Other highlights from the report include:Asset data for the United States in 2012
- The ratio of US pension assets to Gross Domestic Product (GDP) increased from 84% in 2002 to 108% in 2012.
- In the past decade, US pension funds have doubled their exposure to alternative assets to an average of 20% from 10%.
- Equity allocations for US pension funds have fallen from 60% in 2007 to 52% in 2012.
- The ten-year average growth rate of global pension assets (in local currency) is over 8%
- The largest pension markets are the US, Japan and the UK with 57%, 13% and 9% of total pension assets, respectively
- All markets in the study have positive ten-year compound annual growth rate (CAGR) figures (in local currency)
- In terms of ten-year CAGR figures (in local currency terms), Hong Kong and Brazil have the highest growth of 14% followed by South Africa (13%) and Australia (11%). The lowest are Japan (2%), France (2%) and Switzerland (4%)
- Ten-year figures (in local currency) show the UK and Netherlands have both grown their pension assets the most as a proportion of GDP by 42% to reach 112% and 156% of GDP respectively, followed by Australia (up 32% to 101% of GDP), the US (by 24% to 108% of GDP) and Hong Kong (up 23% to 40% of GDP).
- During this time South Africa’s ratio of pension assets to GDP has fallen by 2% to 64% of GDP.
- Bond allocations for the P7 markets have decreased by 7% in aggregate during the past 18 years (40% to 33%). Allocations to equities have fallen by 2% (to 47%) during the same period.
- Equity allocations in the UK have fallen from 61% in 2002 to 45% in 2012. In the Netherlands allocations fell from 37% to 27%, during the same period while Canada’s allocation to equities fell from 51% to 43%. Australia maintains the highest allocation to equities at 54% followed by the US on 52%, while the Netherlands overtakes Japan (55%) as having the highest allocation to bonds of 57%.
- Allocations to other (alternative) assets, especially real estate and to a lesser extent hedge funds, private equity and commodities, for the P7 markets have grown from 5% to 19% since 1995
- In the past decade most countries have increased their exposure to alternative assets with the UK increasing them the most (from 3% to 17%), followed by Switzerland (18% to 30%), Canada (13% to 23%), the US (from 10% to 20%) and Australia (14% to 23%). Whereas allocations to alternatives have fallen in the Netherlands from 19% to 16% during the same period.
Defined Benefit (DB) and Defined Contribution (DC) for the P7
- During the ten-year period from 2002 to 2012, the CAGR of DC assets was 8% against a rate of 7% for DB assets
- DC pension assets have grown from 43% in 2002 to 45% in 2012
- Australia has the highest proportion of DC to DB pension assets: 81% / 19%
- The markets that have a larger proportion of DC assets than DB assets are the US and Australia while Japan is close to 100% DB. The Netherlands and Canada, historically only DB, are now showing signs of a shift towards DC with 6% and 4% of assets in DC plans.
- 65% of pension assets of the P7 group are held by the private sector and 35% by the public sector
- In the UK and Australia the private sector holds the biggest portion of pension assets, accounting for 89% and 84% respectively of total assets in 2011
- Japan and Canada are the only two markets where the public sector holds more pension assets than the private sector, holding 73% and 57% of total assets respectively.
- The P13 refers to the 13 largest pension markets included in the study which are Australia, Canada, Brazil, France, Germany, Hong Kong, Ireland, Japan, Netherlands, South Africa, Switzerland, the UK and the US. The P13 accounts for more than 85% of global pension assets
- The P7 refers to the 7 largest pension markets (over 95% of total assets in the study) and excludes Brazil, Germany, France, Ireland, Hong Kong and South Africa
- All figures are rounded and 2012 figures are estimates
- All dates refer to the calendar end of that year.
 Measured by asset values over liability values using sovereign bond yields to discount liabilities.Towers Watson Investment Towers Watson Investment is focused on creating financial value for the world’s leading institutional investors through its expertise in risk assessment, strategic asset allocation and investment manager selection. It is a division of Towers Watson’s Risk and Financial Services business, has over 750 associates worldwide and assets under advisory of over $US2 trillion. About Towers Watson Towers Watson (NYSE, NASDAQ: TW) is a leading global professional services company that helps organizations improve performance through effective people, risk and financial management. The company offers solutions in the areas of benefits, talent management, rewards, and risk and capital management. Towers Watson has over 14,000 associates around the world and is located on the web at www.towerswatson.com.