Vanguard has welcomed the publication of the EU Commission strategy for its Savings and Investments Union initiative, which has the potential to transform Europe’s investing culture and provide better outcomes for retail investors.
In particular, Vanguard said that it supports the idea of European savings and investment accounts, which will enable people across the EU to benefit from best-in-class tax incentives for retail investment. It also welcomes the ambitious agenda on retirement savings, which is crucial for improving the financial well-being of EU citizens.
As the EU commission acknowledges[1], approximately EUR 10 trillion of EU retail savings are currently held as bank deposits and investors should have the opportunity, if they wish, to hold more of their savings in higher-yielding capital-market instruments.
Jon Cleborne, head of Vanguard Europe, commented, “Evidence from EU Member States like Sweden and Denmark, and internationally from Australia, the UK, and the US, shows that good tax incentives can drive retail participation in capital markets. The keys to success include offering tax-advantaged accounts that are simple, attractive, and stable.
“Vanguard firmly believes in the need to help more people become investors. Our commissioned research[2] estimates that the EU could unlock an additional EUR 11 trillion in investment across retail and retirement markets if member states take the right steps.
“While tax incentives will help drive change, the financial industry must also provide more meaningful help to investors. This includes educating them about how inflation affects cash, which hampers individuals’ likelihood of reaching long-term goals. We should also help them understand other financial concepts like the power of compounding and the importance of cost awareness -higher fees do not mean higher returns.
“We are committed to supporting the Savings and Investments Union initiative and look forward to collaborating with the EU Commission and Member States to realise its full potential.”
Vanguard data: inflation erosion on cash
Cash feels safe, but its value is eroded by inflation. Inflation means that €10,000 saved in cash in 2004 would be worth only €8,139. in “real” terms today. The same amount invested in the global stock market would be worth €59,352 today – that’s in real terms, after inflation.
[1] https://finance.ec.europa.eu/document/download/13085856-09c8-4040-918e-890a1ed7dbf2_en?filename=250319-communication-savings-investmlents-union_en.pdf
[2] https://www.ie.vanguard/content/dam/intl/europe/documents/en/the-future-of-pensions-and-retail-investments.pdf
