Australian foresight of retirement market

Despite the global financial crisis, the global retirement market is expected to grow by 66% by 2020.

Australia's share of the world retirement market in 2009 was 3.5% - more than Japan at 3.2%, Northern Europe at 3.1%, Southern Europe at 3.0%, Asia at 1.8% and Central/Eastern Europe at 0.4%. The global markets larger than Australia include the United States at 50.5%, Western Europe at 20.1%, and the United Kingdom at 11.5%.

The global financial crisis affected most countries' retirement assets. Australia's pool of retirement funds fell 11% between 2007 and 2008. However, the growth in Australia's retirement assets is expected to excel those of all other countries, except Greece (because it's coming out of a low base).

Most countris have commenced reforms to strengthen their retirement markets. In Australia, the reforms began two years ago, which will continue to strengthen until it overtakes Germany and the Netherlands. In 2009, Australia had the sixth largest pool of retirement assets. By 2020, Australia is set to take fourth place, behind the United States, the United Kingdom, and France.

The new reforms, particularly in Asia, include netting retirement funds from contributions, rather than investment performance. As a result, Asia is estimated to grow 16.8% per annum in 2020.

The aging population and the flood of baby boomer retirees is putting pressure on retirement schemes in all developed countries, including Australia. Reform trends in Europe and the United States over the past 10 years included the expansion of mandatory occupational pension schemes and a shift from defined benefit to defined contribution plans. Australia implemented these reforms much sooner than other countries and its continued strong growth in superannuation assets is testament to the foresight of these early reforms.

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