Key Takeaways
- • The 2026 Marsh CFA Institute Global Pension Index (MCGPI) found that 43 of 55 covered pension systems have fertility rates below the 2.1 replacement level, and 23 are below 1.5.
- • Life expectancy at age 65 in more developed regions has risen 50.9% since 1950 to about 20 additional years, lengthening the period retirement benefits must cover.
- • The U.S. Old-Age and Survivors Insurance Trust Fund is projected to exhaust its reserves in Q4 2032, according to its latest trustees' report.
- • Pressure on returns is pushing some pension funds toward private equity, infrastructure and private credit, with about a third of Australian superannuation funds recording negative net cash flows over three years, per a 2025 APRA report.
- • Experts diverge on the response: Sebastien Betermier calls ageing a "ticking time bomb," while Hostplus CEO David Elia urges diversification and sees policy and technology as mitigants.
Summary
The world's pension systems face a demographic crisis as longer lifespans and falling birth rates strain their ability to sustain payouts for future generations, according to CNBC. Defined-benefit plans face mounting liabilities as retirees live longer, while defined-contribution members risk outliving their savings and place greater pressure on investment performance. Pay-as-you-go systems, in which current workers largely fund current retirees, are the most exposed. Fully funded systems such as Singapore's are more resilient because benefits are financed through accumulated savings and investments.
Sebastien Betermier, executive director at the International Centre for Pension Management, described the problem as "huge" and said it has grown more pronounced over time. He noted that some pension fund members have been retired for nearly half a century, aged 107 or 108. "The higher the longevity, the more years the pension funds have to cover, and so that immediately comes in as an additional liability," he said, adding that the cost is "a ticking time bomb" for the next generation.
The 2026 Marsh CFA Institute Global Pension Index, published the prior Tuesday, covers 55 pension systems. Of these, 43 have fertility rates below replacement level and 23 have rates below 1.5. The MCGPI report stated that "very few systems, as they currently operate, are secure," and cautioned that future benefit outflows will exceed contributions in some fully funded schemes, creating growing financial strain. In the U.S., the Social Security trust fund's reserves are projected to run out in Q4 2032 per the latest trustees' report.
The demographic squeeze is also reshaping investment strategy. Many mature funds already pay out more in benefits than they receive in contributions. According to a 2025 Australian Prudential Regulation Authority report, about a third of superannuation funds recorded negative natural cash flows over a three-year period. Industry watchers say the search for higher returns has pushed some funds into private equity, infrastructure and private credit. Jean-Pierre Aubry of Boston College's Center for Retirement Research said "everybody is shifting a little more risk where they can," noting that U.S. state and local pension funds hold only about 20% of assets in bonds, making them considerably more exposed to investment risk than peers in Europe and Canada.
Not all managers view ageing as a reason to take on more risk. David Elia, CEO of Hostplus, said demographics are one of many factors in investment decisions and emphasized diversification across asset classes, geographies and industries, with returns that adequately compensate for risk. He argued governments could mitigate ageing pressures through immigration policy and technology, and that demographic shifts could create new investment opportunities, while acknowledging that governments "are going to have to address it."
Sebastien Betermier, executive director at the International Centre for Pension Management, described the problem as "huge" and said it has grown more pronounced over time. He noted that some pension fund members have been retired for nearly half a century, aged 107 or 108. "The higher the longevity, the more years the pension funds have to cover, and so that immediately comes in as an additional liability," he said, adding that the cost is "a ticking time bomb" for the next generation.
The 2026 Marsh CFA Institute Global Pension Index, published the prior Tuesday, covers 55 pension systems. Of these, 43 have fertility rates below replacement level and 23 have rates below 1.5. The MCGPI report stated that "very few systems, as they currently operate, are secure," and cautioned that future benefit outflows will exceed contributions in some fully funded schemes, creating growing financial strain. In the U.S., the Social Security trust fund's reserves are projected to run out in Q4 2032 per the latest trustees' report.
The demographic squeeze is also reshaping investment strategy. Many mature funds already pay out more in benefits than they receive in contributions. According to a 2025 Australian Prudential Regulation Authority report, about a third of superannuation funds recorded negative natural cash flows over a three-year period. Industry watchers say the search for higher returns has pushed some funds into private equity, infrastructure and private credit. Jean-Pierre Aubry of Boston College's Center for Retirement Research said "everybody is shifting a little more risk where they can," noting that U.S. state and local pension funds hold only about 20% of assets in bonds, making them considerably more exposed to investment risk than peers in Europe and Canada.
Not all managers view ageing as a reason to take on more risk. David Elia, CEO of Hostplus, said demographics are one of many factors in investment decisions and emphasized diversification across asset classes, geographies and industries, with returns that adequately compensate for risk. He argued governments could mitigate ageing pressures through immigration policy and technology, and that demographic shifts could create new investment opportunities, while acknowledging that governments "are going to have to address it."
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