Worldwide Pension Funds Rebounded in 2023, but Failed to Make Up for 2022’s Wipeout

An OECD study concluded that last year’s progress did not bring funds back to year-end 2021 levels.

Pension fund assets worldwide staged a comeback in 2023, according to an Organization for Economic Co-operation and Development report. But that only partly offset pension plan asset losses from 2022, when inflation and interest rate hikes, along with fears of economic downturn, soured returns.

Total assets globally (all assets in the countries studied) remained 7% lower last year than at the end of 2021.

U.S. retirement plans at year-end 2023 were still 4.4% below their level from the end of 2021, a strong market year based on recovery from lifted pandemic lockdowns. The U.S. pension asset total for last year was $38.8 trillion.

The funds with investment portfolios (including both governmental and corporate-sponsored plans, as opposed to pay-as-you-go approaches like the U.S.’s Social Security system), benefited in 2023 from rate cuts or the prospects of them, as well as slowing inflation, the report explained.

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In the study, the OECD, the 38-nation organization committed to democracy and free markets, focused on its own membership and 33 non-members, such as India and Brazil. (The U.S. is the largest member, in terms of assets; China, Russia, Iran and North Korea are not members and were not included in the study.)

Indeed, stocks worldwide made a good comeback in 2023, with the equity benchmark, the MSCI All Country World Index, rising 22.2% after falling 18.3% in 2022. But many pension funds own a lot of bonds, so the performance of the Bloomberg Global-Aggregate Total Return Index—which slid 16.3% in 2022 and moved back up only 5.8% in 2023—was a drag on portfolios overall. In the U.S., for instance, total assets shrank 12.8% in 2022 and rose just 10% in 2023.

Last year, only five of the 71 nations in the survey faced asset declines, notably the U.K., which was down 3% due to a decrease in the value of its bond holdings. One beneficial trend was an increase in nations requiring participation in pension plans, which happened in Greece and Georgia; issuing new automatic enrollment mandates, seen in Poland and Turkey; and expanding access to plans by relaxing eligibility requirements, as in Australia and Norway.

The 2023 investment gains were spurred by cuts in interest rates, such as in Chile, or expectations for reductions, as in the U.S. The returns exceeded the inflation rate in most of the nations studied. Last year, Poland logged the biggest gain, with 30.2%, easily making up for its 16.1% drop in 2022; the surge in 2023 came thanks to its outsized allocation to equities, more than 90%. The U.S. had roughly 35% in stocks.

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