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Impact of the Euro debt crisis on the investment behavior of 50+ European Investors
 

Impact of the Euro debt crisis on the investment behavior of 50+ European Investors

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Allianz International Pensions conducted a survey in seven European countries among wealthier people aged between 50 and 70. Countries included were Austria, France, ...

Allianz International Pensions conducted a survey in seven European countries among wealthier people aged between 50 and 70. Countries included were Austria, France,
Germany, Italy, Netherlands, Switzerland and the United Kingdom (UK). The main objective of the survey was to analyze the ideas of the 50+ generation about retirement income, planning for retirement and financial topics most relevant to this clientele in a financial environment characterized by uncertainty and volatility. In this report we focus on those results which address the recent financial developments, namely the euro debt crisis.

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    Impact of the Euro debt crisis on the investment behavior of 50+ European Investors Impact of the Euro debt crisis on the investment behavior of 50+ European Investors Document Transcript

    • International Pensions Papers 1/2013Impact of the Eurodebt crisis on theinvestment behaviorof 50+ EuropeanInvestors
    • Allianz International Pension Papers 1/20132MastheadPublisherAllianz SEKoeniginstrasse 2880802 Munich, GermanyPhone: +49 89 3800-0Fax: +49 89 3800-3425www.allianz.comEditorsDr. Renate Finke, Senior EconomistRenate.Finke@allianzam.comInternational PensionsInternational.Pensions@allianzam.comClosing DateFeb 8, 2013Cautionary Note Regarding Forward-Looking StatementsThe statements contained herein may include statementsof future expectations and other forward-looking statements thatare based on management’s current views and assumptions andinvolve known and unknown risks and uncertainties that couldcause actual results, performance or events to differ materially fromthose expressed or implied in such statements. In additionto statements which are forward-looking by reason of context,the words “may”, “will”, “should”, “expects”, “plans”, “intends”,“anticipates”, “believes”, “estimates”, “predicts”, “potential”,or “continue” and similar expressions identify forward-lookingstatements. Actual results, performance or events may differmaterially from those in such statements due to, without limitation,(i) general economic conditions, including in particular economicconditions in the Allianz Group’s core business and core markets,(ii) performance of financial markets, including emerging markets,and including market volatility, liquidity and credit events (iii) thefrequency and severity of insured loss events, including from naturalcatastrophes and including the development of loss expenses, (iv)mortality and morbidity levels and trends, (v) persistency levels, (vi)the extent of credit defaults, (vii) interest rate levels, (viii) currencyexchange rates including the Euro/U.S. Dollar exchange rate, (ix)changing levels of competition, (x) changes in laws and regulations,including monetary convergence and the European MonetaryUnion, (xi) changes in the policiesof central banks and / or foreign governments, (xii) the impactof acquisitions, including related integration issues, (xiii)reorganization measures, and (xiv) general competitive factors,in each case on a local, regional, national and / or global basis. Manyof these factors may be more likely to occur, or more pronounced,as a result of terrorist activities and their consequences. Thecompany assumes no obligation to update any forward-lookingstatement.No duty to updateThe company assumes no obligation to update any informationcontained herein.Contents03 Introduction04 Key results05 Impact of the euro crisis on the financial situation05 Box: Survey sample and methodology09 Trust in the euro10 References11 Recent Publications
    • Allianz International Pension Papers 1/20133Allianz International Pension Papers 1/2013One of the major challenges for private investors preparing for retirement is copingwith volatile financial markets. Whereas younger investors still have time to adapt andcompensate for investment decisions which might not prove favorable, or which wereinfluenced by negative market movements, people close to retirement do not havethat luxury. The struggle around the euro debt crisis has had a big impact on marketmovements and performance of investments. It has increased uncertainty for investors,made products formerly perceived as secure and attractive seem much less so and hasled to an investment landscape of financial repression. In this situation, it is interesting toknow how people react to these developments – particularly those close to retirement.Allianz International Pensions conducted a survey in seven European countries amongwealthier people aged between 50 and 70. Countries included were Austria, France,Germany, Italy, Netherlands, Switzerland and the United Kingdom (UK). The main objectiveof the survey was to analyze the ideas of the 50+ generation about retirement income,planning for retirement and financial topics most relevant to this clientele in a financialenvironment characterized by uncertainty and volatility.1In this report we focus on thoseresults which address the recent financial developments, namely the euro debt crisis.Introduction1 The results on retirement planning areforthcoming, Q2 2013.
