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The total value of pension assets managed globally rose by 14% in 2006 to reach a new high of $26.0 trillion. Figures in IFSL’s Pension Markets report show that $2.9 trillion of pension fund assets in the UK make up 11% of total assets worldwide. UK assets are only exceeded by the dominant US market, where assets of $16 trillion make up 61% of global total.
Two thirds of global assets, $17.5 trillion, are invested in occupational pension funds, with a further $3.4 trillion in pension insurance contracts and $5.0 trillion in other retirement products, such as personal pensions.
IFSL’s report also draws attention to the growing assets of public pension and sovereign wealth funds. These funds totalling an estimate $5.6bn fall into two categories. Firstly, OECD countries, particularly the US, Japan, Norway and Sweden have set aside over $4bn to finance future payouts on pay-as-you-go pensions. Secondly, oil states and other emerging economies have built up sovereign wealth funds of some $1.5bn, proceeds from which have recently been invested in major western firms.
Real rates of return of UK pension funds eased back again in 2007 to 3%, the lowest for five years, down from 7% in 2006 and an average return of 13% in the three previous years. The pensions balance for FTSE100 companies in the UK has seen a marked turnaround: an aggregate deficit of around £40bn in previous years was turned into a surplus of £12bn in 2007. But many pension schemes could be pushed back into deficit this year as a result of falling equity markets, lower long-term bond yields and longer life expectancy. Elsewhere in Europe deficits in occupational pensions remain on the balance sheets of the largest companies.
