Pension Fund Market

Pension Fund Market Outlook (2024 to 2034)

Worldwide revenue from the demand for pension funds is estimated to stand at US$ 4,535.4 billion in 2024 and is slated to increase at a CAGR of 7.2% to reach US$ 9,170.19 billion by 2034, as opined in the newly published report by Fact.MR.

In keeping with the length of their commitments, pension fund plans make investments with a long-term investing view. To thrive in the present complicated and demanding climate, pension funds are modifying their investing methods. Bonds and stocks with extended investment horizons are the investments made by pension funds.

They allocate money to hedge funds, private equity, real estate, and other alternatives to diversify their portfolios in light of the market's volatility. Strong pension reform initiatives have been underway in several countries, sometimes incorporating a rise in the use of privately run, financed pension plans.

In several countries, it is anticipated that these financed arrangements will become more significant in providing retirement income. Particularly as a source of long-term savings, privately managed pension assets become more prevalent in the financial markets.

Changes in regulations and demographics are the main drivers of the pension fund business. The need for pension goods and services is increasing as the world's population ages, forcing pension funds to modify their investment strategies to maintain long-term viability. .

In addition, funds are compelled to embrace increasingly complex risk management and investing strategies due to changing regulatory environments that are intended to improve accountability and transparency in the pension sector.

For the first time, the combined defined contribution (DC) assets of the six prominent pension markets worldwide surpassed defined benefit (DB) assets in 2021. Due to greater member coverage and larger contributions in certain regions, DC assets continued to expand at a noteworthy rate than DB throughout the ten years ending in 2021 (8.4% pa vs. 4.8% pa).

Several employers face issues, including member engagement in addition to an increase in dispersed contribution assets. Although it presents implementation issues, targeted interaction yields greater insights. Technological developments are redefining member expectations, altering the character of member interactions, and creating new opportunities for customization.

Report Attribute	Detail
Pension Fund Market Size (2024E)	US$ 4,535.4 Billion
Forecasted Market Value (2034F)	US$ 9,170.19 Billion
Global Market Growth Rate (2024 to 2034)	7.2% CAGR
North America Market Value (2024E)	US$ 1,986.98 Billion
East Asia Market Growth Rate (2024 to 2034)	7.2% CAGR
Equities Segment Value (2024E)	US$ 2,001.97 Billion
Bonds Segment Value (2034F)	US$ 2,706.8 Billion
Key Companies Profiled	Social Security Trust Funds; AT&T Corporate Pension Fund; California Public Employees Retirement System; National Railroad Retirement Investment Trust

Why is the Market for Pension Funds Progressing at a Noteworthy Pace?

“Several Tax Benefits Making More People Desire for Better Pension Funds”

The IRS views a pension fund as a qualified retirement plan. The IRS provides a tax deduction for citizens to a qualified plan to promote retirement savings. The annual contributions made by a corporation to the pension plan are entirely deductible from its income taxes. The company gets a significant tax credit since funding a pension plan requires a significant amount of money each year.

In addition to lowering their tax obligations, this provides a retirement benefit for the business and its workers, which fuels the expansion of the pension fund industry.

A novel micro-pension fund concept was introduced by major firms in South Africa to guarantee that every employee had a comfortable retirement. For example, Econet Life, an insurance division of EcoCash Holdings Zimbabwe, introduced a novel micro-pension fund product in September 2022 that enables individuals working in the unorganized sector to accumulate retirement savings.

The Dura/Isiphala Pension Fund, a new product that was introduced in Kariba, is anticipated to encourage workers in the unorganized sector to enroll in pension plans. More people use this product to make monthly payments to their Dura/Isiphala, and they will reap the rewards of their investment when the time comes—which might be a year, two, or even ten years from now. These factors are further leading to a growing pension fund market size.

“Stability and Security among Population Driving Pension Fund Market Growth”

Pension funds give retirees both financial and social security. Some risk factors are still present, though. Non-transferable pension funds are among them. Several pension fund plans that are provided by several organizations are not transferable. Compared to a 401(k) or other defined contribution plans, a pension offered by a particular firm is frequently less flexible.

For example, if a worker changes employment, the money they earned at their former job does not accompany them. Moreover, some organizations have guidelines that specify who is qualified for a pension fund. It is determined by how long they have been employed by the organization. Therefore, non-transferable pension funds are preventing the pension funds sector from expanding.

Historically, the global pension fund sector has struggled to provide enough returns to give its members substantial and steady retirement incomes. Even while the markets' quick recovery following a severe drop in 2020 has given some relief, it will not be enough to increase pension plans' long-term solvency.

To increase return and seek ways to reduce expenses, pension funds are now considering a wider variety of investment options and asset classes, including private markets. Participants are also under more pressure to embrace responsible investing by integrating ESG concepts into their investment choices

What a Major Challenge Faced Related to Pension Funds?

“Market Instability and Low Interest Rates Harming Overall Growth”

It has become more challenging for funds to provide enough returns to cover their commitments due to low interest rates. Significant unfunded obligations are plaguing several pension plans, raising questions about their long-term viability. The performance of funds is seriously threatened by economic uncertainty and market volatility.