    • Allianz International Pension Papers 1/20134• A negative impact of the euro crisis on the personal financial situation is perceivedespecially in Italy and France. The majority of respondents in Germany andSwitzerland notice no impact at all.• More than half of Italian respondents save less money than before the euro crisis.But in the other countries surveyed the majority of respondents did not change theirsavings amounts.• The main change in investment behavior is to reduce the risk and choose rathershort-term investments. Respondents in the United Kingdom tend to maintain theirinvestment behavior as before the crisis.• Although there is a great deal of uncertainty around financial markets and how toinvest in that environment, people in Austria, Germany and Italy largely trust theeuro, more skepticism in euro-zone countries is found in France and the Netherlands.Though the largest skepticism is found in the UK.• The vast majority of respondents across all countries surveyed think that there will betax hikes and increasing inflation rates in the follow up of the debt crisis.Key results
    • Allianz International Pension Papers 1/20135People close to retirement or in their early years of retirement, probably thought that they hadsecured their retirement strategy and could rest on their laurels, but were instead faced withsevere volatility and financial crises during the last decade. The euro-zone debt crisis continuedthis stream of uncertainty. Although it seemed the crisis had already peaked in the middle of 2012when the president of the European Central Bank Mario Draghi released his statement to supportthe euro, the crisis will have an ongoing impact on financial markets with low yields and evennegative real interest rates.In such a situation of financial repression, investors lose money. Those nearing retirement age andthose who have recently reached retirement, who planned on using part of their financial assetsto generate an income stream for their retirement years, are faced with lower assets thanpreviously anticipated.But to what extent has the crisis already impacted the investment decisions of wealthier peopleaged 50 to 70? Among the five euro-zone countries, currently only Germans feel mostlyunaffected. A majority of 62% say the crisis has had no impact on their personal financial situation.A similar result can be seen in Switzerland, which is not surprising as a non-European Unionmember with its own currency and a country perceived as a safe haven during the crisis. Incontrast, the majority of French and Italian interviewees felt a negative impact from the euro crisison their personal financial situation while Austrian respondents were split. (Chart 1)Survey sample and methodologyAll in all, 1,400 respondents from Austria,France, Germany, Italy, the Netherlands,Switzerland and the United Kingdom (UK) took part in the survey. It should be understoodthat this study is not representative of the entire 50-70-year-old population, but rathertargets the wealthiest 20% of this specific age group.For the objectives of retirement planning and investment, this subset is particularlyinteresting for two reasons. Firstly, given the low replacement rate of public pensionscompared with this segment’s current income and living standards in most countries,financial planning is extremely critical. Secondly, since this group is likely to be moreeducated, they are also more likely to have the ability to master their own retirementstrategy and investment decisions. The survey was conducted online in November 2012,in Austria in January 2013.Impact of the Euro crisison the financial situation
    • Allianz International Pension Papers 1/201362 See Allianz Global Wealth Report 2012,Deutsche Bundesbank (2012a) and Bancad‘Italia (2012)These answers mirror the development of financial assets of private households in thesecountries. In Switzerland and Germany, overall assets saw an increase between 2010 and 2011,and again into 2012, whereas both France and the UK saw slight losses and Italian householdsfaced a larger loss of 3% between the end of 2010 and the middle of 2012. In Austria financialassets remained unchanged.2The picture in the Netherlands is mixed: although financial assetsas a whole performed well, half of the older Dutch people felt the crisis has had a negative impacton their financial situation.Although the general results seem as if people are quite relaxed, a statement concerning theeuro tells a different story. In