Summary
On 30 October, the OECD published its annual analysis of pension markets, reviewing 88 pension systems and outlining global trends in the financial performance of private and funded pensions, including investment returns and asset allocation.
Main findings
- Pension assets have grown over the last decade despite declining in 2018 compared to 2017.
- Pension assets were hit by the downturn on equity market in 2018 but are still generating positive investment income over the longer term.
- An overwhelming majority of pension assets are accumulated through pension funds.
- A transition from defined benefit to defined contribution plans continues.
- A gender pension gap exists in all OECD countries, which widens throughout the accumulation phase.
Regarding distribution and performance of private pensions assets, the report finds that:
- In 2018, pension assets were overwhelmingly accumulated through pension funds, gathering alone over USD 28 trillion of assets (out of a total of USD 40 trillion) at the end of 2018.
- Pension insurance contracts sold by insurance companies are most predominant in the French and Danish markets.
- The largest amounts of pension assets in Europe were recorded in the Netherlands and the UK, however both markets saw a decline in assets in 2018 when compared with 2017, in line with a global decline.
- Real investment rates of return of pension plans in 2018 were negative on average in the OECD (-3.2%).
Regarding the gender pension gap, the report finds that:
- Women are less likely to participate in a pension plan – due not only to the lower share of women employed but also to the sectors that they work in.
- The current difference in the proportion of men and women participating in a pension plan is likely to lead to differences in the proportion of retired men and women benefitting from a private pension income.
- When women do participate in a pension plan, there is a gap between the pension assets and entitlements that they accumulate and those accumulated by men.
- This gap first emerges in the 25-34 year group and continues to widen from that point onwards – due to differences in careers, parenting leave – reaching its peak at the eldest ages (33% between men and women aged between 45 and 54 years old, 36% between those aged 55 to 64 years old).
- Differences in pension assets are likely to compound over time as these assets are invested in financial markets and yield investment returns.