Strong investment performance pushes private pension assets to new levels

By Romain Despalins 

Pension assets rose to record levels in 2017, exceeding USD 40 trillion in the OECD area for the first time ever, according to Pension Markets in Focus. Almost all countries showed positive investment results which can be attributed to buoyant stock markets. Average annual returns calculated over the longer term are also positive for most reporting countries, regardless of the financial crisis.

The funding ratios of defined benefit (DB) plans, however, are still below their pre-financial crisis level in most countries. Traditional DB plans embed a benefit promise to plan members that plan sponsors (usually employers) guarantee. Plan sponsors may have to contribute more in these plans when assets do not cover the liabilities arising from the pension promise (i.e. when they are underfunded).

A special feature in this report describes the main factors driving the evolution of the funding position of DB plans (i.e. the ratio of their assets over their liabilities). Various factors affect the evolution of assets and liabilities of DB plans such as the amount of contributions paid into these plans, the evolution of interest rates and the increase in the period that pension benefits have to be paid due to higher life expectancy.

This annual OECD report on trends in the financial performance of private pension plans covers 87 countries. It assesses the amount of assets in funded and private pension plans, describes the way these assets are invested in financial markets, and looks at how investments have performed, both in the past year and over the past decade.

References and links

Read the report at www.oecd.org/pensions/pensionmarketsinfocus.htm

OECD work on private pensions www.oecd.org/pensions

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