Global retirement plan assets across 22 countries jumped in 2019 thanks primarily to strong equity markets, up 15% for the year to $46.73 trillion, said the Thinking Ahead Institute.
The non-profit group, which is part of Willis Towers Watson's Thinking Ahead Group, said retirement assets now equal 68.8% of the gross domestic product of these 22 countries, up from 60.4% as of Dec. 31, 2018.
According to the Global Pension Assets Study 2020, average growth per year in dollar terms was 15.2% across these countries.
The three largest markets — the U.S., U.K., and Japan, with a total of $36.03 trillion in assets — represented 77.1% of total assets. The U.S. remained the largest country by retirement assets at $29.2 trillion, up 18.2% over the year and representing 62.5% of the total. Supplanting Japan, the U.K. was the second-largest retirement market at $3.45 trillion, up 23.3% for the year and representing 7.4% of the total, while Japan ranked third at $3.39 trillion, up 8.9% for the year and representing 7.2% of the total.
The overall increase in assets among the 22 countries was largely attributable to an average return of 19.3% recorded for a 60% global equities/40% global bonds portfolio.
Defined contribution plan assets for the seven largest retirement markets have grown an average 7.5% per year over the past 20 years, compared with 3.5% for defined benefit plan assets. Over the past decade, DB assets overall have grown at an average 4.8% per year, vs. 8.4% for DC assets. Year-over-year growth was not provided. Assets in DC plans now account for slightly more than 50% of total assets across the seven largest markets, equal to the year before, when DC plan assets exceeded DB plan assets for the first time.
"The DC market has retained its newly found position as the larger of the two, as DB assets grow at a far slower pace. But the challenge of member engagement, critical for a stronger DC system, remains an unresolved issue for many schemes," said Marisa Hall, co-head of the Thinking Ahead Institute, in a news release. "As such, we expect this to be an area of particular focus for leading DC organizations as the next generation of plans takes shape. Advances in technology are opening up new possibilities for customization, changing the nature of member interactions and resetting member expectations. The future of DC is likely to be hyper-customized, with increased focus on individual participants, but many employers need to improve their governance to fully embrace this."
The study report is available on the Thinking Ahead Institute's website.