European pension markets have seen some of the fastest asset growth in the world in recent years.
Pension assets in the Netherlands have risen from 114% of national GDP to 170% in the past decade, according to the Towers Watson global pension asset study. Meanwhile, the UK’s pension sector has risen from 67% to 131% of GDP.
Last year was especially good to European pension schemes. In dollar terms, the Netherlands pension industry grew 16.3%, while the UK grew 15.7% and Ireland grew 13.6%. The Swiss and French pensions sectors also achieved asset growth in dollar terms well ahead of the world average of 6.9%.
“After such a long period of financial retrenchment and uncertainty this is all genuinely encouraging,” says Chris Ford, head of investment, Europe, Middle East and Africa at Towers Watson. “Generally, pension funds are now implementing investment strategies that are more flexible and adaptable and which contain a broader view of risk so as to make greater allowance for the sort of extreme economic and market volatility they have experienced during the past five years.”
The UK is now the world’s second largest pensions market after the US, having edged ahead of the Japanese market in 2013, according to the Towers Watson data. The UK and Japan control about 10% each of world pension assets, while the US continues to dominate the world industry with about 60%.
In 2013, the average asset allocation of pension schemes in the seven largest pension markets – Australia, Canada, Japan, Netherlands, Switzerland, the UK and the US – was 52% equities, 28% bonds, 1% cash and 18% in other assets such as property and other alternatives.
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