The reform process of the last decade has been particularly marked in Continental Europe and EMU countries where the introduction of tax-favored savings products for retirement triggered a build-up process in this pension segment. The growth in importance of these products can be seen within the financial assets of private households. In many countries these saving products have increased their presence within household portfolios rising from an average in Western Europe of 30% in 1998 to 34% in 2007.
However, the world financial crisis dragged down stock markets in 2008 and triggered massive losses in equity and real estate valuations. This has had a drastic effect on the financial assets of private households in Western Europe. Assets are estimated to have declined by 8.5% in 2008. But this aggregate picture hides significant variation between countries resulting from differences in investment behavior and pension systems. For example, the Swiss and Dutch authorities reported losses in pension fund assets in 2008 of almost 18%. UK losses may be even higher due to the drastic fall in real estate prices and their crossover effects to financial assets. As a result, these developments could put the role of funded pensions in the overall old age provisioning system to the test in countries with mature funded pension systems. In particular, this will be a challenge for countries where second and third pillar pension provisions are still being built up.