Elderly people walk in a shopping district of Tokyo, Japan, on Thursday, Aug. 16, 2012. With 7 million baby boomers starting to retire this year, and about one-third of population forecast by the National Institute of Population to be over 65 by 2030, the opportunities are poised to increase for services companies geared toward retirees. Photographer: Tomohiro Ohsumi/Bloomberg
© Bloomberg

Strong gains for equity and bond markets pushed the value of retirement savings to new heights in 2017.

Assets managed in institutional pension funds across 22 major retirement markets reached a record $41.3tn at the end of 2017, up 13 per cent on the previous year, according to Willis Towers Watson, the investment consultant.

The total value of pension assets rose $4.8tn last year, the largest annual increase in dollar terms since 1997 when the report was first published.

Roger Urwin, global head of investment content at Willis Towers Watson, said that although “unusually high” market returns had boosted the 2017 data, pension funds had shown encouraging long-term improvement with global asset growth averaging 6.2 per cent per year in dollar terms over the past two decades.

Chart: Pension assets

Pension assets measured as a percentage of gross domestic product show wide variations between countries and over time. The Netherlands, home to some of Europe’s largest and most sophisticated retirement funds, saw pension assets increase from 126 per cent of gross domestic product in 2007 to 194 per cent. No other country came close to matching that rise but Australia, Switzerland, the US and Canada all registered substantial increases in institutional pension fund assets.

The main exception is Japan where an ageing population has led to an increase in retirement benefit payments and a drop in pension fund assets from 66 per cent of GDP in 2007 to 63 per cent last year.

Institutional pension assets have remained stuck at low levels in Germany, France, Italy and Spain, leaving citizens in these counties almost entirely dependent on provision by the state during retirement.

UK pension assets have risen from 88 per cent of GDP to 121 per cent over the past two decades. Further improvement is expected due to the auto-enrolment of millions of workers into saving schemes that will boost future pension pots.

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