Australia’s pension funds shine in 2021 global rankings

26 Feb 2021

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  • Edmund Tang

Last year, the value of pension funds in Australia ranked as the fifth largest in the world. Locally called superannuation, the pension fund market was valued at US$2.3 trillion, according to the Willis Towers Watson Global Pensions Asset Study - 2021.

Australian pension have achieved one of the highest growth rates of pension fund assets in the world over the long term. From 2000 to 2020, these assets grew by a compound annual growth rate (CAGR) of over 11%.

This means that as a ratio of GDP, Australian pension assets rose from 112% a decade ago (see chart below) to 175% of GDP in 2020. This pension funds-to-GDP ratio was the third highest among the 22 major pension markets last year.  

The high rate of private pension savings benefits several areas of the Australian economy:

  • It adds dynamism and depth to Australia’s managed funds industry.
  • It places the Australian Government in a strong, long-term fiscal position, compared to other developed country governments.

The 2021 report illustrates the global significance of Australia’s pension system. It demonstrates Australia’s strength as an investment market, and as a source of investment capital.

A globally significant industry

By their sheer size, Australian pension funds are now a major driver of the country’s rapidly expanding managed funds (MF) industry. In total, pension assets contribute around 80% to the total value of managed funds in Australia.

This means that the value of Australia’s managed funds has also grown fast. The total value of all managed fund assets grew from A$719 billion in 2000 to A$3.8 trillion in 2020.[1]This gives an impressive, two-decade CAGR of almost 9%.

Today, Australia’s asset pool of managed assets is the eighth largest in the world [2], worth around US$2,187 billion. This is an astonishing achievement: Australia doesn’t even make it into the world’s top 50 countries in terms of population size.

Australia’s asset pool particularly stands out in Asia. Only China’s and Japan’s managed funds markets are larger. According to the Investment Company Institute, China’s pool of managed assets was worth US$2,278 billion in the September quarter of 2020; Japan’s was worth US$2,191 billion.>[3]

Strong performance in a difficult year

The strong performance of Australian pension assets in 2020 is remarkable because the Australian Government allowed pension holders to withdraw funds to cope with the challenges of COVID-19.

The head of strategic advisory for investments at Willis Towers Watson, Jessica Melville said: “Australia’s performance, where assets rose to 175% of GDP (up from 151% the year before) was particularly impressive, considering over A$36 billion in outflows because of the Early Access to Super scheme.”

While early release supported members in their time of need during the pandemic, Australian funds have shown considerable resilience and they will continue to play a significant role in the nation’s recovery,” she commented.

Global pension fund assets 2020

[1] Australian Bureau of Statistics Cat. No. 5655.0 Managed Funds, Australia, Tables 1 and 2 (Released 10 December 2020).

[2] Figures for Hong Kong and Singapore are not included in the survey of the Investment Company Institute (ICI).

[3] Investment Company Institute, Quarterly Worldwide Mutual Fund Market, Supplement: Worldwide Public Tables, third Quarter 2020, Data in US Dollars (Released 21 Dec 2020). Note that Australia's managed fund assets in the ICI survey excluded funds managed by Australian investment managers on behalf of Australian entities other than managed funds institutions; excluded funds on behalf of overseas investors; and excluded funds on behalf of other Australian investment managers.