Global pension assets increased by 11 per cent to reach US$55.7 trillion in 2023, up from $50.2 trillion at the end of 2022, according to a new report by WTW’s Thinking Ahead Institute.

This growth was attributed to stronger capital market performance following a much more negative impact from markets in the correction of 2022, said the report, adding the return for a reference 60/40 balanced portfolio was 16.6 per cent.

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“This global growth is not yet rapid and pension assets remain behind their pre-2022 position, but it is far better than the experience a year before,” said Jessica Gao, director at the Thinking Ahead Institute, in a press release. “Inflation has moderated and, as a result, financial markets have remained supported by interest rates, which appear also to have peaked, at least for now, in most countries.”

Allocations to public equities have shrunk over the past two decades, from 51 per cent in 2003 to 42 per cent in 2023, while allocations to private equity increased from 12 per cent to 20 per cent during the same period. Meanwhile, allocations to bonds remained stable at an average of 36 per cent, unchanged from 2003.

The report also noted the continuing global shift from defined benefit pension plans to defined contribution plans. While DB pension plans still hold the majority of pension assets in Japan (95 per cent), the Netherlands (94 per cent) and the U.K. (74 per cent), DC pension plans hold the majority of pension assets in Australia (88 per cent). In Canada, DC pension plans hold 44 per cent of assets.

The U.S. accounted for 63.9 per cent of assets among the largest 22 pension markets, followed by Japan (6.1 per cent) and the U.K. (5.8 per cent).

Read: Largest global pension funds’ combined assets decreased 12.9% in 2022: report