Pension fund assets now top $25trn (€22trn) in member countries of the Organisation for Economic Co-operation and Development (OECD), according to its latest figures.
The five biggest countries in the OECD area in terms of pension fund assets were the US, the UK, Australia, Canada and the Netherlands, altogether totalling $21.7trn, or more than 85% of OECD pension fund assets.
The largest percentage increases in assets were found in Estonia, Korea, Luxembourg and Turkey, where pension fund assets rose by more than 20% compared with their levels in December 2013.
In Poland – the only OECD country where pension fund assets went down between end-2013 and end-2014 – assets fell by more than 50%.
The OECD says this is probably due to the reversal of the mandatory funded pension system, which led to a transfer of domestic sovereign bonds held by open pension funds into the social security system.
The weighted average asset-to-GDP ratio for OECD countries reached 86%.
Within Europe, four OECD countries achieved asset-to-GDP ratios above this average: the Netherlands (161%), Iceland (146%), Switzerland (126%) and the UK (96%).
In most OECD countries, pension fund assets have increased at a higher pace than GDP since December 2013.
Among non-OECD countries in Europe included in the survey, Romania and Albania experienced an increase of more than 30% in pension fund assets since December 2013.
Meanwhile, pension funds in all the reporting OECD countries recorded positive real returns between December 2013 and December 2014, ranging from 1.3% in the Czech Republic to 23.4% in the Netherlands.
More than one-third of OECD countries experienced real returns higher than 5%, the OECD weighted average.
The OECD attributed the positive estimates for the real rate of return of pension fund assets partly to two main factors.
First, world stock markets achieved a good performance – the MSCI World Index increased 5.5% in 2014.
Second, interest rates fell, increasing the market value of pension funds’ fixed income assets.
However, the OECD acknowledged that the low-yield environment may also increase the actuarial value of the liabilities of defined benefit pension plans.
Turning to asset allocation, shares and bonds remained the main instruments for investment in almost all the reporting countries.
Within Europe, pension funds in Poland and Kosovo had more than half of their portfolio invested in shares.
In six other European countries – Albania, Czech Republic, Hungary, Romania, Serbia and Slovakia – pension funds favoured bills and bonds, with more than 75% of their portfolios invested in this asset class.
The report also showed that a few countries invested significantly in classes other than bills and bonds, and shares.
Germany was one of these, with pension funds usually investing around 20% of their portfolios in loans.