The views of this article are the perspective of the author and may not be reflective of Confessions of the Professions.
The global pension assets market is worth more than thirty-six billion US dollars based on the sixteen major global markets. The market had a growth rate of over six percent between 2013 and 2014. The United States is the largest pension assets market by far accounting for sixty-one percent of the global market with the United States pension assets market worth twenty-two billion US dollars in 2014.
The United Kingdom is the second highest valued market worth a little over three billion US dollars, followed by Japan, the third highest pension assets market worth close to three billion US dollars. Australia comes in fourth place worth a little over one and a half billion US dollars and the Canadian market is the fifth largest global market valued at exactly one and a half billion US dollars.
The top three fastest growing markets in the decade between 2004 and 2014 were Mexico at more than nineteen percent, South Africa at almost thirteen percent and Australia at a little over eleven percent.
Within the asset allocation market, equities, bonds and cash allocations have declined, while the market for alternative assets (such as property for example) has continued to rise. The alternative assets market rose by twenty percent between 2004 and 2014. Switzerland currently has the most diversified portfolio across pension asset allocations within the top sixteen major global pension assets markets.
For more information, have a look at the infographic below created by Easy Life Cover, a life insurance company based in Ireland.
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The World of Pension Assets
What is a Pension Asset
- Contributions are invested in 1 or more pension funds in a private personal pension plan.
- These funds are used to buy & sell a different mix of assets e.g. equities & bonds.
- The value of the funds rise & fall, depending on the performance of the assets.
- The funds are expected to grow annually, but it is not guaranteed.
Global Market Size & Growth
- US$36+ Billion: The total value of personal assets.
- 84% of GDP: Global pension assets in 2014.
- 6.1% Growth Rate: Between 2013 & 2014.
- USA with 61%+: Is the largest pension assets market.
The Value of The Largest Asset Markets
- USA: $22 billion+
- UK $3.3 billion+
- Japan $2.8 billion+
- Australia $1.6 billion+
- Canada $1.5 billion+
- Netherlands $1.4 billion+
- Switzerland $823 million+
- Germany $620 million+
- South Korea $511 million+
- Brazil $268 million+
- South Africa $234 million+
- Malaysia $205 million+
- Mexico $190 million+
- France $171 million+
- Ireland $132 million+
- Hong Kong $120 million+
The Fastest Growing Markets 2004 – 2014
- Mexico 19.4%
- South Africa 12.9%
- Australia 11.2%
- Hong Kong 10%
- Brazil 9.8%
- UK 8.9%
- Netherlands 8.2%
Asset Allocation Changes & Dominant Markets
Bonds, equities & cash allocations are declining, but alternatives continue to rise.
49% (1995) – 42% (2014)
Australia, UK & US
High equity allocations.
40% (1995) – 31% (2014)
The Netherlands & Japan
Higher exposure to bonds.
6% (1995) – 2% (2015)
Most diversified, with similar allocations to equities, bonds & alternatives.
Defined Contribution vs. Defined Benefit
|Defined Contribution (DC):
the pension income depends on what is paid into the fund & the investment performance.
|Defined Benefit (DB):
an employer scheme where benefits are defined at the outset i.e 1/60 for each year of service.
|Defined Contributions are up by 8% in the past decade (2004 – 2014).||Defined Benefits are at 53% vs. Defined Contributions at 47%.|
DB / DC Asset Split
Australia 85% (DC) / 15% (DB)
US 58% (DC) / 42% (DB)
UK 29% (DC) / 71% (DB)
Netherlands 5% (DC) / 95% (DB)
Canada 4% (DC) / 96% (DB)
Japan 3% (DC) / 97% (DB)