US, Australia the fastest growers as global pension assets hit $59 trillion

US and Australia have the fastest growth in pension assets among the world’s seven largest markets, as defined contribution-dominated countries helped push global pension assets to $58.5 trillion by the end of 2024.

The number was released as a part of the annual Thinking Ahead Institute Global Pension Assets Study, which examined asset size and allocation trends 22 major pension markets. It found that the largest seven pension markets (P7) – Australia, Canada, Japan, Netherlands, Switzerland, UK and US – alone represent 91 per cent of the global assets.

The US leads the world by a considerable margin, with an estimated $38 trillion in pension assets, but the market with greatest exponential growth within P7 was Australia, which reached $2.6 trillion at the end of 2024. The latter’s assets increased by almost 500 per cent in the past two decades.

“The rise of DC becomes more pronounced every year that we conduct this study,” said director at the Thinking Ahead Institute, Jessica Gao.

“While global pension assets continue to reach new record levels, it is those markets with larger pools of DC assets that are the main engine behind this continued growth.”

DC assets dominate both the US and Australia, representing 69 per cent and 89 per cent, respectively, but it is compulsory for Australian employers to make pension contribution that is 11.5 per cent of an employee’s salary. The mechanism is known as Super Guarantee and its rate will increase to 12 per cent in the 2025/26 financial year.

Since 2014, the value of Australian pension assets has grown by 110 per cent in local currency terms and in US by 75 per cent.

Elsewhere, Canada surpassed the UK to become the third largest pension market with $3.2 trillion in assets as of the end of 2024.

The UK was the only market that shrank (-0.7 per cent) for the year. It also recorded the slowest growth among the seven largest markets over the past decade – its assets represented 8.8 per cent of the largest 22 markets in 2014 but only 5.4 per cent in 2024.

Switzerland has the largest pension-assets-to-GDP ratio in local currency, as the nation’s retirement savings represented 152 per cent of its economic output. It is followed by Canada (147.5 per cent) and Australia (146.4 per cent).

Asset allocation trends

Thanks to the dominance of DC funds, US and Australia also have the largest allocations to equities – 50 per cent and 52 per cent respectively – while P7 funds on average allocate 45 per cent.

Over the past decade, US and Australia have had the highest allocations to domestic equities while Canada, Japan and the UK have had the lowest among the P7.

The UK significantly increased its bond allocation in the past decade, allocating 38 per cent in 2014 while 56 per cent in 2024. It closely followed by Japan (55 per cent) in 2024.

The report observed the trend of asset owners seeking diversification and higher returns in alternative asset classes, such as private debt and infrastructure more recently.

“In the past, alternative investments were often grouped into a single category distinct from traditional assets like equities and bonds,” the report said.

“However, the newer versions of alternative investments have become more granular, allocating capital across various distinct asset classes such as equity, debt, real estate, commodities, liquid alternatives and infrastructure.

“Beyond financial returns, alternative investments can play a bigger role than listed assets in contributing to achieving broader societal goals, particularly those related to climate change and sustainability.”