Pensions, population and policy

Retirement savings have been a key driver of the growth of the investment industry over the past 3 decades – but what drives retirement savings? Is it demographic trends or public policy or something else?

In this post, we illustrate some of the factors that may determine the level of pension assets.  We compare a small group of countries, primarily in the developed world, using data from Towers Watson’s recently-released 2013 Global Pension Assets Study.

Here are the connections we saw:

Pension assets rise with GDP

Not surprisingly, wealthier countries had a higher level of pension assets.

2013 pension assets vs gdp

Pension assets rise with aging

Pension assets per person tend to rise as the population gets older, at least initially.

2013 pension assets vs age 65 

However, the growth in pension assets slows with aging. See our recent post, “The investment industry faces the challenges of global aging,” for some thoughts on why that may be the case.

 2013 pension asset growth vs age 65

Pension assets rise with privatization

The more privatized a pension system, the higher the level of assets per capita.

 2013 pension assets vs privatization

 Privatized systems generally rely more heavily on defined contribution.

 2013 dc vs privatization

For our look at the 2012 data, see “Global pensions in 5 charts.”

  • Susan

    Good charts. Wouldn’t the pace of pension asset slowing with aging depend on the population demographics? Not just the % assets 65+ CAGR but the 65+ relative to the 25-64 dynamic of savers versus dissavers in retirement.

    • NICSA

      Possibly. It might also depend on what proportion of the over-65 group is over age 80, when withdrawals to meet health care and assisted living expenses are likely to be high. Something to look at. . .

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