Europe’s productive capital gap: ALFI/McGill study reveals lessons from pension reforms abroad

Mobilising pension and household savings to scale up risk capital

• Countries with capitalised pension systems hold two to three times more risk-bearing assets per worker than pay-as-you-go (PAYG) peers: almost EUR 250,000 in Sweden and Canada, compared to EUR 66,000-EUR 91,000 in Germany and France.
• This gap emerged gradually over 20-30 years of steady pension reforms, rather than abrupt policy shifts.
• Higher savings and higher equity exposure reinforce each other: Sweden allocates 75% of pension assets to risky capital compared to 41% in Germany.
• Risk exposure at the institutional level spills over into households: systems with equity-heavy public and occupational pensions see higher private equity participation in voluntary savings.
• Multiple reform strategies exist, but all share common features: scale, cost-efficient investment options, strong governance, professional asset management, broad coverage, portability, and well-designed financial incentives.

The ALFI/McGill study ‘Europe's productive capital gap’ shows that Europe is falling behind in mobilising household and pension savings into productive investment compared to reformed pension economies such as Australia, Canada, and Sweden.

The study compares nine countries: four European economies with reformed, capital-based systems (Denmark, Finland, the Netherlands, and Sweden); two successful reformers outside Europe (Australia and Canada); and three major European economies still dominated by PAYG pensions (Germany, France, and Luxembourg).

Researchers find that countries that transitioned to partly funded pension regimes in the 1990s are now poster-child cases of successful reform, showing how gradual changes, compound interest, and equity-heavy investment strategies can dramatically scale up national pools of risk capital.

Serge Weyland, CEO at ALFI, said: “This study highlights how well-designed pension systems can mobilise retirement savings into productive risk capital. Europe has a unique opportunity to transform these savings into a powerful driver of growth. With the right governance, scale, and long-term vision, pension reforms can unlock the risk capital our economies need.”

Patrick Augustin, Associate Professor in Finance at McGill University and Director of McGill Luxembourg Centre for Finance, highlighted: “The most robust pension systems are not simply those that accumulate more savings, but those that allocate capital more efficiently—across public, occupational, and private pillars—through scale, governance, and long-term investment discipline.”

Lessons for Europe

As Europe faces similar political and demographic challenges as the countries examined, its reforms can draw on their experiences while tailoring solutions to local contexts. This study provides strong evidence and detailed insights that we hope will help shape the future agenda of Europe’s Savings and Investment Union.

• Download the photo of Serge Weyland (JPG)
• Download the photo of Patrick Augustin (JPG)
• Download the ALFI/McGill ‘Europe's productive capital gap’ study (PDF format)
• Download the press release (PDF format).

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Notes to editors:

For more information and interview requests, please contact:

• ALFI, Luigi Salerno, Head of Communications: Salerno@alfi.lu
• Peregrine Communications: ALFI@peregrinecommunications.com

About ALFI

The Association of the Luxembourg Fund Industry (ALFI) represents the face and voice of the Luxembourg asset management and investment fund community. The Association is committed to the development of the Luxembourg fund industry by striving to create new business opportunities, and through the exchange of information and knowledge.

Created in 1988, the Association today represents over 1,400 Luxembourg domiciled investment funds, asset management companies and a wide range of businesses that serve the sector. Luxembourg is the largest fund domicile in Europe and a worldwide leader in cross-border distribution of funds.

ALFI’s mission is to lead industry efforts to provide solutions and make Luxembourg the most innovative international investment fund centre.

To keep up with all the news from ALFI and the fund industry in Luxembourg, follow us on LinkedIn, YouTube and Flickr.

For more information please visit www.alfi.lu.

About McGill University

Founded in Montreal, Quebec, in 1821, McGill University is Canada’s top ranked medical doctoral university. McGill is consistently ranked as one of the top universities, both nationally and internationally. It is a world-renowned institution of higher learning with research activities spanning three campuses, 12 faculties, 14 professional schools, 300 programmes of study and over 39,000 students, including more than 10,400 graduate students.

McGill attracts students from over 150 countries around the world, its 12,000 international students making up 30% of the student body. Over half of McGill students claim a first language other than English, including approximately 20% of our students who say French is their mother tongue.