Defined contribution (DC) pension schemes now represent almost half (48%) of global pension assets, according to data.
Willis Towers Watson’s Global Pension Assets Study revealed global DC assets have undergone a 10-year compound annual growth (CAG) rate of 7% since 2005, compared to 3% for defined benefit (DB) assets.
The consultant’s research on the 19 major pension markets across the globe found at the end of 2015 Australia and the US had a larger proportion of DC than DB pension assets with Australia having a split of 87% / 13%, respectively, followed by the US at 60% / 40%.
In the UK meanwhile, DC accounted for 32% of total assets while DB was 68%.
Willis Towers Watson global head of investment content Roger Urwin said the shift to DC had been led by the US market for some years, but warned DC funds remain handicapped by the limitations in governance models, risk-sharing models, and investor understanding.
He added: “We remain concerned that pension provisions will fall well short of member expectations based on a central investment outlook for decidedly skinny returns which is compounded by relatively low contribution rates. On top of capital market risks there remain large risks of regulation and governance mismanagement.”
