Pension funds

OECD Observer

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Pensions funds in the OECD area have grown sharply over the last decade, from US$5.9 trillion in 1994 to US$15.6 trillion by 2004, representing a compound growth rate of 10.2% per annum.

According to the second edition of OECD’s new bulletin, Pension Markets in Focus, the ratio of total OECD pension fund assets to GDP increased from 81.9% to 84.1% in 2004, driven by the growth of assets in the largest market, the US. Some countries like Poland, Spain and France recorded fast growth, albeit from a low base.

As Pension Markets in Focus shows, the main types of funded pension systems in most OECD countries are occupational or employer-based plans. In Mexico, Poland, and the Slovak Republic, mandatory personal plans predominate. Fourteen OECD countries have mandatory or quasimandatory funded pensions. In the Netherlands and Sweden, these systems cover some 90% of the workforce, reflecting collective bargaining there. In the countries where funded pension systems is voluntary, 40-60% of the workforce is covered in eight of them, and under 20% of the workforce in a further nine. The largest voluntary pension funds are in the US, the UK and Canada.

These funds are in the 40-60% coverage range, but because those funds are mature, they are large in GDP terms (see graph). By contrast, Sweden’s pension fund has wider coverage, but as it is relatively new, accounts for just 12.7% of GDP.

©OECD Observer No 254, March 2006

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