Australian super funds have the highest allocation to cash compared with pension funds in the other major markets, according to a report by Watson Wyatt.

The latest pension fund data on the largest 11 markets show that all, except Germany, experienced significant declines in total assets in 2008 and that asset allocations to equities continued to decline from a high reached back in 1998.

In Australia, average allocation to equities is now 45 per cent (as at the end of December), compared with an average of 42 per cent for overseas pension funds, and 29 per cent in bonds, compared with 40 per cent for overseas pension funds.

The highest allocation to cash is by Australian funds, with 10 per cent, followed by Swiss funds, with 9 per cent. This probably reflects the stronger cashflows of most Australian funds against their overseas counterparts, rather than any strategic allocations. Nevertheless, it does show Australian funds have been slow to invest in growth assets during the past year.

Australia, the beacon for pension fund systems around the world, has suffered a drop in total assets from 105 per cent of GDP in 2007 to 67 per cent at the end of 2008, according to the report.

While the drop in super assets contrasts with the previous 10 years average annual growth rate of 12 per cent, it was not as bad as that suffered by most other countries. And a large part of the comparison with previous periods is due to the big fall in the value of the Australian dollar versus the US dollar in the second half of last year.

The 11 largest pension fund markets in the study saw their total assets decline from 82 per cent of GDP a year ago to an average of 61 per cent.

Martin Goss, head of client consulting at Watson Wyatt in Australia, said the data showed a worrying picture.

“This is a wake-up call for governments worldwide to engineer bigger allocations to pension savings,” he said.