The ageing population in the euro area is not expected to lead to a significant structural shift in the demand for safe assets, argued a blog post by three economists from the European Stability Mechanism, published on 27 January 2025. Robert Blotevogel, Giovanni Callegari and Aleksandra Kolndrekaj analysed data from the euro area household finance and consumption survey (HFCS) and concluded that the share of safe assets in household portfolios has remained stable across most age groups, with only a slight increase among the oldest households.

Ageing population

The euro area is experiencing rapid population ageing, with the median age currently at 45 years and projected to rise to 48 by 2050. Although this appears modest, it signals a profound demographic shift. Today’s ratio of workers to retirees, which stands at 3:1, is expected to decrease to 2:1 by mid-century. This trend carries significant economic implications, particularly for saving and investment patterns, which may evolve as the population structure changes.

There is ongoing debate about how ageing populations will influence savings and investment in the euro area. One perspective suggests that retirees, as they deplete their wealth, will drive a phase of dissaving—wherein they spend more money than they earn or receive as income. Conversely, others argue that longer life expectancies will encourage higher savings to sustain living standards throughout extended retirements.

Safe assets

The ESM economists explored whether these demographic changes would increase demand for safe assets--such as deposits, bonds, life insurance and voluntary pensions--and alter their share in household portfolios. Historically, safe assets have accounted for about a quarter of total household assets in the euro area. However, the HFCS data often underestimates wealth, particularly among wealthier households. To address this, the economists rescaled the data using totals from the European Central Bank’s quarterly sector accounts.

The rescaled data revealed two key insights. First, safe asset holdings increased across all age groups after rescaling, with the highest proportion observed among younger households.

This is likely because younger households typically have smaller overall asset bases that lack significant property ownership.

Second, beyond age 35, the share of safe assets remained relatively stable, showing no notable increase as households aged.

This indicates that older households do not disproportionately increase their safe asset holdings as part of their overall portfolios. These findings suggest that, despite the growing number of ageing households, their impact on the demand for safe assets will remain limited.

Looking ahead to 2050

Using euro area population projections for 2050, the economists employed a set of regressions and weighted indices to project safe asset holdings across age brackets in 2025 and beyond. They argue that while the total safe asset holdings by younger and middle-aged households are expected to decline due to a reduced number of households in these age groups, this decline will be offset by increased holdings among older households, primarily driven by their growing share of the population.

Assuming a constant wealth-to-income ratio, the economists project that total safe asset holdings in the euro area will grow from €16trn in 2021 to €41trn by 2050. However, this increase reflects broader economic growth rather than a structural shift in demand for safe assets caused by ageing.

Dissaving

The study emphasises that an ageing population is unlikely to cause a dramatic shift in the demand for safe assets. Household preferences for asset allocation will remain stable, with changes in total asset holdings expected to align with nominal income growth.

These findings dissuade concerns that population ageing will lead to widespread dissaving or asset price instability in the euro area. Instead, demand for safe assets is projected to remain stable across age groups, alleviating fears of disruptive economic shifts.

While the analysis focuses on safe asset demand, the economists caution that ageing could impact the macroeconomy in other ways. These include effects on productivity, growth, inequality, labour markets, capital flows and credit systems. These broader changes could indirectly influence savings and asset demand through general equilibrium effects, though such dynamics were beyond the scope of this study.