Australian pension market still global leader
Tuesday, 23 February 2016 11:05am

Australia is not only one of the biggest pension markets in the world, it is among the fastest growing.

Willis Towers Watson has just released its 2016 Global Pension Assets Study and it reveals that Australia's US$1.5 trillion pension asset pool is the world's fifth largest but is the second fastest growing, having increased 9.1% pa over the last decade.

Only Mexico, with growth of 9.2% pa, shaded it, though its US$177 billion asset pool is minuscule by Australian standards.

The US remains the world's largest pension market with US$21.8 trillion followed by the UK with US$3.2 trillion, Japan with US$2.7 trillion and Canada with US$1.53 trillion.

But in contrast to Australia's almost double digit annual growth over the decade, most of these bigger markets grew only about 6% pa. Japan's, however, has contracted 1% pa over the decade.

Australia's pension market is also a world leader in relative economic terms as its pension market asset pool stands at 120% of GDP, sitting only slightly behind the US's 121% ratio.

The UK's pension market is meanwhile valued at 112% of its GDP, Canada's is valued at 97%, and Japan's is 67%.

The Netherlands' pension market is valued at 184% of its GDP.

According to Willis Towers Watson, the total global pension market is valued at US$35 trillion, representing an average 80% of corresponding GDP - illustrating how significant these assets have become in global economic terms.

Australia's aggressive growth may be put down to its high relative exposure to equities but since its 48% weighting is similar to the US and UK's 47% and 43% weightings, the report notes currency valuation change is an equally important factor.

The report also debunks the myth that Australia's pension assets have a very aggressive investment strategy - which critics say makes it overly vulnerable to market corrections - as Australia's 17% weighting to cash is far and away in excess of 3% weighting for major pension markets.

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