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IPE special report May 2018

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Pension asset-to-GDP ratios for OECD countries up 5% over decade

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  • Pension asset-to-GDP ratios for OECD countries up 5% over decade

GLOBAL - Occupational pension funds account for close to 73% of GDP in OECD countries, up 5 percentage points in a decade, according to a report.

According to 'Pension Markets in Focus', assets under management also rose to $20.1trn (€15.5trn), recovering losses of $3.4trn suffered since the 2008 financial crisis.

Denmark ranked first in overall returns, counted in local currency, with its pension funds returning more than 12%.

Of the surveyed countries, the Netherlands saw the highest asset-to-GDP ratio of 138%, close to twice the weighted average of 72.4%.

Developed pensions markets, such as those in the Netherlands, Iceland and Switzerland - the latter two having asset-to-GDP ratios of 128.7% and 110.8%, respectively - heavily affected the weighted average, with 20 countries reporting a ratio of less than 20%, and 27 countries falling below the weighted average.

The report added: "Only 13 out of 33 countries, for which information was available, had assets-to-GDP ratios above 20%, which is considered the minimum for meeting the OECD's definition of a 'mature' pension fund market."

The OECD also found that of the 33 countries surveyed, not a single one invested more than 50% in public equity.

Of all countries, Australia came closest with 49.7% in equity, compared with 2001 when the US, Ireland and the UK invested more than 50% in stocks.

The survey noted a geographic reallocation of investment in 2011 as a means of reducing exposure to risky countries.

"This was the case, for instance, in Slovakia, where pension fund exposure to debt from the European periphery fell by 3 percentage points, to 4.5%," the report said.

"The flight to safety also translated into a drop in foreign exposure among pension funds.

"This has been particularly marked in countries like Chile, Denmark, the Netherlands and the Slovak Republic, which experienced drops in assets invested abroad ranging from 8 to 10 percentage points between 2010 and 2011."

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