Sound fundamentals: Australia now home to world’s 4th largest pension assets

14 Apr 2020

Tags

  • Edmund Tang
  • Australian Economy

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.[1] Australia’s asset pool of MF is the fifth[2] 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.[3]

Global comparisons

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.

Pension assets by country


[1] Australian Bureau of Statistics Cat. No. 5655.0 Managed Funds, Australia, Table 1 (Released 05 Mar 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, Fourth Quarter 2019, Data in US Dollars (Released 25 Mar 2020).