European Countries Lead Global Pension Rankings; AI Impacts the Rise

A recent global pensions report from the Mercer CFA Institute has revealed that European countries dominate the top spots in global pension system rankings. According to the analysis, the Netherlands secured the top position, followed by Iceland and Denmark, which considered over 50 indicators and assessed 47 retirement income systems, covering 64% of the world's population.

Key indicators included the level of private and public sector pension benefits, the sustainability of the system for the long term, and the quality of governance. European countries, including Finland, Norway, Sweden, the UK, Switzerland, Ireland, Belgium, Portugal, and Germany, received favourable grades, with room for minor improvements. In contrast, France, Spain, Italy, Poland, Austria, Croatia, and the US were identified as having major risks or shortcomings.

The report highlighted the global challenges faced by retirement income systems, citing factors such as persistent inflation, rising interest rates, geopolitical uncertainty, and the ageing population. The Organisation for Economic Co-operation and Development (OECD) recommended necessary reforms despite financial and economic uncertainty to safeguard the well-being of current and future pensioners.

The report also addressed the impact of artificial intelligence (AI) on pension systems, acknowledging its potential to improve performance by reducing costs, identifying risks, and enhancing decision-making processes. AI could be utilised for tasks such as building customised portfolios and detecting market anomalies. However, the report noted that AI might not accurately predict market movements, leading to continued uncertainty.

Additionally, the survey highlighted the risks associated with AI models generating fake information when used in new contexts and the potential for cyber-attacks targeting pension members' data. Despite challenges, the expansion of AI within investment managers' operations was seen as a potential avenue for more efficient and informed decision-making, resulting in higher real investment returns for pension plan members.

Disclaimer: This information is for general knowledge and informational purposes only and does not constitute financial, investment, or other professional advice.