The UK recorded the weakest annual growth in its pension assets among the seven biggest pension markets in the last 10 years.
New research published by the Thinking Ahead Institute on February 10 revealed that the UK’s global share of pension assets dropped from 8.8% of the 22 largest markets in 2014 to 5.4% in 2024.
The UK’s total estimated pension assets last year sat at $3.14bn (£2.53bn). Just over a quarter (27%) of these assets were made up of defined contribution (DC) pensions, with three-quarters in defined benefit (DB) pensions.
Of the largest seven pension markets, the UK allocated the biggest proportion of assets to bonds at 56%.
The UK was the only country in the WTW-founded study to experience negative annual growth over the past year, declining by 0.7%. Global pension assets rose by 4.9% year-on-year to a record $58.5tn, which was driven by growth in the world’s biggest DC markets.
“The slow growth of UK pension assets can likely be attributed to multiple factors, including the maturity of DB schemes, ongoing de-risking, and the relatively not-fast-enough expansion of DC assets” Thinking Ahead Institute director Jessica Gao told Pensions Expert. “UK DB schemes have been progressively de-risking by shifting away from growth assets.”
UK stock market underperforms
LCP partner Sir Steve Webb partly attributed the UK’s weak growth rate to the performance of the stock market.
“The UK stock market has substantially underperformed its global and US counterparts for the last 20 years, so to the extent that UK pension schemes are invested in UK equities, this will have depressed the relative performance of UK funds,” the former pensions minister told Pensions Expert.
The Thinking Ahead Institute study earmarked four key challenges for asset owners in the coming years, highlighting macro uncertainty and systemic risk, the rising influence of politics on pension funds, and surging interest in alternative assets.
It also noted pension funds’ increasing interest in ‘organisational alpha’, which the Thinking Ahead Institute defined as “the unique combination of people, processes, skills, and governance within a pension fund organisation that collectively contribute to its ability to create sustainable value”.
