Although the financial aspects of aging and longevity have been debated for decades, the global financial crisis significantly altered the discussion. Policymakers, plan providers and retirees alike face new challenges in the post-crisis world.
Retirement professionals should look to other industries, such as banking or securities' processing, for ideas on how to improve efficiency and effectiveness, the report stated.
Complex retirement systems should also be simplified for plan participants, according to the report. Systems that are overly complicated “limit system confidence, engagement and willingness to contribute voluntarily or exercise choices,” the report said.
Simplification is especially crucial for defined contribution plans where participants are required to select investment options, said Mr. McKenzie.
In the future, benefit expectations will need to be rebalanced as well. Global retirement systems are strained by “increasing longevity and expectations of generous retirement benefits vs. dwindling financial resources to safely meet those expectations” according the report. In an effort to meet future liabilities, countries have opted to raise the retirement age. However, Mr. McKenzie did note that raising the retirement age can be a “challenging” policy to sell.
Other steps to achieving retirement system reform include acceptance of a new level of regulation, supervision, governance and transparency; encouraging local financial markets to evolve “concurrently” with growth in pension assets; recalibrating investment functions and investment management; and becoming customer-centric, according to the report.