The demographic math gets tougher
Pensions face two headwinds at once: people live longer and fewer workers are coming up behind them. That adds years of payments for retirees and squeezes systems where current workers fund current retirees.
The 2026 Marsh CFA Institute Global Pension Index, published Tuesday last week, puts numbers on it. Of 55 systems, 43 sit below the 2.1 births per woman replacement mark, and 23 fall under 1.5. The report stated, "The funding of future pensions and aged care both become more critical as the ratio of workers to retirees continues to decline," adding, "Very few systems, as they currently operate, are secure."
Longevity compounds the challenge. Across advanced economies, a 65-year-old can now expect roughly 20 more years of life, a 50.9% increase since 1950. The pool of potential workers per older person is also set to fall sharply, a particular problem for pay as you go plans that rely on today's contributions to cover today's benefits.
In the U.S., the latest trustees' report projects that the Old-Age and Survivors Insurance Trust Fund - which pays retirement and survivor benefits to tens of millions - will exhaust its reserves late in 2032, specifically in the fourth quarter.
Different systems, different pressure points
Plan design matters. Defined benefit plans promise a set income in retirement, so each extra year of life raises their liabilities. Defined contribution plans pay based on savings and investment returns, so longer lives heighten the risk that balances run out.
Fully funded schemes that invest contributions to meet future benefits are not insulated either. As memberships age, more funds are paying out more than they take in, making them lean harder on markets and the assets they have already built.
Australia offers a snapshot.
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Rethinking risk in the hunt for returns
Investment strategies are shifting as obligations grow. Many mature funds already rely more on investment gains than fresh contributions, and industry watchers say that pressure has pushed allocations toward riskier, more complex assets such as private equity, infrastructure and private credit.
He described the problem as "huge, and it's gotten more pronounced over time," noting that some funds still pay retirees who left the workforce nearly 50 years ago, with ages reaching 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.
Aubry drew attention to the portfolios held by American state and local public pension plans, observing that bonds make up only about 20% of assets, with a sizable allocation to stocks and private investments. Because of this mix, U.S. public pension funds carry greater investment risk than counterparts in Europe and Canada.
Not every manager wants to dial risk higher. Hostplus CEO David Elia said demographics are just one factor in investment decisions. He emphasized diversification across asset classes, geographies and industries, and making sure potential returns compensate for the risks.
Elia added that governments can help counter ageing pressures through immigration policies and technological advances, and that demographic shifts may create new opportunities. "I don't underestimate governments being incredibly creative in terms of dealing with these types of issues," he said. "You know, but they're going to have to address it, no doubt about that."
What this means for your portfolio
In plain English: fewer contributors and longer retirements mean bigger bills for pension systems. For many funds, outflows already exceed inflows, and investment returns carry more of the load.
That reality is reshaping portfolios, particularly in the U.S., where public pensions keep relatively small bond allocations and heavier exposure to equities and private markets. Watch how the largest funds manage liquidity, risk and the split between public and private assets. Those shifts influence demand for stocks, bonds and private credit, and ripple into the markets your portfolio depends on.
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