London, Jan.29 : The total value of pension assets managed globally rose by 14 percent in 2006 to reach a new high of 26.0 trillion dollars.
Figures in IFSL's Pension Markets report show that 2.9 trillion dollars of pension fund assets in the UK make up 11 percent of total assets worldwide. UK assets are only exceeded by the dominant US market, where assets of 16 trillion dollars make up 61 percent of global total.
Two thirds of global assets, 17.5 trillion dollars, are invested in occupational pension funds, with a further 3.4 trillion dollars in pension insurance contracts and 5.0 trillion dollars in other retirement products, such as personal pensions.
IFSL's report also draws attention to the growing assets of public pension and sovereign wealth funds. These funds totalling an estimate 5.6 billon dollars fall into two categories.
Firstly, OECD countries, particularly the US, Japan, Norway and Sweden have set aside over four billion dollars to finance future payouts onay-as-you-go pensions. Secondly, oil states and other emerging economies have built up sovereign wealth funds of some 1.5 billion dollars, proceeds from which have recently been invested in major western firms.
Real rates of return of UK pension funds eased back again in 2007 to three percent, the lowest for five years, down from seven percent in 2006 and an average return of 13 percent in the three previous years. The pensions balance for FTSE100 companies in the UK has seen a marked turnaround: an aggregate deficit of around 40 billion pounds in previous years was turned into a surplus of 12 billion pounds in 2007.
But many pension schemes could be pushed back into deficit this year as a result of falling equity markets, lower long-term bond yields and longer life expectancy. Elsewhere in Europe deficits in occupational pensions remain on the balance sheets of the largest companies.