Assets in pension funds exceeded 50.9 trillion euros worldwide in 2023, 11.2% more

Spain captured 0.1% of the market, with 37,473 million euros in assets

MADRID, 11 Mar. (EUROPA PRESS) -

Global pension assets grew again by up to 11.2% in 2023, reaching 55.7 trillion dollars (50.9 trillion euros), according to the latest global study of pension system assets prepared by Thinking Ahead Institute (TAI) of WTW.

This figure contrasts with the 50.1 trillion dollars (45.8 trillion euros) at the end of 2022, when the same TAI study had measured the largest annual drop since the global financial crisis, after a decade of uninterrupted growth.

Spain stands at 41,000 million dollars (37,473 million euros) in pension assets, 7,000 million dollars (6,398 million euros) more than the previous year and 0.7% less than a decade ago. Regarding the weight it represents in the pension markets, the country remains at 0.1%, the same percentage as that registered in 2013.

The revival of growth during 2023 is, in large part, a result of "stronger" performance of the markets throughout the year, following the negative impact seen in financial markets during 2022.

The TAI estimates that the return, measured in dollars, of a reference portfolio composed of 60% global equities and 40% global fixed income, stood at 16.6% in the twelve months to December 2023.

On the other hand, the asset allocation among global pension funds has varied and, since 2003, the prominence of equities has been reduced by nine percentage points, from 51% to 42% in 2023. Meanwhile, the allocation Fixed income remains stable at an average of 36%, the same in 2023 as in 2003.

Compared to 20 years ago, asset allocation to “other” asset classes, from real estate and infrastructure to private equity, has increased “significantly.”

These "alternative investments" now represent 20% in pension fund portfolios, up from just 12% in 2003. At the same time, reflecting awareness of market risk and systemic uncertainty, average allocations to treasury instruments have increased "slightly" from 1% to 3%.

If, in addition to Spain, we consider each market individually, the United States dominates with 63.9% of the assets among the 22 largest pension markets (P22), followed by Japan and the United Kingdom, with 6.1% and a 5.8%, respectively. Together, these countries account for more than three quarters of global pension assets.

91% of the P22 assets are concentrated in the seven largest markets, that is, 50,842 billion dollars (46,468 billion euros). Within this group, defined contribution pension plans now represent a majority of 58%.

Pension plan systems and structures continue to evolve. While defined benefit schemes continue to dominate in the Netherlands and Japan, accounting for 94% and 95% of total pension assets, other countries are seeing a steady shift towards defined contribution. It should be noted that the Dutch pension system is in the process of reform, moving from the traditional defined benefit system to the defined contribution system.

In Australia, meanwhile, defined contribution assets now represent 88% of total pension assets, while in Canada, where there was previously a clear defined benefit majority, defined contribution has increased to a considerable 44%.

In the United Kingdom, the defined contribution already exceeds a quarter of assets, meaning that British defined benefit assets stand at 74% and are progressively decreasing with respect to the total.

"Pension assets are growing again, just as the importance of the pension sector itself is constantly growing in a world that faces new challenges and opportunities to face the future with prosperity. Growth is once again the order of the day," said the director of the Thinking Ahead Institute, Jessica Gao.

"This global growth has not yet reached a rapid pace, and pension assets are still behind their pre-2022 position, but it is much better than what was recorded a year earlier. Inflation has moderated and, consequently, financial markets have remained supported by interest rates that also seem to have peaked, at least for now, in most countries," he added.

For his part, the investment director of WTW Spain, Oriol Ramírez-Monsonis, highlighted that "systemic risk continues to increase" and the expectations of pension funds have to adapt quickly to "a changing world."

"The pension industry is facing increasing pressure from regulators. The influence of governments on pension plans is very high, as they seek new forms of investment necessary to overcome capital-intensive systemic problems, such as the energy transition or the mitigation of climate change," he explained.