Sound fundamentals: Australia now home to world’s 4th largest pension assets
14 Apr 2020
Savings and investment buttress investor sentiment
In one key area, Australia entered the current period of uncertainty comparatively stronger than virtually all other developed economies – savings. Australians have saved more for retirement compared to most other citizens and that’s thanks to Australia’s superannuation system.
These savings assets provide a source of investment capital, easing long-term pressures on government spending, business growth and infrastructure investment.
US$2.1 trillion in superannuation savings
According to the Willis Towers Watson Global Pensions Asset Study – 2020, Australia finished 2019 with the world’s fourth-largest pension (superannuation) market in the world, valued at US$2.1 trillion.
Before the onset of the coronavirus pandemic, Australia also experienced one of the highest growth rates of pension fund assets in the world. Assets rose to 151% of GDP in 2019, up from 110% a decade ago, representing a compound annual growth rate (CAGR) of around 9.2% between 2009 and 2019 (in local currency terms).
Fast, long-term growth rates have now created the second-highest pension asset-GDP ratio among the world’s 22 major pension markets.
A major managed funds industry
The findings illustrate the health and scale of Australia’s pension system, which has become a significant driver behind the country’s rapidly expanding managed funds (MF) industry, which is now world-class and globally significant.
Total consolidated assets of Australia’s MF have surged from A$245 billion in 1991 to A$3.9 trillion in 2019. Australia’s asset pool of MF is the fifth largest in the world. It is also the largest in Asia, with total assets of around US$2.2 trillion in the December quarter of 2019.
The 2020 Global Pensions Asset Study found that global institutional pension fund assets in the 22 major markets covered by the study is estimated at US$47 trillion in 2019. Growth averaged 6.3% over the past decade.
By asset value, the US remains the world’s largest pension market (accounting for 62.5% of the world total), followed by the UK (7.4%), Japan (7.2%), and Australia (4.4%).
In US dollar terms, the assets of the pension markets of the US and UK have risen by 7.8% and 5.1% a year, respectively since 2008, while the Japanese market has grown by 0.1% per year. Over the same period, Australia’s pension assets have grown at a CAGR of 6.6% a year.
Ten-year figures (in local currencies) show that the Netherlands grew their pension assets the most as a percentage of GDP, with the ratio increasing by 73 percentage points (ppt) to reach 187%, followed by Australia (up 41 ppt to 151%), the US (41 ppt to 136%), Switzerland (40% ppt to 146%) and the UK (39 ppt to 126%).
This demonstrates that Australia’s savings assets are not only large by global comparison, they were also growing healthily in the period prior to the pandemic.
 Australian Bureau of Statistics Cat. No. 5655.0 Managed Funds, Australia, Table 1 (Released 05 Mar 2020).
 Figures for Hong Kong and Singapore are not included in the survey of the Investment Company Institute (ICI).
 Investment Company Institute, Quarterly Worldwide Mutual Fund Market, Supplement: Worldwide Public Tables, Fourth Quarter 2019, Data in US Dollars (Released 25 Mar 2020).