The number of pension funds has fallen markedly in many OECD countries over the last 10 years, and the Netherlands, Denmark and the UK have witnessed the largest shrinkage in percentage terms, according to a report from the organisation.

In its 2016 Pension Markets in Focus report, the OECD said the number of pension funds had decreased in 15 OECD countries and nine non-OECD countries in 2015 compared with 2005, with 14 of those 15 OECD countries being European.

The report said: “The biggest change, compared with 2005, occurred in the Netherlands (-60.1%), Denmark (-60.0%) and the United Kingdom (-52.3%).”

In terms of the total number of pension funds to disappear, the largest decrease was in the UK.

The fall in pension fund numbers may have been the result of mergers, closures or acquisitions, it said.

“Mergers between pension funds may result in economies of scale and potentially help pension funds to become more competitive,” it added.

On the other hand, some pension scheme closures may have resulted from difficulties in delivering the terms of contracts or meeting funding requirements in case of defined benefit (DB) plans, the OECD said.

“The 2008 financial crisis and falling interest rates caused the funding position of DB plans to deteriorate,” it said, adding that difficulties in meeting funding requirements may have forced underperforming funds to wind up. 

The amount of assets invested per pension fund, however, increased between 2005 and 2015 in almost all countries for which data were available.

Related to the fact that pension systems are consolidating, particularly in Europe, the OECD outlined the findings of an analysis into whether there were a link between the number of pension funds in a pension system and the real net returns produced overall.

“Countries with a declining number of pension funds may experience higher net returns if underperforming funds exit the market,” it said.

But alternatively, it said, a low number of pension funds could lead to a situation of oligopoly, with a potentially lower level of competition than in countries with more funds. 

Results showed that countries with 30-149 pension funds had experienced higher real net returns than countries that had more pension funds between 2005 and 2015.

In the year 2015 alone, however, there was no relationship between the number of pension funds and the real net rates of return, the OECD said.

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