Pension assets reach $55.7t on market surge

WTW said systemic risks persist despite a rebound.

A stronger capital market performance drove the global pension assets rebounds in 2023, reaching $55.7t, marking an 11% increase from 2022.

The latest Global Pension Assets Study by the Thinking Ahead Institute (founded by WTW) revealed a resurgence follows a notable decline in 2022, interrupting a decade of uninterrupted growth.

Equity allocations amongst global pension funds have decreased by nine percentage points since 2003, while bond allocations remain stable at 36%. 

Meanwhile, allocations to alternative asset classes like real estate and private equity have increased from 12% to 20% over the same period. 

Cash instrument allocations have also slightly risen from 1% to 3% over the past two decades.

The United States leads as the largest pension market, followed by Japan and the UK. Australia ranks fifth, with the highest allocation to equities and the lowest to bonds among the top seven pension markets. 

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Defined contribution (DC) pensions now dominate in the top seven markets, accounting for 58% of assets, with many countries transitioning towards this model.

Whilst defined benefit (DB) funds still prevail in the Netherlands and Japan, other countries are increasingly adopting DC structures. 

In Australia, DC assets constitute 88% of total pension assets, while Canada and the UK also see significant growth in DC shares.

Despite the rebound, systemic risks persist, prompting pension funds to adapt quickly amidst regulatory scrutiny and government interventions to address pressing issues like the energy transition and climate change. 

The industry is evolving towards a partnership of human intelligence and artificial intelligence to navigate these challenges and ensure sustainable pension incomes for future generations.