Strong gains in the largest equity markets worldwide caused global retirement assets to soar in 2019, according to research from Willis Towers Watson, with defined contribution assets outpacing their defined benefit counterparts.
Surveying what it designated as the P22, or the 22 largest major markets, the firm’s non-profit Thinking Ahead Institute found a 15% jump to $46.7 trillion at year-end 2019.
Strong stock gains in Mexico, Canada and the United States lead the way and was “a significant swing in fortunes from 2018, which saw an overall 3.3% decline in global pension assets,” WTW reported.
The seven largest markets for pension assets (the P7)–Australia, Canada, Japan, the Netherlands, Switzerland, the UK and the US—account for 92% of the P22, marginally higher than the previous year.
The U.S. also remains the largest pension market, representing 62% of worldwide pension assets, followed by the UK and Japan with 7.4% and 7.2% respectively.
DB vs. DC
According to the research, total DC assets continue to grow, representing slightly over 50% of total P7 pension assets.
Last year DC exceeded DB assets for the first time, a culmination of 10 years of faster DC assets growth than DB, reflecting increased member coverage and, in some markets, higher contributions.
“The DC market has retained its newly-found position as the larger of the two as DB assets grow at a far slower pace,” Marisa Hall, Co-Head of the Thinking Ahead Institute, said in a statement. “But the challenge of member engagement, critical for a stronger DC system, remains an unresolved issue for many schemes.”
As such, she added, the institute expects “this to be an area of particular focus for leading DC organizations as the next generation of plans takes shape. Advances in technology are opening up new possibilities for customization, changing the nature of member interactions and re-setting member expectations. The future of DC is likely to be hyper-customized, with increased focus on individual participants, but many schemes need to improve their governance to fully embrace this.”