FMA Study on “The market for state-sponsored retirement provision in 2018”: the number of contracts has fallen for a seventh consecutive year; negative investment performance in 2018.
The market for state-sponsored retirement provision (PZV; prämienbegünstigte Zukunftsvorsorge), a state-sponsored retirement provision for discretionary old age pensions, has decreased in 2018 for a seventh year in a row. In 2012, when there was an all-time high, there were 1.54 million life insurance contracts and 97,000 contracts held with investment fund management companies (KAGs), i.e. approximately 1.64 million contracts in total, whereas there were only around 1.20 million at the end of 2018, a -26.83% decrease compared to the historic high, and in 2018 alone the decrease was by -7.1%. The assets under management in PZVs fell by -3.7% in 2018, the first time in their history that they had fallen, but this notwithstanding nevertheless stood at € 8.65 billion. The net inflow (earned premiums) was € 837.8 million in the 2018, a fall of 2.8% compared with the value for 2017. These are the findings of the annual FMA Study on “The market for state-sponsored retirement provision in 2018”.
KAGs are leaving this market, while insurers continue to offer products
Investment fund management companies have already discontinued offering new contracts for several years; and due to the short terms of their legacy contracts (ten years), a large amount of them have already matured. At the end of 2018 there were only 9,000 remaining, with the net inflow standing at € 7.6 million and the assets under management at € 106 million. In the coming year the KAGs will practically completely disappear from the PZV market altogether.
Number of new contracts increases again
Of the 19 insurance undertakings active in this market, in 2018 there were still five who were selling new contracts in 2018, with 15,921 new contracts (for the first time in a long while there was an increase, of 10.0% compared to 2017). Since just over 100,000 contracts were either terminated or matured, the total portfolio of PZV insurance contracts nevertheless fell for the fifth year in a row.
Negative investment performance
In 2018 PZVs posted a negative investment performance for the third time in their history (after 2008 and 2011) – and that before guarantee and other costs – and closed the year with a performance of -2.8%. The hypothetical “stylised Benchmark Portfolio“ calculated by the FMA for the purpose of comparison (30% Austrian ATX shares and 70% Austrian government bonds) fell by 3.5%.
As a state-sponsored old-age pension product the legislator obliged providers to at least guarantee the safeguarding of the paid-in nominal premiums. In the case that such high investment losses have been incurred for a product, that the assets are only sufficient at the end of the term to pay out the paid-in capital, this is known as a “stopped out contract”. In 2018 1.5% of the PZV contracts from insurance undertakings were stopped out, while 7.0% were stopped out in the case of KAGs. This means that the equity share that can be recognised in income was below one percent, meaning that such contracts no longer or barely are able to participate in future positive developments of the capital markets.
Since 2012, when the state premium for promoting PZV products was halved, it is now 4.25%, with the maximum state-sponsored deposit standing at € 2,825.60 in 2018, with a resulting maximum premium of € 120.09.
The full report can be found on the FMA website (in German only) at:
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