Australia’s super system a world leader

The compulsory nature of Australia’s superannuation guarantee regime helped ensure Australian pension assets grew faster over the last 20 years than any other country, according to new research released by Willis Towers Watson.

Willis Towers Watson senior investment consultant, Paul Newfield said Australia’s world-leading performance over the past two decades had been underpinned by compulsory contributions, higher growth asset allocations and general strength in investment markets.

The good news about Australia came as the Willis Towers Watson Global Pension Assets Study found that global institutional pension fund assets in the 22 major markets grew to US$41.3 trillion at the end of 2017 with the total value of assets growing by US$4.8 trillion in 2017.

It noted that this was the largest single-year growth in US dollar terms in the last 20 years and represented growth of over 13 per cent during the year.

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Looking at Australia, the Willis Towers Watson analysis said that Australia continued to be among the world leaders and punch well above its weight in terms of assets in the system, continued growth rate of these assets and the size of its defined contributions (DC) system.

It said pension assets in Australia also continued to rise as a percentage of gross domestic product (GDP) and the pension system continued to influence the political agenda and the size and significance of the system was likely to see this trend continue.

Looking at the relative growth rates of defined contribution (DC) and defined benefit (DB) assets for the seven largest pension markets in the last two decades, the study showed that DC assets grew at 7.5 per cent per annum compared with 4.9 per cent for DB assets.

“DC now accounts for 49 per cent of total assets across the seven largest pensions markets in the world as these funds continue to experience positive net cash flow and relatively lower levels of benefit withdrawals compared to their DB counterparts,” Newfield said. “As such we would expect DC assets to become larger globally than DB assets within the next two years.”