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UK becomes second largest pensions market as assets soar

Assets of UK institutional pension funds now exceed those of Japan for the first time, according to Towers Watson’s Global Pension Assets Study.

The UK’s pension assets hit an all-time high of over GBP2.0trn in 2013, having grown by over 13 per cent during the year, the second highest rate after Ireland.
 
According to the research, global institutional pension fund assets in the 13 major markets grew by 9.5 per cent during 2013, compared to 6.9 per cent in 2012, to reach a new high of almost USD32trn.
 
The growth is the continuation of a trend which started in 2009 when assets grew 18 per cent, and in sharp contrast to a 22 per cent fall during 2008 when assets fell to around USD20trn.
 
Global pension fund assets have now grown at over 6.7 per cent on average per annum (in USD) since 2003.
 
The study reveals that the growth in assets helped to strengthen pension fund balance sheets globally during 2013, with ten-year figures (in local currency) showing the UK grew its pension assets by more than any other market as a proportion of GDP (by 64 per cent) to reach 131 per cent. The ratio of global assets to global GDP is at its highest level since the research began.
 
According to the study, pension assets now amount to around 83 per cent of global GDP, a large rise from the 76 per cent recorded in 2012 and substantially higher than the 57 per cent recorded in 2008.
 
Chris Ford, EMEA head of investment at Towers Watson, says: “During 2013 equities enjoyed their best calendar year of risk-adjusted return since the financial crisis and as a result many UK pension funds are in the best shape they have been for many years. The global economic recovery continued to gain momentum throughout 2013, thanks to the absence of major negative events and a stream of positive economic news. 
 
“After such a long period of financial retrenchment and uncertainty this is all genuinely encouraging. Generally, pension funds are now implementing investment strategies that are more flexible and adaptable and which contain a broader view of risk so as to make greater allowance for the sort of extreme economic and market volatility they have experienced during the past five years. This is welcome as the global economic recovery – and the implied normalisation of market conditions - is by no means guaranteed.”

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