Most rich countries' pension funds returned to their pre-crisis levels by the end of last year, a study by the Organisation for Economic Co-operation and Development (OECD) shows

However, funds are not fully in the clear yet as the Euro zone crisis and other financial market issues form growing risks and are making the outlook for this year less clear.

In its annual study, Pension Markets in Focus, the OECD shows that in 2010 pension funds in most OECD countries recovered, on average, more than 80% of the money they had lost in 2008.

The only exceptions to these rules were Ireland, Japan, Portugal, Spain and the United States. In these countries the losses continued.

The OECD calculated an average return of 3.8%.  New Zealand and Chilean funds performed best amongst the group of developed countries with returns of around 10%. In Europe the Dutch did well with an average return of 6%. 

Net returns grew an average of 2.7% in real terms across OECD countries, led by increases in New Zealand, Chile, Finland, Canada and Poland but flattened somewhat by decreases in Portugal and Greece.
 
By December 2010, OECD pension fund assets in relation to national economies amounted to 71.6% of GDP on average. This figure has grown since last year but is still down from the 78.2% recorded in 2007.

The Netherlands has still the largest proportion of pension assets to GDP (134.9%), followed by Iceland (123.9%) and Australia (90.9%). The UK ranked fourth with 86.6%. Only two countries registered a decline in asset-to-GDP ratios, these were Portugal and Japan.

The study showed that in most countries bonds remained by far the dominant asset class, accounting for 50% of total assets on average. Some countries however had large portfolio allocations to equities, such as the United States, Australia, Finland and Chile, each holding in the range of 40% to 50% in the asset class on average. In the UK both bonds and equities both form roughly one-third of the portfolio.

In some countries like Austria, Finland, Poland and the Netherlands, the weight of equities in portfolios increased substantially from 2009 to 2010 (in the range 6 to 7 percentage points), while bond allocation fell by a similar amount.

Public pension reserve funds increased, from $4.6tn in 2009 to $4.8tn in 2010. Investment returns were, on average, lower in 2010 than in 2009 but still remained positive.

To view the complete study, click here.

First published 01.08.2011

azeevalkink@wilmington.co.uk