Pension funds vs Global GDP
Pension funds now manage over
42 trillion US Dollars in OECD countries.
United States
$21t
China
$14t
Japan
$5t
Germany
$3t
Pension funds now manage over 42 trillion US Dollars in OECD countries alone. They are the largest group of asset owners in the world and an important part of our global economic system.
Crucially, the money they manage ultimately belongs to the broad population, giving pension funds a societal aspect that sets them apart from other investors. It is then natural to ask how this wealth can benefit all citizens, beyond the core purpose of providing secure retirement income. The scale and long-term investment horizon of pension funds bear the potential to foster economic growth and vibrancy.
However, currently we do not know enough about how exactly pension funds’ investment activities affect the economy at large.
Why is this important?
Pension policy is at an important junction at a global level.
In many developed countries, existing pension systems are coming under increased financial pressure because of demographic change. Funded pensions are becoming more important, and understanding how this affects the economy will be an essential condition for sound reform proposals.
In developing countries, the task is to design pension systems that simultaneously create pension wealth and promote local development. Establishing pension funds would create a large pool of domestic investors that can contribute to economic growth. These funds can also be endowed with public assets to initially strengthen the system.
