On the go: UK pension assets have surged past Japan to retake second place in the world’s pensions market, according to new research.
A study carried out by the Thinking Ahead Institute revealed that UK pension assets grew by 7.7 per cent last year to $3.9bn (£2.8bn).
The global pensions industry defied the market volatility caused by the coronavirus pandemic in 2021. Global pension fund assets across the 22 largest pensions markets soared to a record $56tn, a 6.9 per cent lift from the previous year.
The global market has almost doubled in the past decade, compared with its level of $29.3tn in 2011.
The seven largest markets — Australia, Canada, Japan, Netherlands, Switzerland, the UK and the US — now make up a total of 92 per cent of total pension assets globally.
Australia and the US demonstrated similar levels of growth, with their markets increasing by 11.6 per cent and 8.5 per cent, respectively.
Defined contribution assets maintained their grip on global pension assets. Having finally become the dominant pension asset in the seven largest markets in 2020, DC assets represented 54 per cent of these markets last year.
“High valuations imply financial security but also pose difficult questions about future allocations,” said Marisa Hall, co-head of the Thinking Ahead Institute.
She added that this will encourage many schemes to continue exploring beyond traditional asset classes.
According to research conducted by the Pensions Management Institute and Schroders Solutions, 56 per cent of UK trustees now favour using illiquid assets as their schemes approach their endgames.
Trustees are increasingly choosing assets that provide a smoother funding journey and that help schemes to achieve rising cash flow demands.
“Pension professionals face structural shifts too, with DC funds seemingly the future in most global pensions markets, regulatory pressure and a growing demand from end-savers for easy access to information and an openness about investment decisions,” Hall added.
The US held on to its status as the world’s largest pensions market, with $35tn invested in pension funds. This accounted for 62 per cent of the assets of the 22 largest markets.
