirement provions in most EU countries (80/90%)

important to spread risk over different pension pillars

why are public pensions under increasing pressure ?

• aging population (baby boomers)

• budgetary constraints

two sorts public pensions

pay-as-you-go

funded schemes

public pensions : pay-as-you-go

active population pays pensions retired population

dependent on demographic evolutions and economic growth

public pensions : funded schemes (kapitalisatie)

savings are invested to pay own pension (pension fund, insurance contracts ext)

dependent on evolution financial markets

occupational pensions - second pillar / aanvullend pensioen

pension provided by the employer

orginized on company or sector level

in some countries mandatory, in others voluntary

important differences between countries

main types of occupational pensions

pension funds (pensioenfonds), pension insurance, book reserves

personal pensions -third pillar

individual pension savings

often fiscally stimulated by governments

provided by banks, insurance companies, and asset managers

long-term savings products e.g. insurance products / mutual funds

→ vb pernsioenspaarfonds

pension funds (second pilar) / pensioenfondsen

funded by employers and sometimes also by employees

long-term investors

pension payments as annuities or lump sum

defined benefits vs defined contributions

pension funds (second pilar) : defined benefits

pension payments are fixed

calculated using income, years worked for the company ect

investment risk with employer

pension funds (second pilar) : defined contribution

only contributions are fixed

pension payments dependent on evolution financial markets

investment risk with employee

investment strategy

important to create a diversified portfolio

look for an optimal risk / return

long-term investment horizon

investment instruments

equities / aandelen

bonds / obligaties

cash

alternative assets

• real estate / vastgoed

• private equity

• hedge funds

privat equity

aandelen die niet beursgenoteerd zijn

→ aandelen die moeilijk zijn om te verkopen; hoger rendement dan bij beursgenoteerde aandelen

hedge fund

een soort beleggingsfonds wat geld probeert te verdienen, ongeacht de richting waarin de mackt zich beweegt

→ gebruikt meer strategieen om tot een positief rendement te komen

second pilar in belgium

occupational pensions are not mandatory in belgium

insurance companies are dominant on belgian market

many SME’s don’t have the knowhow to manage retirement provisions

pension funds are relatively small in international comparison

garanteed min return → investment risk with employer

payment as lump sum or annuity

future challenges of pensions

growing importance of private pensions savings

important differences between countries (limited EU regulation)

pension funds vs insurrance companies

• different regulatory framework

• level playing field ?