Global pension systems face ageing strain as retirement liabilities rise

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Global pension ageing strain

Highlights

Marsh CFA Institute Global Pension Index reports that 43 of 55 tracked pension systems have fertility rates below replacement, stressing long-term funding capacity.
Life expectancy at age 65 in developed regions has risen by 50.9% since 1950 to around 20 years, intensifying pressure on pension benefits longevity.
The U.S. Old-Age and Survivors Insurance Trust Fund is projected to deplete reserves in Q4 2032, highlighting demographic-driven funding risks and shifting investment strategies toward riskier assets.

Demographic pressures deepen funding risks

As reported by CNBC, the scale of the challenge is highlighted in the 2026 Marsh CFA Institute Global Pension Index, which shows that 43 of the 55 pension systems it tracks have fertility rates below the replacement level of 2.1 children per woman, while 23 are below 1.5.

The report says life expectancy at age 65 in more developed regions has increased by 50.9% since 1950, to about 20 additional years. That means retirement benefits must last much longer, even as the pool of potential workers supporting older populations is set to contract sharply.

Sebastien Betermier, executive director at the International Centre for Pension Management, says the issue is becoming more pronounced over time. He notes that some pension funds now have members who have been retired for nearly half a century and are aged 107 or 108.

The pressure is especially severe for pay-as-you-go systems, where contributions from current workers largely finance benefits for existing retirees. In the U.S., the Old-Age and Survivors Insurance Trust Fund is projected to exhaust its reserves in the fourth quarter of 2032, according to its latest trustees' report.

Investment strategies shift as funds mature

Fully funded pension schemes also face strain as more members retire and begin drawing benefits. The Marsh CFA Institute index warns that some funds could end up paying out more than they receive in new contributions, forcing a rethink of investment strategies and liquidity needs.

That demographic squeeze is already reshaping portfolio allocation, with some funds taking on greater risk to generate returns needed to meet growing obligations. Industry observers say the search for higher returns is pushing some investors toward more complex assets, including private equity, infrastructure and private credit.

Jean-Pierre Aubry, associate director of state and local research at the Center for Retirement Research at Boston College, says pension funds are increasingly moving toward riskier investments, although the degree varies by market. David Elias, CEO of Australian pension fund Hostplus, says demographic change is only one of several factors influencing investment decisions.

Our earlier report on the Philippine state pension fund SSS detailed how the fund defended its equity strategy amid scrutiny over unrealized portfolio losses, stressing that paper drawdowns do not translate into cash losses unless assets are sold below cost. The fund highlighted decades of realized gains and recurring dividend income, alongside a disciplined, diversified approach and ongoing risk monitoring to support long-term benefit obligations.

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