Designing savings and investment accounts in the EU

In the context of the EU’s savings and investments union initiative, this report usesexamples of successful (and less successful) savings and investment accounts and taxwrappers in Europe and around the world to analyse the different frameworks; plot theirgrowth and penetration; and outline the potential impact on investment if variations ofthese models were adopted across the EU.

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There is widespread agreement that Europeans are very good savers - but that they need to save better to generate higher long-term returns for themselves and unlock capital that is much needed to support the European economy. All of the key reports on EU capital markets in 2024 (from Mario Draghi, Enrico Letta, Christian Noyer, the ECB, ESMA, and the Eurogroup) agreed on the need to better mobilise EU savings into investments, and the EU is trying to achieve this through its new ‘savings and investments union’ strategy.

At New Financial, we have long argued that to substantially change the way in which Europeans save their money and increase the supply of long-term capital in the EU, measures to widen retail investment need to be paired with more structural reforms of pensions to achieve scale. But the problem is that pensions reforms a) are politically difficult and b) would take a long time.

To achieve progress more quickly, the European Commission is encouraging member states across the EU to introduce savings and investment accounts like the Swedish ISK or ISAs in the UK that aim to incentivise savers to invest more of their money. They are not a silver bullet but play an important role in encouraging a new savings culture in the EU. Only a small number of member states currently have a dedicated framework in place for such accounts.

There are lessons to be learned from existing frameworks for accounts in Europe and around the world. This report uses successful (and less successful) examples to inform the debate on the structure, evolution, and development of these accounts, and the upcoming EU ‘blueprint’.

We believe this paper is the most comprehensive analysis yet of savings and investment accounts in Europe and worldwide but our sample of accounts is not intended to be exhaustive.

Here is a 10-point summary of this report:

1. The context: pools of long-term capital in the EU (at 239% of GDP) are much smaller than in comparable economies such as the US or the UK. Pensions in Europe are largely unfunded, and too many savings by households outside of their pensions are held in unproductive investments such as cash and bank deposits, with negative consequences for the wealth of households and the European economy. 

   
   

2. Designing savings and investment accounts in the EU: while most member states in the EU would benefit from more fundamental pensions reforms, one way to achieve progress more quickly in helping Europeans to save better could be a focus on the reform and introduction of private savings and investment accounts similar to the ISK in Sweden, ISAs in the UK, or TBSZs in Hungary across the EU.

   
   

3. Our sample: this report analyses frameworks for 25 different savings and investment accounts in Europe and around the world, and zooms in on 15 accounts that are not dedicated retirement accounts from 10 countries to plot their growth and penetration.

   
   

4. Success factors: the most successful accounts in our sample are simple to use; allow savers to invest in a broad range of assets (including cash); have no or reasonably high deposit limits; have no withdrawal restrictions such as minimum holding periods; and have an attractive tax incentive.

   
   

5. The poster child: the Swedish ISK is the top account in our sample. 10 years after its introduction, the value of assets held in the account (at 29% of GDP) was more than double the level of assets in the second most successful account. The ISK has a unique combination of flexible features: there is no other account in our sample that has i) no annual or lifetime deposit limit ii) no minimum holding period iii) virtually no restrictions on what savers can invest in iv) a clear and simple tax incentive.

   
   

6. A wide range of success: outside of the ISK, there are three broad groups of accounts: two frameworks for accounts where assets relative to GDP reached the double digits within their first 10 years (ISAs in the UK and TFSAs in Canada); a number of accounts including the ASK in Norway and the PEA in France that were launched relatively successfully; and a group of accounts including the ASK in Denmark and the PIR in Italy that have attracted a much lower take-up for a variety of reasons.

   
   

7. A trillion-euro opportunity: if every EU member state introduced a savings and investment account that saw a take-up similar to the ISK in Sweden, the TFSA in Canada, or the ASK in Norway, the value of assets held in these accounts across the EU could reach between €1.5tn to €4.8tn within 10 years. This is a bold, directional projection that we think is possible to achieve.

   
   

8. Recommendations for a blueprint: we make 10 recommendations based on best practice, lessons, and takeaways from existing frameworks that EU and member states could think about when designing a blueprint for savings and investment accounts. They cover the design of key features; suggestions to encourage engagement; and considerations of the wider context.

   
   

9. The pan-European perspective: a pan-European approach to savings and investment accounts should be a long-term vision and ambition. Done right, this could help build trust and awareness across the EU and bring tangible benefits in terms of interoperability and the cross-border transfer of savings.

   
   

10. What about retirement accounts? Retirement accounts play an important role in any system for short, mid, and long-term savings, but assets in retirement accounts grow slowly. If the EU wants to move savings out of cash and into the capital markets quickly, these are not the type of account to focus on.