Assets earmarked for retirement around the world shrank by trillions of euros last year as rising interest rates decimated bond values, according to the Organisation for Economic Co-operation and Development’s (OECD) preliminary figures released this week.

While three countries had previously had funded pensions worth more than twice their annual gross domestic product (GDP) – Iceland, Denmark and the Netherlands – financial market conditions in 2022 resulted in no country being in that position by the end of last December, according to the data collated on OECD countries, which are responsible for around half the world’s total product.

In its latest Pension Markets in Focus report, based on preliminary 2022 data, the OECD said: “The value of assets earmarked for retirement declined in most OECD countries in 2022 driven by negative nominal investment rates of return.”

Fixed income instruments – the largest asset class for pension providers – saw large drops in valuations across the globe driven by high inflation and interest rates, and widespread decreases in equity valuations had exacerbated negative returns in several markets, the Paris-based organisation said.

After a strong gains in 2021, the OECD said that altogether, by the end of 2022 retirement plans held $48.1trn (€44.0trn) of assets – 15.6% less than a year before, with a decline in pension assets visible in 32 out of 38 OECD countries.

“The sharpest drops occurred in the Netherlands (-20.7%) and the UK (-20.2%), with eight other OECD countries experiencing a drop in the value of assets between 10% and 20%, including the US (-15%),” it said in the report.

“As a result of these declines, there was no OECD country where pension assets exceeded twice the GDP at end-2022, unlike at end-2021 when Denmark (233%), Iceland (219%) and the Netherlands (213%) did,” the OECD said.

At the end of last year, Denmark’s pension assets amounted to 191.1% of GDP, Iceland’s pension assets equated to 183.2%, and Dutch pension assets had diminished – according to this relative calculation – to 153.7% of GDP, the preliminary data showed.

In real terms, the lowest returns on pension assets were recorded in the Netherlands at -28%, Poland at -29%, Lithuania with -29.2%, and Latvia with -29.7%, the OECD said.

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Rachel is IPE's Nordic correspondent. She has long been a freelance writer, and over the years, has written for The Telegraph, The Independent, The Observer, AMWatch and elsewhere. In 2001, Rachel's personal finance book Kickstart Your Money was published by John Wiley & Sons.View full Profile

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