particular, French and Italian respondents fear for the safety of theirsavings (69% and 60% respectively) followed by Germans (48%) and Austrians (38%) whereasthe Dutch seem more relaxed (32%).Chart 1: Impact of euro crisis on financial situation་Question: Does the euro crisis have any impact on your financial situation so far?Base: Top 20% of 50-70 year old people regarding investable assets The euro crisis has noimpact on my financialsituation so far The euro crisis hasnegative impact on myfinancial situation The euro crisis haspositive impact on myfinancial situation Don’t know / no answer6234483315Austria(n=200)France(n=202)Germany(n=200)Netherlands(n=200)Switzerland(n=200)UK(n=199)Italy(n=201)434791306253357337331395471247105
    • Allianz International Pension Papers 1/20137One would expect people to adapt to a new situation. Therefore, it is not surprising that Germanand Swiss people have not changed their savings behavior, as most of them did not feel anyimpact of the euro crisis on their financial situation. However, the majority of those interviewedin Austria, the Netherlands, France and the United Kingdom also did not change their habits.(Chart 2) Only Italy is outstanding in that one out of every two respondents said that they nowsave less. This might be due to the weaker economic situation in Italy and lower wages that resultin a reduced ability to save. On the other hand, we also have to note that the interviewees werebetween the ages of 50 to 70, where people might not be so inclined to save so much.Even if people do not change their behavior with regard to the amount they save, they do reviewtheir investment attitudes. For most of the interviewees, the main reason for change in invest-ment behavior is to reduce risk, for example the majority in France and Italy state that they takecare to ensure that their investments are not so risky. (Chart 3) They might pay more attention tothis issue as French and Italian households used to invest a higher portion of their financial assetsin capital market products than the average household in Western Europe. In the Netherlands,Chart 2: Change of saving behavior due to euro crisis Yes, I save morethan before Yes, I save lessthan before No, my saving behaviorhas not changed Don’t know / no answerAustria(n=200)France(n=202)Germany(n=200)Netherlands(n=200)Switzerland(n=200)UK(n=199)Italy(n=201)Question: Did you change your saving behavior due to euro crisis compared to the time before the crisis?Base: Top 20% of 50-70 year old people regarding investable assets7147908187046902312236411551313988031811693
    • Allianz International Pension Papers 1/20138households have a very conservative asset structure, so risky investments are not a part of theirinvestment focus.3Most of them have not changed their investment behavior.A similar situation can be found in the United Kingdom, where 53% say that their investmentbehavior did not change. In Austria as well as in Germany – besides avoiding risky assets – almosthalf of interviewees invest their money somewhat short-term. In Germany this behavior couldalready be observed a couple of years ago when volatility in financial markets began to increaseand uncertainty dominated due to financial and debt crises. Since then, Germans prefer to puttheir money into accounts that are accessible at short notice.4The risk aversion of the 50 to 70 year olds in our survey is also apparent in the low consent to thestatement “I invest more money in stock than before.”Chart 3: Change of investment behavior due to euro crisisI keep care that my investmentsare not so riskyI invest money rathershort-term nowMy investment behavior has notchangedI bought real estate or planto buy oneI bought gold or precious metalsI invest more money in stockthan beforeI start to invest with a higherlevel of risk than beforeI make investments not in euroanymore, but in other currency5122451443122Austria(n=200)602418181151France(n=202)482646167372Germany(n=200)3845547121Netherlands(n=200)46321519917122Switzerland(n=200)26531433521UK(n=199)541438138664Italy(n=201)Question: What about money investment. How has the euro crisis changed your money investment behavior?Which of the following statements apply to you?Base: Top 20% of 50-70 year old people regarding investable assets3 Allianz Global Wealth Report 20124 See Deutsche Bundesbank (2012b)and Allianz (2012)
