Mature plans are buying private assets to cover the gap as the 2026 global pension index flags longevity risk
Mature pension funds paying out more in benefits than they collect in contributions are moving into private equity, infrastructure and private credit to cover the shortfall.
CNBC reported the shift last Friday, drawing on the 2026 Marsh CFA Institute Global Pension Index and interviews with pension researchers in Canada, the United States, and Australia.
“You can try to earn higher returns on your investments, but that’s going to require taking on greater levels of risk,” Sebastien Betermier, executive director at the International Centre for Pension Management, told CNBC.
Betermier said some funds have members who have been retired for close to half a century, aged 107 or 108, and that each additional year of longevity lands on the balance sheet.
“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, calling the cost imposed on the next generation a ticking time bomb.
Life expectancy at age 65 in more developed regions has risen 50.9 percent since 1950, to about 20 additional years, according to index figures carried by CNBC.
Of the 55 systems benchmarked, 43 have fertility rates below the replacement level of 2.1 children per woman and 23 sit below 1.5.
Fully funded schemes face the same squeeze as pay-as-you-go systems, the index stated: “Future benefit outflows will exceed the level of contributions or premiums ... this financial strain will inevitably grow in the future.”
About a third of Australian superannuation funds recorded negative natural cash flows from assets over a three-year period, the Australian Prudential Regulation Authority reported in its 2025 review of member outcomes.
Jean-Pierre Aubry, associate director of state and local research at the Center for Retirement Research at Boston College, told CNBC that US state and local government pension funds hold only about 20 percent of assets in bonds, with much of the remainder in equities and private assets.
Those allocations leave US public funds considerably more exposed to investment risk than counterparts in Europe and Canada, he said. “I think everybody is shifting a little more risk where they can. The costs are going up with this demographic shift,” Aubry said.
Canadian funds have been moving in the same direction, with one quarter of institutions planning to cut Canadian equity exposure in favour of alternatives over three years.
The two countries’ public plans sit on different footings.
The Old-Age and Survivors Insurance Trust Fund is projected to deplete its reserves in the fourth quarter of 2032, with 78 percent of benefits payable at that point, the Social Security Board of Trustees said in its 2026 annual report.
Combined OASI and Disability Insurance reserves fell by US$160bn in 2025 to US$2.56tn, and the trustees put the 75-year actuarial deficit at 4.42 percent of taxable payroll, up from 3.82 percent a year earlier.
The Office of the Chief Actuary’s 32nd actuarial report found the base Canada Pension Plan sustainable over 75 years at a minimum contribution rate of 9.19 percent from 2034, against a legislated 9.9 percent, as covered in the Chief Actuary’s finding that the plan can last 75 years unchanged.
The 33rd report, assessing the base rate cut under Bill C-30, projected annual contributions falling short of expenditures from 2027, four years sooner than the previous report, per the actuarial review of the contribution rate reduction.
Canada ranked 12th of 55 on the index’s sustainability sub-index with a score of 66.6; the United States ranked 23rd at 57.1.
David Elia, chief executive officer of Australian pension fund Hostplus, told CNBC demographic change was one of several factors shaping investment decisions, and stressed diversification across asset classes, geographies and industries alongside returns that adequately compensate for risk.
“I don’t underestimate governments being incredibly creative in terms of dealing with these types of issues,” Elia said. “You know, but they’re going to have to address it, no doubt about that.”
