The UK’s pension scheme assets have grown by an average of 6.5 per cent during the last decade, in sterling terms, according to Willis Towers Watson.

Its Global Pension Assets Study found that over the last 10 years, the ratio of UK pension scheme assets to GDP has grown from 91 per cent in 2006 to 108 per cent in 2016, despite a fall of almost 4 per cent in the last 12 months.

In terms of investments UK pension schemes have continued to lower exposure to equities over the last decade, on aggregate allocating 47 per cent of assets to equities strategies in 2016, compared to 64 per cent in 2006.

The UK is the second largest pension market in the world with 7.9 per cent of total global pension assets, following the USA with 61.7 per cent and leading on Japan with 7.7 per cent. In USD terms, the pension asset growth rate of the UK in 2016 was 1.3 per cent.

In the UK, the top 10 pension funds represent 16.2 per cent of the total UK pension assets. Among them, 12.4 per cent are private pension funds and the remaining 3.7 per cent are state-sponsored pension funds.

The report looked at global institutional pension fund assets in 22 major markets, which grew to $36.4trn at year end 2016, representing an increase of 4.3 per cent in the 12-month period. Total pension assets in these countries amount to 62 per cent of their GDP.

The report also shows pension fund assets have grown at 3.8 per cent on average per annum (in USD) over the past five years, with the growth rate highest in China (20.3 per cent), where the study covers the Enterprise Annuities market, and lowest in Japan (-5.4 per cent).

Growth in defined contribution (DC) assets continued to outstrip that of defined benefit (DB) assets, with DC assets now accounting for over 48 per cent of global pensions assets, compared with around 41 per cent in 2006. DC assets have grown at a rate of 5.6 per cent over the past decade, compared with 2.6 per cent for DB assets.

Commenting, Willis Towers Watson global head of investment content Roger Urwin said: “Pension funds worldwide made some progress against their headwinds in 2016. This was largely because equity markets and alternative asset classes produced gains ahead of expectations. While funds in many countries have large pension outflows to deal with, it was encouraging to see overall asset values rise in the vast majority of countries covered in the study.

“The study also confirms a continuing globalising trend as indicated in the reduction in pension funds’ bias to domestic equities markets, with the weighting of domestic equities falling on average from 69 per cent in 1998 to 43 per cent in 2016. Of the markets analysed, Switzerland, Canada and the UK had the lowest percentage allocation to domestic equities markets, whilst US funds had the highest exposure to domestic equities.”

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