Ageing Society: New Opportunities

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Ageing Society New Opportunities? Peter van
Leeuwen ING Netherlands, Director
Institutions 30 November 2006
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ING Worldwide Group
About 120,000 employees in over 50 countries
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Top 20 global financial institutions
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Growing our business
Trends
Growth Engines
generate

• Aging of the population
• Major concern everywhere
• Seeking financial security
• Private sector steps in

• Retirement services
• US retirement services
• Benelux
• Emerging markets

• Shift economic power to East
• China grows almost 10 per year
• Growth in Central Europe
• Need to be there

• Emerging markets
• China, India, 19-state Bank of Beijing
• Central Europegt Romanian banking from scratch

• Technology
• Internet, from fashion to business
• Challenge opportunity

• Direct banking
• Continue success Postbank
• ING Direct

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Demographic development 1900-2000
The Netherlands
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Ageing Society starts at young age
The Netherlands
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Ageing Society
Relative increase in two age groups
1950-2000 2000-2050
per annum 65 year 2.1
1.2 20-64 year
1.1 0.1

• Increase in ageing slows down next 50 years!
• Ageing problems are the result of
• Increase in 65
• No growth of working population

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Ageing Society 65 2006
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Ageing Society Pension age 65 ? 67 years

"Tsunamie" of 65- and 67-"
Decrease of grey impact by 65-gt67 year pension
45
7
AOW 66
40
6
AOW 67
35
5
30
4
working population 20 year
25
3
65
20
2
67
15
1
10
0
2000
2010
2020
2030
2040
2050
2000
2010
2020
2030
2040
2050
year
year
The Netherlands
10
Ageing Society - full jobs
The Netherlands - 2000
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Ageing Society - full jobs
The Netherlands - 2000
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Ageing Society Working less hours
Full jobs in no. of hours, The Netherlands
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Ageing Society Working longer is no solution
Increase participation of 45 population
The Netherlands
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Ageing Society 65 2006
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Ageing Society European Population (mill)
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Ageing Society no. of inhabitants Europe
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What does Silver Europe bring us?

• Workforce crises
• Diversity
• Defensive attitude
• Exploding healthcare costs
• Financing gap

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Financing gap
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Financing gap
Different systems for financing pensions in
Europe
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Financing gap
3 Pillars 1. State pension 2. Company
pension 3. Private arrangements (life
insurance) ) Household of 2 persons
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Financing gap

• Elderly people have much to spend
• 50 in European Union represent
• 75 of stock markets
• 65 of private savings
• 60 of private housing
• 50 of private cars
• 80 of luxury cars
• 65 in The Netherlands
• 3 has minimal income (5 workers- or 25 social
  benefit with children)
• 23 bill. AOW and 20-25 bill. other income
• 90 of retired couple have car, above 80 years
  30 drives a car
• 8 of people reserves money for children, 55
  spends for enjoyment

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Financing gap

• Can we finance future pensions?
• IFRS
• Inflationincomes (back service!), investment
  results
• Defined contribution or Defined Benefit (last or
  average income)
• Dutch 3 pillars approach is sustainable, but
  requires some maintenance
• State pension AOW 65 year
• Company pension 65 year- 35.000 gt defined
  benefit - last income gt 70- 35.000 gt
  defined benefit - average income
• Private arrangements defined contribution

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Financing gap ? Financial instruments

• Present arrangements provide basis, but need
  adjustment
• Other products needed more savings, less
  credits, estate planning
• Index link savings
• (grand-) Children savings account
• Sale-lease-back of houses
• Transparancy pension status
• One overview leading to income after retirement
• Gap what is needed to reach a specified income
• Some maintenance of the 3 pillar system
• For those with a pension gap save, invest, etc.
• Much more attention needed for financial
  planning services!

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Conclusions

• The population will change rapidly (age,
  culture, attitude, etc.)
• Measures need to be taken asap lower costs
• In general
• (some) changes in pension systems
• not people working longer, but let more people
  work
• more savings (babyboom?) - risk averse
• transfer to next generation
• Financial institutions will innovate in response
  to new competitors
• develop new ways to inform and advise their
  clients (intimacy)
• invest in more flexible financial products
  (asset lt-gt income)
• reduce transaction costs
• New financial instruments will be developed to
  handle ageing risks
• derivatives regarding mortality risks