The world's pension systems are confronting a severe demographic crisis that threatens the sustainability of retirement benefits across developed nations [1]. According to the 2026 Marsh CFA Institute Global Pension Index (MCGPI), life expectancy at age 65 in more developed regions has increased by 50.9% since 1950 to approximately 20 additional years, while simultaneously, 43 of the 55 pension systems covered by the index have fertility rates below the replacement level of 2.1 children per woman, with 23 systems falling below 1.5 [1]. This creates a structural imbalance where pension funds must stretch assets across decades-long retirements while the pool of workers contributing to these systems shrinks dramatically [1].
The challenge manifests differently across pension plan types [1]. Defined-benefit schemes, which promise retirees predetermined income, face mounting liabilities as members live longer—some pension funds have retirees aged 107 or 108 who have been retired for nearly half a century [1]. Defined-contribution plans, where payouts depend on accumulated savings and investment returns, place greater pressure on funds' investment performance as members risk outliving their savings [1]. Sebastien Betermier, executive director at the International Centre for Pension Management, characterized the situation as "a ticking time bomb," emphasizing that "the higher the longevity, the more years the pension funds have to cover, and so that immediately comes in as an additional liability" and warning of "the cost that it imposes actually on the next generation" [1].
The MCGPI report concludes that "very few systems, as they currently operate, are secure," highlighting that the funding of future pensions and aged care becomes increasingly critical as the ratio of workers to retirees continues to decline [1]. This structural vulnerability is compounded by pension funds' continued exposure to and plans to increase allocations to private credit markets, particularly software-heavy lending, which are currently facing heightened scrutiny [1]. The convergence of demographic pressures and investment concentration risks creates significant challenges for pension fund sustainability and intergenerational equity.
CONCLUSION
Global pension systems face an unprecedented sustainability crisis driven by demographic shifts—increased longevity and declining birth rates—that fundamentally threaten their ability to meet future obligations. With most major pension systems currently operating in an unsustainable manner according to the MCGPI report, policymakers and fund managers face mounting pressure to restructure retirement systems and adjust investment strategies to address this long-term liability challenge.