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Global retirement assets in major markets rise 4.3% — Willis Towers Watson

Retirement assets in 22 major global pension markets reached an estimated $36.435 trillion as of Dec. 31, up 4.3% from 2015, said Willis Towers Watson’s annual Global Pension Assets Study released Monday.

Broken out by region, U.S. retirement assets accounted for 61.7% of the total, followed by the U.K at 7.9% and Japan at 7.7%.

The 2016 study also found that the ratio of total retirement plan assets to global gross domestic product for the 22 markets was 62% as of Dec. 31, vs. 80% at the end of 2015. China’s addition to the 2016 study contributed to part of the decrease, Willis Towers Watson noted in a news release about the survey. Finland and Italy were also added to the report this year.

The Netherlands had the highest ratio of assets to GDP at 168%, followed by Australia at 136%, Switzerland, 123%; the U.S., 121%; and the U.K., 108%. China, which includes its enterprise annuity market only, had the lowest ratio at 1.2%. Other countries with a low ratio of assets to GDP were France at 5.9%, India, 4.7%; Spain, 3.1%, and Italy, 8.2%.

Steve Carlson, head of investment, North America, at Willis Towers Watson, attributed the year-over-year increase in global pension assets among the 22 markets to strong equity markets and currency exchange rates. He added that countries with a higher ratio of retirement assets to GDP show a greater likelihood of retirement sustainability into the future.

Retirement assets for the seven largest markets — U.S., U.K., Australia, Netherlands, Switzerland, Canada and Japan — make up 91.7% of the 22 major global markets.

Over the past 10 years, defined contribution assets among the seven largest markets have grown 5.6% annually, while defined benefit assets have grown only 2.6% annually

Broken out by plan type, DC assets among the seven largest made up 48.4% of the $33.427 trillion in retirement assets in those markets as of Dec. 31, a similar percentage as last year.

Australia continues to have the highest proportion of DC to DB assets, at 87% and 13%, respectively, similar to last year. The ratio of DC/DB for the U.S. was 60% and 40%, respectively, similar to last year.

In terms of DB asset allocation, the average asset allocation for the seven largest markets as of Dec. 31 was 46% equities (vs. 44% in 2015), 28% bonds (29%), 24% other assets (which includes real estate and other alternatives and is unchanged from last year) and the rest in cash. Since 1997, the allocation to other assets has increased to 24% from 4%, while equity and bond allocations have decreased to 46% and 28%, respectively, from 57% and 35%.