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Tuesday 22 January 2019


Spring Conference

Netherlands maintains highest ratio of pension assets to GDP

Written by Talya Misiri

The Netherlands continued to have the highest ratio of pension assets to GDP in 2017, with 194 per cent, it has been reported.

According to Willis Towers Watson’s Global Pension Assets Study, the Netherlands had the highest ratio of pension assets to GDP; followed by Australia with 138 per cent and Switzerland with 133 per cent.

Ten-year figures, in local currency, found the UK to follow the Netherlands in growing its pension assets as a proportion of GDP the most, up by 88 per cent to 121 per cent in 2017.

The Netherlands and the UK were also among the three markets globally that have increased allocation to bonds by the largest amount in the past ten years. Bond allocations grew from 43 per cent to 50 per cent and 30 per cent to 35 per cent, respectively.

Both the Netherlands and UK continued to be markets dominated by defined benefit pension assets, with 94 per cent and 81 per cent, respectively.

Home bias for equities were seen to be falling the last two decades, falling from 68.7 per cent in 1998 to 41.1 per cent in 2017. Switzerland and the UK were two of the 22 major markets in the study to have the lowest allocation to domestic equities.

Overall, total pension assets to GDP ratio were 67 per cent at the end of 2017 and pension fund assets managed by the top 100 alternative asset managers rose to $1,612bn, according to Willis Towers Watson’s Global Alternatives Survey.

Global institutional pension fund assets in the 22 major markets grew to $41.3 trillion at year end 2017.

Willis Towers Watson global head of investment content Roger Urwin said: “While the short-term figures are positive these are due to unusually high market returns. Looking back at 20 years of progress makes for encouraging reading. In particular, the improving position of pension assets as a proportion of GDP and the evolution of pension fund governance, which has risen up trustees’ agendas and is certainly a lot stronger as a result.”

Urwin added: “DC now accounts for 49 per cent of total assets across the seven largest pensions markets in the world as these funds continue to experience positive net cash flow and relatively lower levels of benefit withdrawals compared to their DB counterparts. As such we would expect DC assets to become larger than DB assets within the next two years. With DC models in the ascendancy, it is important that governance issues and the shift in risk on to the end-saver are closely monitored, without regulation becoming a burden and hindering the ability of DC plans to deliver optimal outcomes.

“Other challenges that lie ahead for funds worldwide include the need for countries with ageing populations to accommodate increased benefit payments. We note a much increased use of liability driven investment strategies (LDI). We also are seeing traditionally DB-focused countries showing signs of a shift towards adopting DC pension plans.”

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