Investment Opportunity Worth €4.8tn Overlooked by EU Savers, according to a new warning
In a groundbreaking report, think tank New Financial, in partnership with Fidelity International, has identified a potential €4.8 trillion opportunity to transform Europe's financial landscape. The key to unlocking this opportunity lies in encouraging Europeans to shift their savings from cash-reliant habits towards long-term investments.
The success of Sweden's "ISK" account, which holds assets equivalent to 29% of Sweden's GDP, ten years after its launch, has been attributed to its simplicity, tax transparency, and user flexibility. This standout model is one of the standout models mentioned in the report, serving as a beacon for the future of European savings and investment.
The report's recommendations focus on the design and promotion of savings and investment accounts across the EU. Specifically, it highlights the importance of developing accessible and attractive accounts that facilitate a cultural and behavioural shift from short-term savings to long-term investment products.
Learning from best practices internationally is also crucial in designing effective tax wrappers and account structures that encourage sustained investment. The report analyses 15 different investment account models from Europe and worldwide, assessing their growth and impact, and discusses what lessons the EU and its member states could draw from these to foster greater investment participation.
Supporting the rollout of the Savings and Investment Union (SIU) initiative is another key recommendation. This initiative aims to unify and streamline investment opportunities for Europeans, thereby enhancing economic resilience through greater capital market participation.
Encouraging lifecycle investment strategies and preserving strong regulatory frameworks such as UCITS, regarded as the “gold standard,” are also pivotal in increasing retail investor engagement, lowering fund costs, and shifting asset allocation towards long-term investment.
The report suggests that the absence of consistent, user-friendly investment vehicles is a factor contributing to Europe's low capital pool. To address this, the proposed blueprint emphasises ease of use, tax incentives, high or no deposit ceilings, and no penalty for withdrawals.
Awareness campaigns to improve financial literacy are also recommended, as are commitments from policymakers to minimise future changes that could erode confidence. The introduction of junior investment accounts is suggested, and the blueprint advocates against geographic restrictions that limit savers to local markets.
Christian Staub, head of Emea and global client propositions at Fidelity International, supports the need for innovative savings frameworks to empower individuals and strengthen Europe's financial future. Maximilian Bierbaum, head of research at New Financial and lead author of the report, believes that with the right policy tools, Europeans can shift behaviour and unlock the potential of their savings for long-term prosperity.
If similar accounts were adopted across the EU and saw take-up in line with the most successful accounts in the report's sample, they could collectively attract between €1.5 trillion and €4.8 trillion in investment over the next decade. This shift could significantly boost Europe's economic resilience, particularly as long-term capital pools in the EU stand at just 239% of GDP, significantly lower than levels in the US or UK.
The European Commission's "Savings and Investments Union" initiative aims to encourage EU households to consider more productive investment options. As of 2023, EU households collectively held nearly €11 trillion in cash, highlighting the potential for this transformative shift.
The report concludes that this inertia is a missed opportunity not just for individuals, but for Europe's broader economic resilience and capital markets depth. With the right policies in place, Europe can unlock the potential of its savings and secure a prosperous financial future.
Personal finance can greatly benefit from the design and promotion of savings and investment accounts across the EU, as recommended in the recent report by New Financial and Fidelity International. By developing accessible and attractive accounts that facilitate a shift from short-term savings to long-term investment products, Europeans can potentially collectively attract between €1.5 trillion and €4.8 trillion in investment over the next decade, boosting economic resilience and securing a prosperous financial future.
