The world's pension systems are confronting a demographic crisis as longer lifespans and dwindling birth rates threaten to stretch retirement finances, raising questions about their ability to sustain payouts for future generations.
Pension offerings generally fall into two categories: defined-benefit plans, which promise retirees a predetermined income, and defined-contribution plans, where payouts depend on accumulated savings and investment returns.
Ageing poses different challenges for the two systems: defined-benefit schemes face mounting liabilities as retirees live longer, while defined-contribution members risk outliving their savings, placing greater pressure on funds' investment performance.
The problem is "huge, and it's gotten more pronounced over time,” said Sebastien Betermier, executive director at the International Centre for Pension Management, noting that some pension funds have members who have been retired for nearly half a century, aged 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. "Think about the cost that it imposes actually on the next generation … it is a ticking time bomb," Betermier told CNBC.