Global pension assets record largest annual decline since the Global Financial Crisis

ARLINGTON, VA, February 16, 2023 — After more than a decade of uninterrupted growth, last year global pension assets recorded their largest fall since the global financial crisis of 2008, according to the latest Global Pension Assets Study from leading global advisory, broking and solutions company WTW’s Thinking Ahead Institute. The study shows that global pension assets now stand at US$47.9 trillion¹, a fall of 16.7% in a year driven largely by a correction in both fixed-income and equity markets.

The U.S. remains the largest pension market, followed at a significant distance by Japan and Canada. Together, these three markets account for over 76% of pension assets in the largest 22 pensions markets (P22). The U.K. slid into fourth place, mainly due to losses incurred by pension funds with liability-driven investing strategies and the forced selling of gilts during a liquidity crisis.

Since 2002, overall equity allocations have shrunk from 50% to 42%, and similarly the allocation to bonds has decreased from 38% to 32%. Allocation to other assets (real estate and other alternatives) has increased from 9% in 2002 to an estimated 23% at the end of 2022. Traditionally the U.S. and Australia have had higher allocations to equities than the rest of the largest seven pensions markets (P7), while Japan, Netherlands and the U.K. have had higher allocations to bonds.

In many regions around the world, defined benefit (DB) pensions continued to diminish in the continuing shift to defined contribution (DC) plans. In the past 20 years, global DC assets have grown 7.2% per annum, compared with a 4.4% per annum growth rate for DB assets.

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Last year we experienced, to an extent, a global polycrisis where various risks combined, were amplified as a result, and manifested in significant asset falls..”

Marisa Hall | Thinking Ahead Institute

“Last year we experienced, to an extent, a global ‘polycrisis’ where various risks combined, were amplified as a result, and manifested in significant asset falls. It is our view that these systemic risks will increase in the future and will emanate predominantly from environmental, societal and geopolitical sources,” said Marisa Hall, head of the Thinking Ahead Institute.

“While many pension funds are focused on the long term, this situation presents short-term challenges that cannot be ignored. The main challenge is that accurate pricing of these risks is near impossible, as they have high uncertainty and low tractability, but their impact is likely to be broad and significant and will test organizational resilience.

“Our work with investors points to transition pathways focused on cleaner energy, fairer societies and greater accountability,” continued Hall. “As this landscape evolves, pension organizations will need to adjust their strategies and use adaptive capital to navigate these changes and build in future resilience.”

Notes to editors

• The P22 refers to the 22 largest pension markets included in the study, which are Australia, Brazil, Canada, Chile, China, Finland, France, Germany, Hong Kong, India, Ireland, Italy, Japan, Malaysia, Mexico, Netherlands, South Africa, South Korea, Spain, Switzerland, the U.K. and the U.S.
• The P7 refers to the seven largest pension markets (92% of total assets in the study): Australia, Canada, Japan, Netherlands, Switzerland, the U.K. and the U.S.
• All figures are rounded, and 2022 figures are estimates.
• All dates refer to the calendar end of that year.

Footnote

¹ As of December 31, 2022