Ten-Year Global Retirement Asset Growth Seen at 66%

September 3, 2010 (PLANSPONSOR.com) – The next 10 years should bring a 66% increase to the global retirement market despite the effects of the current worldwide financial crisis, according to a new Allianz report.

A news release about the Allianz Demographic Pulse report said the growth of total pension assets from 22 trillion euros, to 36 trillion euros represents a 4.7%-annual growth rate.  “We expect the escalation in retirement savings to be the driving force for the development of the monetary wealth in many countries in Europe, Asia-Pacific and the United States,” declared Renate Finke, Senior Pension Analyst at Allianz, in the announcement.

According to the Allianz report, the United States was the leading retirement market in the world in 2009 covering slightly more than half of the world’s total retirement assets of some 22 trillion euros.

The U.S. retirement market is still expected to dominate the world pension market until the end of the decade even though it is only expected to grow by a 3.6% compound annual growth rate (CAGR). Despite its low growth, the net increase in the United States during this period will equal the total volume of continental Western Europe today, Allianz said.

After the U.S. in 2009, next came the U.K. with 11.5%, Western Europe’s combined retirement assets came to slightly more than 20% while Australia and Japan each laid claim to 3% of the global market. The emerging economies of Asia and central and eastern European (CEE), which are still in the early stages of building their individual funded pension systems, represented 1.8% and 0.4%, respectively, according to Allianz.  

“The emerging markets of Asia will develop most dynamically”, says Finke. “By 2020, these markets are expected to grow by 16.8% a year, reaching a total volume of 2.2 euros trillion or the size of United Kingdom’s current market.”

Similar dynamics are expected in central and eastern European economies, where most countries have established a mandatory funded pension pillar over the last decade. Central and Eastern Europe are anticipated to realize an annual growth rate of 15.5% until 2020.

While the global retirement market is expected to continue on a growth pattern in the next decade, the economic downturn definitely took its toll. At year-end 2008, this volume stood at 20 trillion euros; down by roughly 15% from year-end 2007 (23.2 trillion euros). With a drop of 22%, the largest pension market in the world, the United States, was hit even harder.

According to the Allianz research, despite of the great disparity of situations and assets in the global retirement markets challenges are very similar:  Aging societies and rising government debt imply a stronger role for funded pensions. “There seems to be an emerging consensus that the best-practice for pension systems worldwide is to combine a sustainable public pillar with a strongly funded pension pillar in order to spread risks,” Allianz said.

The Allianz report is here.