Assets in retirement savings plans and public pension reserve funds

Assets in retirement savings plans amounted to USD 54.1 trillion at end-2020 in the OECD area. The United States had the largest pension market within the OECD member countries with assets worth USD 35.5 trillion, representing 65.6% of the OECD total. Other OECD countries with large pension systems include the United Kingdom, with assets worth USD 3.6 trillion and a 6.6% share of OECD pension market in 2020; Canada, USD 3.1 trillion and 5.7%; the Netherlands, USD 2.1 trillion, 3.9%; Australia, USD 1.8 trillion and 3.3%; and Japan, USD 1.6 trillion and 2.9%.

Pension assets in the OECD amount to as much as the sum of the GDPs of all OECD countries at end-2020, but their prominence domestically varies across countries. In three countries, assets exceeded more than twice the size of the GDP: Denmark (229.4%), the Netherlands (212.7%) and Iceland (206.9%). Six additional OECD countries achieved asset-to-GDP ratios higher than 100% – Canada (179.7%), the United States (169.9%), Switzerland (167%), Australia (131.7%), the United Kingdom (126.8%) and Sweden (108.9%). These countries have private pensions from long ago, and most of them have mandatory or quasi-mandatory private pension systems. By contrast, the asset-to-GDP ratios were below 20% in 16 OECD countries, including some with relatively recent mandatory or automatic enrolment programmes (such as Latvia, Lithuania and Poland) or with relatively low coverage of the working-age population (such as France, Greece, Italy). Greece recorded the lowest amount of assets relative to its GDP among OECD countries (below 1%).

In non-OECD G20 economies, the size of pension assets also varied widely, from 92.1% in South Africa to 2% of GDP in Indonesia (for employer pension funds and financial institution pension funds).

Many countries also decided to accumulate assets in order to support the operation of public pension arrangements, usually financed on a pay-as-you-go basis. More than 20 OECD countries hold reserves that are separated and ring-fenced in public pension reserve funds (PPRFs). By the end of 2020, the total amounts of assets in PPRFs were equivalent to USD 6.8 trillion in the OECD area. The largest reserve was held by the US social security trust fund at USD 2.8 trillion, accounting for 41.5% of total OECD assets in PPRFs, although the assets consist of non-tradable debt instruments issued by the US Treasury to the social security trust. Japan’s Government Pension Investment Fund was second at USD 1.7 trillion – 25.3% of the OECD total. Of the remaining countries, Korea, Canada, France and Sweden had also accumulated large reserves, respectively accounting for 11.7%, 6.5%, 2.8% and 2.5% of the total.

In terms of total assets relative to the national economy, PPRF assets accounted for 13.9% of the GDPs of all OECD countries with reserves at end-2020. The highest ratio was observed for the Korean National Pension Fund with 45.1% of GDP. Other countries where the ratio was of a significant size include Finland with 33.6%, Luxembourg with 33.6%, Japan with 33% and Sweden with 31.8%. The expansion of these pools of assets are forecast to continue over the coming years in some countries (such as Canada, Japan and New Zealand) but assets in some other PPRFs have started or will fall in the near future (such as in France (FRR) and Spain). Belgium that used to have a PPRF (Zilverfonds) closed it in 2017, while Ireland converted its own (the Irish National Pension Reserve Fund) into a sovereign wealth fund (Ireland Strategic Investment Fund) in 2014, with a broader mandate than financing pay-as-you-go pension plans.

The term “retirement savings plans” refers to private pension arrangements (funded and book reserves) and funded public arrangements (e.g. ATP in Denmark).

Private pension plans are pension plans administered by an institution other than general government. They may be administered directly by a private-sector employer acting as the plan sponsor, a private pension fund or a private sector provider. In some countries, these may include plans for public-sector workers.

Funded public arrangements are pension plans that are managed by a public institution.

PPRFs are reserves established with the primary goal to support unfunded / pay-as-you-go public pension arrangements. They could act as a short-term liquidity buffer, a temporary buffer against shocks (such as a demographic change) or as a permanent smoothing vehicle between the inflows and outflows of public pension arrangements.

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