Australia is tipped to become the second-largest global pension market by 2030 if it maintains its current growth momentum, as large defined contribution (DC) markets pushed global pension assets to new heights in 2024.
According to the annual Thinking Ahead Institute Global Pension Assets Study, assets in 22 major global pension markets now stand at US$58.5 trillion ($93.2 trillion). The largest seven markets (P7) – Australia, Canada, Japan, Netherlands, Switzerland, UK and US – alone represent 91 per cent of global assets.
The US leads the world by a considerable margin, with an estimated US$38 trillion in pension assets, but the market with greatest exponential growth was Australia, which reached US$2.6 trillion at the end of 2024. The latter’s assets increased by almost 500 per cent in the past two decades.
“The rise of DC becomes more pronounced every year that we conduct this study,” said director at the Thinking Ahead Institute, $93.2 trillion.
“While global pension assets continue to reach new record levels, it is those markets with larger pools of DC assets that are the main engine behind this continued growth.”
DC assets dominate both the US and Australia, representing 69 per cent and 89 per cent of pension assets, respectively.
“While the falling Australian dollar tempered growth in assets in 2024 in USD terms, Australia’s superannuation assets have outpaced other major pension markets over the long-term due to a combination of the rising superannuation guarantee and a strong bias towards defined contribution – which has led to higher growth portfolios,” said Jonathan Grigg, director of investments Australia at WTW.
Elsewhere, Canada surpassed the UK to become the third-largest pension market with US$3.2 trillion in assets as of the end of 2024.
The UK was the only market that shrank (contracting by 0.7 per cent) for the year. It also recorded the slowest growth among the seven largest markets over the past decade – its assets represented 8.8 per cent of the largest 22 markets in 2014 but only 5.4 per cent in 2024.
Switzerland has the largest pension-assets-to-GDP ratio in local currency, as the nation’s retirement savings represented 152 per cent of its economic output. It is followed by Canada (147.5 per cent) and Australia (146.4 per cent).
Asset allocation trends
Another factor that could have contributed to US and Australian pension asset growth is both countries’ large allocation to equities – 50 per cent and 52 per cent, respectively, while the largest seven markets on average allocate 45 per cent.
Over the past decade, the US and Australia have had the highest allocations to domestic equities while Canada, Japan and the UK have had the lowest among the seven biggest markets.
UK funds significantly increased bond allocations in the past decade, from 38 per cent in 2014 to 56 per cent in 2024. It was closely followed by Japan (55 per cent) in 2024.
The report observed the trend of asset owners seeking diversification and higher returns in alternative asset classes, such as private debt and infrastructure more recently.
“In the past, alternative investments were often grouped into a single category distinct from traditional assets like equities and bonds,” the report said.
“However, the newer versions of alternative investments have become more granular, allocating capital across various distinct asset classes such as equity, debt, real estate, commodities, liquid alternatives and infrastructure.
“Beyond financial returns, alternative investments can play a bigger role than listed assets in contributing to achieving broader societal goals, particularly those related to climate change and sustainability.”
