Survey reveals annual 8.8% gain through until 2020, doubling current assets across the Gulf
Arabian Gulf pension funds are expected to double to
That reflects annual growth of about 8.8 per cent from 2012 to the end of the decade, according to a report from
Assets under management held for public service employees from the
The GCC pension fund industry is fairly young in comparison to counterparts in western markets.
The burden has increased on financial institutions to create successful investment models that guarantee strong returns matching future liabilities. Factors include a surge in population growth and pressure for job creation programmes, which has largely comprised state spending on building new industries to diversify revenues away from oil.
"My understanding is that they over allocate in fixed income, but also do a lot of investments out of the region," said
Political turmoil in the region has caused governments to allocate more cash into pension funds and "development" sovereign wealth funds,
Saudi Arabia has made the biggest contributions towards its pensions funds as more than 2.3 million Saudis are set to enter the workforce in the next five years.
In the West, pension funds have come under fire for struggling to meet target yields amid a low-interest environment.
New regulations such as Solvency II, Basel III and the US Dodd-Frank Act are all expected to have implications on European pension schemes.
"There are a lot of debates in
Pension offerings in the GCC so far have been exclusive to nationals of the union's respective countries.
At present, firms must by law pay end-of-service benefits, also known as gratuities, which top out at two years of basic salary after 25 years of service. However, financial firms have warned that these costs represent unfunded liabilities and a saver is left with nothing if a company goes bankrupt.
Expatriates tend to send their savings abroad, investing in real estate, equities and various assets and pouring some money into Bancassurance programmes.
Pension schemes offered by insurers and banks are expected to reach
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