Brussels, 12 February 2018 - For immediate release



Bocconi study shows benefits for consumers of life-cycle investment as a PEPP default option

A study by the SDA Bocconi School of Management “Consumer protection and the design of the default option of a pan-European Personal Pension Product”, commissioned by the European Fund and Asset Management Association (EFAMA), was published today.  

The study is a useful academic contribution to the debate on whether the PEPP should offer a default investment option with a financial guarantee, or whether the default option can rely on a life-cycling technique consisting of reducing the proportion of risky assets in the PEPP portfolio as retirement approaches.
Backed by a variety of economic arguments, the study concludes that the inclusion of life-cycle investment strategies as default option in the PEPP is economically desirable for consumers, who would benefit from superior returns and comparatively low risk compared with bonds, over a long investment horizon.   The study also illustrates the advantages of life-cycle investment solutions in terms of risk mitigation and performance enhancement.
The study conducted a series of simulations based on historical returns data for the period 1969-2012, which was marked by the two oil shocks, and increasing and decreasing interest rates and inflation rates, and for the period 1992-2012, characterized by falling interest rates and inflation rates.  The first period is referred to as the “old normal” and the second as the “new normal”.
The study presents strong evidence of the robust level of capital protection offered by life-cycle strategies:
• Under the “old normal”, the majority of savers in a life-cycle strategy can expect a real rate of return greater than 5.9% over a 40-year accumulation period, compared to only 3.3% in a product with a guarantee. 
• Under the “new normal”, the majority of savers in a life-cycle strategy can expect a real rate of return greater than 5.1%, compared to only 1.2% in a product with a guarantee. 
• Shortening the length of the accumulation period does not alter the results significantly.  By way of illustration, under the new normal scenario, the real return of the guaranteed strategy reaches 1.4% in 50% of the cases, compared to 5.8% for life-cycle strategies. 
• Life-cycle strategies ensure that 99.9% of the savers end up with an accumulated pension wealth greater than the inflation-adjusted capital invested, under both a 40- and 20-year accumulation period
The study also clearly demonstrates that the emergence of the “new normal” economic and financial landscape after the global financial crisis, coupled with the Solvency II constraints, has had a significantly adverse impact on the returns offered by life-insurance products offering a financial guarantee.
Claudio Tebaldi, Professor, SDA Bocconi School of Management, noted: "Research in the emerging field of household finance has led to the emergence of a new way of approaching consumer financial regulation, which has important implications for the regulation of financial products.  Our study, which belongs to this area of research, aims at contributing to the current debate on the type of default option that should offered by a pan-European Personal Pension Product.  More explicitly, our paper has two main goals: i) to offer a guide on how to improve policymakers’ understanding of household retirement saving behavior and ii) to provide an illustration of the important advantages that life-cycle investment solutions may offer in terms of risk mitigation and performance enhancement.
John Y. Campbell, Professor of Economics at Harvard University, noted: “The study by Andrea Berardi, Claudio Tebaldi, and Fabio Trojani is an illustration of the power of household finance theory to assist the design task faced by European financial regulators”.*
William Nott, EFAMA President, commented: “The level of capital protection offered by life-cycle strategies is very robust. The Bocconi study confirms that life-cycle investment strategies are a powerful tool for delivering high real rates of return and managing risks, not just investment risk but also inflation risk.  We strongly believe that these strategies should qualify as a default option for the PEPP.”
Peter De Proft, EFAMA Director General, commented: “We hope policymakers look both at the net return offered by life-cycle strategies, and at the return loss caused by a financial guarantee over a long investment period.  The potential of the PEPP in reducing the pension gap lies in its ability to generate return and retirement wealth; life-strategies are able to strike the right balance between return generation and capital protection”. 
For media enquiries, please contact:
Peter De Proft, Director General
Bernard Delbecque, Senior Director for Economics and Research
Telephone: +32 (0) 2 513 39 69 - E-mail:
– Ends –
Notes to editors:

The study can be downloaded from the EFAMA website via this link
* In his 2006 Presidential Address to the American Financial Association, John Campbell coined the name "Household Finance" for the field of financial economics that studies how households use financial instruments and markets to achieve their objectives.
About the study: The authors of the study are: Claudio Tebaldi (, who is affiliated with the Department of Finance at Bocconi University, IGIER and Baffi-CAREFIN Milano, Italy; Fabio Trojani, who is affiliated to Università Bocconi Department of Finance, University of Geneva and Swiss Finance Institute; and Andrea Berardi, who is affilated to Università_di Venezia Ca'Foscari.  The study includes a foreword from John Y. Campbell from Harvard University.

About the European Fund and Asset Management Association (EFAMA):
EFAMA is the representative association for the European investment management industry. EFAMA represents through its 28 member associations and 62 corporate members close to EUR 23 trillion in assets under management at end 2016. At end June 2017, total net assets of European investment funds reached EUR 14.8 trillion, with over 31,200 of these funds were UCITS (Undertakings for Collective Investments in Transferable Securities) and over 28,300 funds composed of AIFs (Alternative Investment Funds). For more information about EFAMA, please visit