. maturing defined benefit plans and newly set up defined contribution schemes may have different propensities to invest in risky assets, and thereby affecting the relative price of the assets. looking at available data does indeed suggest many factors impacting on the asset allocation of the different types of pension schemes. at the same time, the shift between types of pension schemes transfers the longevity risk of the individual into a future income risk for the individual. in the defined contribution pension system, a longer life can only be counterbalanced by either saving more, working longer or through unrealistically high rates of return on investments. none of these remedial options are available ex post. individuals with retirement income stemming from such pensions schemes therefore run the risk of outliving their resources, leaving only a reduction their standard of living when they are old. furthermore, as retirement income becomes subject to a greater number of risks, plan beneficiaries will have to provide for these challenges, thus putting them in a less good position to bear risk in their remaining portfolio behaviour and altering their behaviour as investors on financial markets. in this context it is noteworthy that most people have substantial problems giving a reasonable estimate of how much money at retirement they will have had to accumulate in order to sustain their current standard of living. few people realize how large the capital stock will need to be and how low the rate of withdrawal has to be, irrespective of the asset allocation chosen. individuals have a poor appreciation of the financial implications of longevity. it is the responsibility of public authorities to further promote financial education programmes aimed at enhancing not only the awareness of citizens on the financial risks they face in their decisions but also the ability to judge the options at their disposal. for instance, the rate of return on the investments is crucial to the value of definedcontribution pension schemes at retirement. this raises a number of challenging questions with respect to the structuring of the payout options for these schemes. the main options include lump - sum payments, programmed withdrawals and annuities. the choice amongst them depends on the balance to strike between flexibility and protection from longevity risk, and is most certainly subject to the country context. to this regard, financial markets need to be sufficiently developed and to offer adequate financial products, which enable individuals to convert the accumulated assets into a stream of income at retirement. it requires the ability from individuals to carefully assess their situation and make important financial choices for themselves. from a public policy point of view,

countries with a strong ageing of the population. over the coming decades, as the “ first pillar ” of old - age provision will increasingly need to be complemented by a strong “ second pillar ” of occupational pension funds, a significant increase in the value of assets managed by the retirement savings industry can be expected. this will particularly need to be the case in countries where this industry is less developed and in countries with underfunded public pension systems with defined benefits. at present the share of total wealth invested by euro area households with insurance corporations and pension funds is much smaller than is the case for us households. this largely reflects the larger weight of real estate in euro area households ’ portfolios ( both in value and relative to gdp ). the strong rise in property prices experienced in recent years by some euro area countries contributed to increase the share of housing wealth in total household wealth. at the same time, with the normalisation of house price dynamics, the accumulation wealth through institutional investors should come to the fore more strongly in the future. at just under 30 %, the share of financial wealth invested with insurance corporations and pension funds is currently very close to the share observed for the us. furthermore, this share has gradually risen from 24 % in early 1999 in part, reflecting a shift in the preference of households with respect to asset holdings from direct holdings of securities to professional asset managers. looking across the euro area, the size of the private pension fund industry differs extensively with the spectrum going from the netherlands with a very large sector of 1. 3 times gdp to france and germany with much smaller ones below a tenth of gdp. several factors have contributed to this cross - country variation in the design and importance of pension funds : the past demographic structure of the population, the fiscal position of governments and socioeconomic trends. the global pension landscape is also being affect by the shift, in particular by occupational pension plans, toward defined contribution plans, while often defined benefit plans have been closed to new entrants. traditionally, private pensions have been employer - provided and been of the defined - benefit type, where the entitlement depends on some measure of individual earnings and years of service. the pension benefit in defined - contribution plan depends on the value of individual and employer contributions, the investment returns that these earn and the terms on which accumulated capital can be converted into a flow of pension benefits. potentially, this shift in the type of the private pension schemes may have repercussions on to financial markets and portfolio allocation