Savings Habits of Europeans

25 Nov 2022

In December 2021 the Pan-European Pensions Survey was released by Insurance Europe and it’s opening eyes to the savings and safety net habits of EU citizens. Here’s some facts about the survey:

Date: July and August 2021
Respondents: 16,799
16 countries: Austria, Denmark, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Luxembourg, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland
50% female, 50% male
Aged from 18 to 70
Different employment statuses
Different education levels
Different personal circumstances

According to the survey 38% of respondents said they are not saving through supplementary pensions, which means something that is not supplied by the state. Surprisingly, 25% of those that aren’t saving aren’t interested in savings but unsurprisingly 30% of non-savers can’t afford to save.

Both these figures are problematic. Respondents that aren’t interested may not know the consequences of not saving and have not had their eyes open to the issues that can arise from not having the proper supports in place in old age. In Latvia, Estonia and Lithuania the old-age poverty rates are above 40% and across Europe female old-age poverty rates are 7% higher than men’s. The aging population is more likely to live in inefficient housing in terms of energy use and they also allocate a higher share of their income to food. These two areas are some of the first indicators of inflation and often affected the most. Educating those that not interested in saving may be a first step towards mitigating the high rate of old age poverty.

The second metric, those that say they can’t afford it, is more complicated. It’s all well and good to tell people they should save, but more immediate goals, like putting food on the table and having a roof overhead, often take precedence over something that is less tangible in the present. Bigger issues in this instance could be universal income, better social supports like childcare and parental leave and mental health supports among a myriad of others.

In addition, global issues, most recently COVID-19, have impacted savings. Since 2020 people have had to delay savings plans, reduce their contributions or even withdrawal money to combat everything from job loses to health problems.

For those that are saving, safety is key. It’s important to EU citizens to know that the money they invest is safe and secure, of course no one wants to lose money but part of the problem with this outlook is that when you invest money in a less risky way such as a savings account you could actually be losing money to inflation. The 100 € you save today will actually be worth less twenty years from now because as inflation increases, as it does most years, the worth of that currency decreases. However, if you decide to invest in a diversified portfolio for the long term, it’s likely that your investment will increase somewhere between 3% and 10% per year, depending on the market and the risk tolerance of your portfolio, which generally outpaces inflation. So, while the survey respondents value safety, and ultimately that is very important, other factors such as performance, robustness of provider and again, education of client and provider, are key to providing a well-rounded retirement plan.

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