GCC Institutional Investors - Pension Funds

Executive Summary

Globally, pension funds are one of the most popular instruments that governments and large institutional investors have used in order to fund the retirement benefits of their workforce. In the past two decades, owing to burgeoning fiscal deficits and increasing inflation, governments have shifted from defined contribution model from the previously popular defined benefit model.

However, GCC has remained an outlier with higher oil prices before 2014 giving confidence for the GCC governments in their ability to fund any shortfalls that might arise in the future. Given the way oil prices have broadly remained in the lower range since their drop in 2014-16 and the muted outlook towards fossil fuels warrant a re-assessment of the pension system structure in the region. Recognizing this, GCC governments and pension funds have initiated reforms in the structure of pension systems, their obligations, retirement age etc. Additional reforms to address major challenges in the segment would aid in ensuring wealthy and sustainable pension funds.

Key Discussion Points

• Population characteristics
• GCC Pension Systems
• Asset Mix of GCC Pension Funds
• GCC Pension Fund Reforms
• Challenges faced by the funds
• Policy Recommendations to tap GCC Pension Funds

Did you know?

• GCC pension funds currently manage assets of about USD 460billion.
• UAE offers pension income almost equivalent to working income to most nationals, according to UBS Pension Gap Index.
• Aggregate funding gap in public pension systems in GCC has reportedly exceeded 25% of the region's total GDP.
• Saudi Arabia's Public Pension Agency and Qatar's pension fund hold significant portions in the local equity markets at 18.3% and 42.6% respectively.
• UAE and Saudi Arabia rank 22nd and 26th respectively out of the 43 pension systems ranked by the Global Pension Index