In all countries, the remedies that are put forward are identical, that is, extending contribution periods or reference period or slashing the benefits provided. Little by little and assisted with the rise of a liberalist mood, a third option opened up: the self funded retirement plan.
Pension funds [4], the building block of the system, have developed in many countries for forty years now without necessarily winning the hearts of all stakeholders. With saving through pension plans being constantly endorsed by the different governments, pension funds have today become unavoidable players and sometimes the dreaded actors on the financial markets, the very same markets that can make them shiver.
Pension funds' Assets / GDP in 2017
In the Organisation for Economic Co-operation and Development (OECD) area, the retirement assets reached a record amount of 43.4 trillion USD in 2017. Since the financial crisis, the total assets have steadily increased except in 2015. The majority of these assets, or 28 500 billion USD, are held by pension funds.
Still in the OECD area, the weighted average ratio of "pension funds' assets / GDP" increased from 67.3% in 2001 to 75.5% in 2007 and 133.6% in 2017.
Countries of the OECD zone: Pension funds' Assets / GDP in 2017
| Pension funds' assets / GDP | ||||
|---|---|---|---|---|
Countries of the OECD zone | 2017 | 2015 | 2007 | 2000 |
Denmark | 208.4 | 205.9 | 32.4 | 93.5 |
Netherlands | 184.2 | 178.4 | 132.2 | 105.9 |
Iceland | 164.5 | 157.7 | 134 | 82.6 |
Canada | 154.7 | 156.9 | 55.3 | 112.8 |
Switzerland (1) | 148.8 | 123.0 | 119.4 | 101.4 |
United States | 145.3 | 132.9 | 74.3 | 113.5 |
| Weighted average: 133.6 | ||||
Australia | 130.2 | 122.2 | 105.4 | 73.6 |
United Kingdom | 105.3 | 97.4 | 78.9 | 67.7 |
Sweden | 90.2 | 76.0 | 8.7 | 30.4 |
Chile | 72.0 | 69.6 | 64.4 | 51.3 |
Finland | 60.5 | 58.4 | 71 | 50.5 |
Ireland | 35.9 | 56.4 | 46.6 | 42.0 |
Korea | 30.1 | 25.8 | 3.1 | 6.7 |
Japan | 28.8 | 32.0 | 20 | 18.2 |
New Zealand | 25.8 | 22.2 | 11.1 | 15.3 |
Estonia | 17.5 | 14.5 | NA | 0.0 |
Mexico | 16.9 | 16.7 | 12.1 | 8.9 |
Latvia | 13.8 | 11.0 | NA | 0.9 |
Spain | 13.6 | 14.3 | 7.5 | 7.5 |
Slovak Republic | 11.7 | 10.3 | 4.2 | 2.4 |
Portugal | 11.4 | 10.9 | 13.7 | 10.7 |
Norway | 10.5 | 9.6 | 7.0 | 5.4 |
France (1) | 10.1 | 8.7 | 1.1 | 5.6 |
Poland | 10.1 | 8.8 | 12.2 | 1.3 |
Italy (2) | 9.8 | 8.7 | 3.3 | 2.6 |
Czech Republic | 8.8 | 8.3 | 4.7 | 2.1 |
Belgium | 7.8 | 5.8 | 4 | 5.4 |
Slovenia | 6.9 | 7.0 | NA | 1.1 |
Germany | 6.9 | 6.6 | 4.1 | 3.8 |
Austria | 6.0 | 5.8 | NA | 2.9 |
Hungary | 5.9 | 4.1 | 10.9 | 3.9 |
Luxembourg | 2.9 | 2.8 | 1.0 | 1.1 |
Turkey | 2.6 | 5.5 | 1.2 | 0.4 |
Greece | 0.8 | 0.6 | 0.0 | 0.0 |
(1) Data refer to 2016
(2) Net technical provisions are taken as a proxy of pension assets in book reserves.
NA: not available
Others countries: Pension funds' Assets / GDP in 2017
Countries | Pension funds' assets / GDP in 2017 |
|---|---|
South Africa (1) | 95.3 |
Namibia | 91.7 |
Liechtenstein (1) | 86.9 |
Singapore | 80.2 |
Botswana (2) | 46.9 |
Hong Kong (China) | 43.5 |
Malta | 42.0 |
| Weighted average: 41.3 | |
El Salvador | 35.6 |
Jamaica | 28.5 |
Uruguay | 27.4 |
Croatia | 26.8 |
Kosovo | 25.8 |
Colombia | 25.3 |
Brazil | 24.6 |
Peru | 22.7 |
Trinidad and Tobago (3) | 19.8 |
Simple average | 19.7 |
Costa Rica | 18.8 |
Papua New Guinea (2) | 18.0 |
Kenya | 13.1 |
Bulgaria | 12.9 |
Dominican Republic | 12.4 |
Malawi | 11.8 |
Lesotho (3) | 11.6 |
Suriname (1) | 11.3 |
FYR of Macedonia | 9.4 |
Uganda (1) | 9.3 |
Maldives (1) | 9.3 |
Tanzania | 8.6 |
Thailand | 7.1 |
Guyana | 7.0 |
Nigeria | 6.5 |
Russia | 6.1 |
Ghana | 5.4 |
Romania | 4.9 |
Mauritius (4) | 4.7 |
Zambia (5) | 3.5 |
Armenia | 1.9 |
Indonesia | 1.9 |
Egypt | 1.7 |
Gibraltar (2) | 1.7 |
China | 1.6 |
India (1) | 1.0 |
Panama | 0.9 |
Serbia | 0.8 |
Malaysia | 0.3 |
Albania | 0.1 |
Pakistan (5) | 0.1 |
(1) Data refer to 2016
(2) Data refer to 2013
(3) Data refer to 2012
(4) Data refer to some occupational voluntary pension schemes only
(5) Data refer to 2015
Pension funds during the period of the financial crisis
The recent stock market crash has hit private pension retirement schemes hard. These funds have been affected by the crisis in the OECD zone. Their returns have reported a considerable drop:
- Ireland: -30%
- USA, Canada, Australia and Hungary: -20%
The situation was equally worrisome in Argentina.
In OECD, the outstanding managed assets of pension funds [5] has fallen by 20%, that is, a loss of 3 300 billion USD between January and October 2008. The levels of defined contribution pension benefits decreased by over 10% in 2008 and resulted in payment deficit of 2 000 billion dollars.
The fall of stock markets has triggered the bankruptcy of numerous pension funds which, in extreme cases, could no longer ensure decent disbursements. In period of crisis, this constraint stands as additional financial strain to the economy.