Pensions suffer worst collapse in 2022 since financial crash

Irish market fares best of the seven EU markets studied in report despite pension assets falling 11% last year

Pension funds in 2022 suffered their worst year since the financial crash. Photograph: iStock

A new report confirms that pensions assets last year suffered their worst collapse since the financial crash 15 years ago.

The 300 largest pension funds in the world showed that assets under management tumbled by 12.9 per cent, according to an annual study by the Willis Towers Watson-founded Thinking Ahead Institute.

It was the first loss by the sector in five years and the worst in the 20 years the institute has been studying the data alongside the 2008 financial crash year.

The figures are even worse when the report looks at data across the 22 countries with the largest pensions assets – including Ireland – where the collapse last year hit 16.7 per cent. This followed more than a decade of uninterrupted growth.

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“Last year we experienced, to an extent, a global polycrisis where various risks combined, were amplified as a result, and manifested in significant asset falls,” said Thinking Ahead Institute head Marisa Hall.

“It is our view that these systemic risks will increase in future and will emanate predominantly from environmental, societal and geopolitical sources.”

Ireland fared well by comparison with other countries in the report. Over the past 10 years, Irish pension funds have delivered compound annual growth rates of 4.6 per cent, with assets jumping from $106 billion (€99 billion) in 2012 to an estimated $166 billion despite the setback for pension funds last year.

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That compares with an average for 4.2 per cent across all the markets studied, placing Ireland as the seventh most successful in terms of average growth of the 22 large pension markets over that decade. The figures are skewed by outsized increases in China (17.5 per cent per annum), which was followed by South Korea (9 per cent) and India (8.2 per cent). The US also fared well with a compound annual growth rate of 6.1 per cent.

Ireland fared far better than neighbouring UK which, the report says, saw pension assets contracting by an average of 1.1 per cent every year of the decade to end 2022.

Among the EU states studied in the report, Germany, France and Spain all reported negative annual growth rates while Italy and the Netherlands grew.

Ireland is one of nine countries to report negative compound annual growth rates over a shorter five-year period (-1.2 per cent a year) in dollar terms, and suffered a 15.9 per cent setback last year.

However, in local currency terms, we fared better, with 2022′s loss coming in at 10.8 per cent and the figure for the 2017-22 period turning positive (+1.1 per cent per annum).

Dominic Coyle

Dominic Coyle

Dominic Coyle is Deputy Business Editor of The Irish Times