    • Allianz International Pension Papers 1/20139Although there is a great deal of uncertainty around financial markets and how to invest in thatenvironment,peopleintheeuro-zonelargelytrusttheeuro–particularlyinAustria,GermanyandItaly,where50%,44%and36%(respectively)claimtobackthecurrency(Chart4).IntheNetherlands,only29%claimtotrust theircurrency,whilst38%areundecided.Thelargestskepticismisfoundin France,wherehardlyafifthofrespondentstrusttheeuroand42%remainsundecided.Butthisresultistoppedby people in the United Kingdom, where 75% of respondents do not trust the European currency.Although the Netherlands are not so enthusiastic, the majority (65%) still admit that they benefitfrom the euro and more than every second German and Italian see benefits, whilst half of therespondents in UK do not see any benefits for their country.Nevertheless, the reason for the euro crisis has still not been solved. Government debt levels are stillexcessively high. The majority of around 80% of respondents think that there will be tax hikes andthis opinion is more or less equal across all survey countries. The same holds for expected inflationdevelopment. Across all countries the majority of people see inflation increasing – 80% in Germanyand the UK, around 70% in Austria, France, Switzerland and the Netherlands, whilst only 56% ofItalians see inflation rates rising. Right now, in an environment with yields and interest rates belowinflation rates, it seems as if there is a “smooth” solution. But the results indicate that people fearmore “severe” ways out of the crisis.Trust in the euroChart 4: Trust in the euroQuestion: There is a lot of discussion about the euro crisis in public lately. Do you currently trust in the euro to be a strong currency?Base: Top 20% of 50-70 year old people regarding investable assets Yes, definitely Rather yes Partly Rather not No, definitely not Don’t know / no answerAustria(n=200)France(n=202)Germany(n=200)Netherlands(n=200)Switzerland(n=200)UK(n=199)Italy(n=201)1139402423141811 151 04 8 8152821184224 382416262216313211 16 1321443 3 4 3 43 3 3
    • Allianz International Pension Papers 1/201310Allianz Global Wealth Report 2012, Economic Research & Corporate Development, 2012Allianz (2012), Slight increase in gross financial assets, International Pension Issues 1/2012Banca d’Italia (2012); Supplements to the Statistical Bulletin, Monetary and Financial Indicators,Financial Accounts, Volume XXII – 6 November 2012 No. 57Deutsche Bundesbank (2012a), Monthly Report, December 2012.Deutsche Bundesbank (2012b), Acquisition of financial assets and financing in Germanyin the second quarter of 2012, October 2012.References
    • Allianz International Pension Papers 1/201311Recent PublicationsWhat’s happeneing in the Netherlands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2012Country Factsheets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2012Why Saving on a Regular Basis may be Wise! . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2012Routes to Private Pensions in China – A Scenario Analysis of China’s Private Pension Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2012Design Retirement Attitudes and Financial Strategies of the Affluent 50+Generation in Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2012Wanted: Flexibility in Retirement Entry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2012Germany – Slight increase in gross financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20122011 Pension Sustainability Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2011Pensions in Turkey – A Race against Informality and Low Retirement Ages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2011Fiduciary Management: Meeting Pensions Challenges in Europe – Results of an Expert Survey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2011Putting the Retirement Pieces Together: Strategies of the Affluent 50+  Generation in the United States. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2011UK – on course for an innovative pension system . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2011Better Prepared for Retirement – Europe or the United States? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2010Doing Good by Investing Well? Pension Funds and Socially Responsible Investment: Results of an Expert Survey . . . . . . . . . . . . . . . . . . . . . 2010Demographics in Focus II – Ageing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2010Real Retirement Income: The Impact of Inflation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2010http://projectm-online.com/research