Further, more retirees are supported by fewer active workers due to demographic pressures from aging populations. While complicated restrictions limit investing options, administrative expenses and management fees reduce returns.

Country-wise Insights

Financial security is one of the most important aspects of an individual's life, and in today's capitalistic world, it becomes very important for people to look after their financial growth. This factor is pushing more people to invest in pension funds to have financial security even after they retire.

Some of the major countries staying active in this market include the United States, Mexico, Canada, and Japan. The United States market is forecasted to hold a significant pension fund market share in North America.

Why is the United States Estimated to be a Significant Profitable Country?

“Capitalistic Economy Making More People Aware About Financial Investments”

Attribute	United States
Market Value (2024E)	US$ 1,779.3 Billion
Growth Rate (2024 to 2034)	7.5% CAGR
Projected Value (2034F)	US$ 3,678.28 Billion

The United States consistently ranks as a significant player in the regional market due to its capitalistic economy, which fosters a deeper awareness of financial investments among its citizens. In this environment, individuals are encouraged to plan for their future through several retirement saving vehicles, including 401(k)s and IRAs.

The regulatory framework also supports diverse investment strategies, allowing pension funds to explore a range of assets, from stocks to real estate, enhancing their growth potential.

What is the Reason Behind Increasing Profits of Key Market Players in China?

“Better Interest Rates and Huge Population Working in Favor”

Attribute	China
Market Value (2024E)	US$ 339.81 Billion
Growth Rate (2024 to 2034)	6.9% CAGR
Projected Value (2034F)	US$ 666.12 Billion

Key players in China’s pension fund market are witnessing rising profits primarily due to improved interest rates combined with the country’s vast working population. With the government focusing on enhancing its pension system, reforms that promote better returns on invested capital have generated increased confidence among investors.

The current economic climate, characterized by beneficial interest rates, allows pension funds to earn higher yields on fixed-income investments, contributing to overall profitability.

Category-wise Analysis

Several financial tools are available in the market for customers to gain all their lives. Some of the major tools available are equities, bonds, and cash.

Which Product and Service is Widely Used by Several People Globally?

“Public Defined Benefit Retirement Plans Becoming More Popular Compared to Private Ones”

Attribute	Public Defined Benefit Retirement Plans
Segment Value (2024E)	US$ 2,332.47 Billion
Growth Rate (2024 to 2034)	7.6% CAGR
Projected Value (2034F)	US$ 4,874.19 Billion

Public defined benefit retirement plans are increasingly recognized as a more desirable option compared to private plans. These government-backed systems offer individuals a guaranteed income after retirement, providing financial stability and peace of mind.

With the growing life expectancy and the uncertain nature of market-dependent private plans, several people are gravitating towards public plans. They not only reduce personal investment risk but also ensure a predictable financial future.

Which Market in East Asia is Proving to Be Beneficial for Key Companies?

“Escalating Demand for Equities Compared to Bonds and Other Alternatives”

Attribute	Equities
Segment Value (2024E)	US$ 2,001.97 Billion
Growth Rate (2024 to 2034)	7.6% CAGR
Projected Value (2034F)	US$ 4,189.73 Billion

The equities segment is currently proving to be highly beneficial for key market players, outpacing bonds and other alternatives in demand. Investors are increasingly drawn to equities due to the potential for higher returns, especially in a low-interest-rate environment. As companies focus on growth and innovation, equity investments yield significant capital appreciation and dividend payouts.

Competitive Landscape

Key players in the pension fund market are focusing on adding new securities to make sure they have covered every segment of customers. Some of these securities include:

• ICICI Prudential Life Insurance unveiled ICICI Pru Gold Pension Savings, a new pension plan, in February 2024. This tax-efficient solution enables users to make systematic payments to help more people accumulate a sizeable retirement corpus.
• To facilitate the Rolls-Royce Retirement Savings Trust's transition to a new custom Target Date Fund (TDF) solution that provides retirement benefits to its 34,000 members, BlackRock partnered with the trust in July 2023.
• An innovative micro-pension fund product was introduced in September 2022 by Econet Life, an insurance division of EcoCash Holdings Zimbabwe, enabling individuals working in the unorganized sector to save for their retirement. The Dura/Isiphala Pension Fund, a new product introduced in Kariba, is anticipated to encourage workers in the unorganized sector to enroll in pension plans.

Fact.MR provides detailed information about the price points of key players in the pension fund market positioned across the world, sales growth, production capacity, and speculative technological expansion, in this new market report.

Segmentation of Pension Fund Market Research

• By Product & Service :

  • Public Defined Benefit Retirement Plans
  • Private Defined Benefit Retirement Plans

• By Major Market :

  • Equities
  • Bonds
  • Alternatives
  • Cash

• By Region :

  • North America
  • Western Europe
  • Eastern Europe
  • Latin America
  • East Asia
  • South Asia & Pacific
  • Middle East & Africa