Pension Funds Market Expected to Reach $109,047.7 Billion by 2032—Allied Market Research

According to a new report published by Allied Market Research, titled, “Pension Funds Market, By Fund Type (Defined Benefit Pension Funds, Defined Contribution Pension Funds, and Others), By End User (Government, Corporate, and Individuals): Global Opportunity Analysis and Industry Forecast, 2023–2032". The pension funds market was valued at $64.1 trillion in 2022, and is estimated to reach $109,047.7 billion by 2032, growing at a CAGR of 5.5% from 2023 to 2032.

The retirement payout from a pension fund is guaranteed. It is not based on the stock market such as a 401k. When a company starts its pension, it can create a plan formula to determine an employee's pension benefit. This is usually based on the person's average salary and the number of years he worked at the company. When the employee retires, they receive their promised pension payout. The company is responsible for putting aside enough money to pay this benefit. This feature creates safe retirement income for both the company and its employees, fueling the pension funds market size.

To meet the employees’ retirement needs major market players are adopting different key strategies such as partnerships and product launches to offer a comprehensive solution that ensures lifelong financial protection through an additional income stream. For instance, in March 2022, Max Life Insurance Company Ltd. announced the launch of the ‘Max Life Smart Guaranteed Pension Plan’, a non-linked, non-participating single premium individual/group general annuity plan. The new product offering guarantees the annuitant a regular income stream, ensuring their future financial security. Furthermore, corporations and public sector enterprises can directly purchase this plan as a group annuity product to meet the employees’ retirement needs. 

As populations age globally, the demand for pension products rises, compelling funds to adapt their investment strategies for long-term sustainability. Regulatory changes, aimed at enhancing transparency and accountability within the pension industry, push funds to adopt more sophisticated risk management practices. According to the National Conference on Public Employees Retirement Systems (NCPERS) 2023 Public Retirement Systems Study, public pension funds' average funding ratio increased to 77.8% in 2022, with the majority of pensions' revenue (68%) coming from investment returns. However, economic uncertainties and low-interest-rate environments act as significant restraints, challenging funds to generate sufficient returns to meet obligations.

On the contrary, technological advancements present opportunities for innovation and growth in the pension funds market trends. Artificial intelligence and data analytics enable funds to enhance investment decision-making, optimize portfolio management, and personalize retirement solutions. In addition, to ensure that every employee enjoys a good life after retirement, in South Africa, key players launched a unique micro-pension fund product. For instance, in September 2022, Econet Life, an insurance unit of EcoCash Holdings Zimbabwe, launched a unique micro-pension fund product that allows people in the informal sector to save for retirement. The new product, called Dura/Isiphala Pension Fund, was launched in Kariba and is expected to drive the uptake of pensions by workers in the informal sector. With this product, anyone can make monthly contributions to their Dura/Isiphala and when the need arises after a year, two or even 10 years, they will enjoy the benefits of their investment.

By fund type, the defined benefit pension funds segment acquired a major share in 2022. This is attributed to the fact that these funds guarantee a fixed amount of income to retirees, typically based on their salary and years of service. However, the defined contribution pension funds segment is expected to be the fastest-growing segment in the pension funds market forecast period. This is attributed to the fact that in these funds, individuals contribute a portion of their salary to their pension account, and the funds are invested on their behalf. The eventual retirement income is based on the performance of the investments and the contributions made over time.

Region-wise, North America dominated the pension funds market in 2022. This is attributed to the robust economic growth and favorable investment conditions which contribute to the accumulation of pension assets and drive pension funds market growth. Moreover, technological advancements enable pension funds in North America to adopt innovative investment strategies, optimize portfolio management, and enhance operational efficiency, further fueling market expansion. However, Asia-Pacific is considered to be the fastest-growing region during the forecast period. This is attributed to the rapid economic development and urbanization across many countries in the region that have led to increased wealth accumulation and a growing middle class, driving demand for retirement savings and investment schemes. Moreover, demographic trends, including aging populations and rising life expectancies, are creating need for pension solutions to ensure long-term financial security for retirees.

According to the Global Top 300 Pensions Funds report conducted by the Thinking Ahead Institute, in conjunction with Pensions & Investments, a leading U.S. investment publication, by the end of 2022, combined assets of the world’s top 300 pension funds decreased by 12.9%, now totaling US$ 20.6 trillion compared to US$ 23.6 trillion at the end of 2021. This represents a sharp correction compared to an 8.9% increase in the assets of the largest 300 pension funds in the year 2022.

Key Findings of the Study

• By fund type, the defined benefit pension funds segment held the largest share in the pension funds market in 2022.
• By end user, the government segment held the largest share in the pension funds industry in 2022.
• Region-wise, North America held the largest pension funds market share in 2022. However, Asia-Pacific is expected to witness the highest CAGR during the forecast period. 

The key players operating in the pension funds market analysis include BlackRock, Inc., Deutsche Bank AG, Wells Fargo, The Vanguard Group, Inc., Bank of America Corporation, UBS, JPMorgan Chase & Co., FMR LLC, State Street Corporation, and BNP Paribas. These players have adopted various strategies to increase their market penetration and strengthen their position in the pension funds industry.