Pension Fund Assets Outgrew Liabilities Worldwide in 2005

January 30, 2006 ( - Growth in institutional pension assets in the 11 major international markets was 17%, measured in local currencies, in 2005, while pension fund liabilities increased 9%, according to global research from Watson Wyatt.

In its  press release , Watson Wyatt points out that this 8%-improvement in funding positions for global pensions compares to decreases in funding positions by around 30% between 1999 and 2002.  

Watson Wyatt’s global research shows that total pensions fund assets in all the main markets apart from the US and Japan have doubled in size during the past ten years.   Ireland had the highest 10-year growth figure (312%), largely due to the establishment of its National Pensions Reserve Fund in 2001, followed by Australia, with a 10-year growth figure of 268%.   Australia’s market is dominated by defined contribution assets, according to Watson Wyatt.

Roger Urwin, global head of investment consulting at Watson Wyatt, said strong government support in Australia, including legislation for mandatory contributions, has helped improve the pension position in that country.

Watson Wyatt believes that defined benefit pension provision is unlikely to improve substantially in the medium term.   Urwin said in the release, “While assets have clawed back some ground in the last three years, liabilities are likely to continue to increase because of mortality improvement and falling bond yields. As a result, the global balance sheet is likely to remain in a delicate state for the foreseeable future. It remains the case that pension funds’ balance sheets are volatile on account of their high equity content, which now averages 58% of total assets.”