Global retirement assets grew more than 13.6% to a record $41.35 trillion as of Dec. 31, the largest single-year growth in the last 20 years, said the Thinking Ahead Institute.
The non-profit group, which is part of Willis Towers Watson's Thinking Ahead Group, said total assets across 22 markets have grown to their highest level since the study began in 1997. Average growth per year in dollar terms was 6.2% across these countries.
Retirement assets now equate to 67% of the GDP of these 22 countries, compared with 62% as of Dec. 31, 2016, according to the Global Pension Assets Study – 2018.
The seven largest markets — the U.S., U.K., Japan, Australia, Canada, the Netherlands and Switzerland — represented 91% of total assets at $37.8 trillion. These markets recorded growth of 12.8% for the year ended Dec. 31.
The U.S. remained the largest country by retirement assets at $25.4 trillion, up 12.9% over the year and representing 61.4% of total assets. U.K. retirement assets grew 6.9% to $3.1 trillion, and grew 5.5% per year in sterling terms over the past decade. The market's retirement assets accounted for 7.5% of the total. The third-largest retirement market was Japan at $3.1 trillion, up 10.7% for the year and representing 7.4% of total assets.
Asset growth was largely attributable to market performance. "While the short-term figures are positive, these are due to unusually high market returns," said Roger Urwin, global head of investment content at Willis Towers Watson, in a statement accompanying the study. "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."
The study also considered the defined benefit and defined contribution split of retirement assets. DB assets for the seven largest retirement markets grew an average 4.5% per year over the past 20 years, compared with 7.9% for DC. Over the past decade, DB overall has grown at an average 3.1% per year, vs. 5.6% for DC. Year-on-year growth was not available. Assets in DC plans now account for 48.6% of total assets across the seven largest markets, compared with 48.4% as of Dec. 31, 2016.
The countries making up the remainder of the 22 largest retirement markets were Brazil, Chile, China, Finland, France, Germany, Hong Kong, India, Ireland, Italy, Malaysia, Mexico, South Africa, South Korea and Spain.