Which country in Europe has the best pension system and what does AI have to do with it?

advertisement

According to a recent report, the Netherlands ranks among the top when comparing pension systems around the world. Global Pensions Report by Mercer CFA Institute.

The ranking considered more than 50 metrics and compared 47 retirement income plans covering 64% of the world’s population.

The most relevant measurements were the level of private and public sector pension benefits available, the sustainability of the system for decades into the future, and the quality of its governance.

In the 2023 index, Iceland was stripped of last year’s top spot and took second place, followed by Denmark in third place.

The majority of European countries included in the report performed well. Finland, Norway, Sweden, the UK, Switzerland, Ireland, Belgium, Portugal and Germany require only slight improvements, the report said.

Meanwhile, France, Spain, Italy, Poland, Austria and Croatia, along with the United States, have significant risks and shortcomings to address, the report said.

At the bottom of the ranking were India, the Philippines, and Argentina. This ranking, along with Turkey and Thailand, is the worst, indicating that, if no improvements are made, there are serious doubts about the effectiveness and sustainability of these countries’ pension systems.

Risk within the system

The report states that “retirement income systems around the world are under unprecedented pressure” due to ongoing inflation, rising interest rates, and geopolitical uncertainty that will inevitably impact investment returns. I admit that.

“The average age of the population continues to rise in many markets around the world, primarily in more mature markets,” said Margaret Franklin, president and CEO of CFA Institute.

“Rising inflation and interest rates are creating new market dynamics that pose significant challenges to pension systems. We are also seeing continued rifts related to globalization,” she added. . “These are just some of the increasingly complex challenges facing pension funds and having a significant impact on retirees.”

The report quotes: OECD’s latest pension outlook This requires policy-making around the world to carry out the necessary reforms despite the current fiscal and economic uncertainties to avoid jeopardizing the well-being of current and future pensioners. It is recommended to those who

The report also recommends strengthening asset-backed pensions (rather than pay-as-you-go schemes), which could help diversify retirement funding sources and make pension systems more resilient.

The impact of artificial intelligence on pension systems

Artificial intelligence should improve pension performance by reducing costs and highlighting upcoming risks, the report said.

Other uses for AI could include building customized portfolios and identifying market anomalies, but it is unlikely that AI will be able to accurately predict market movements, so uncertainty will remain, the report said. The book says:

“The continued expansion of AI in investment manager operations and decision-making has the potential to lead to more efficient and better-informed decision-making processes that increase real investment returns to pension plan members. ” said senior partner David Knox. Mercer, according to a Reuters article.

The annual review also flagged the risk of AI models generating false information if used in new situations, as well as the risk of cyber-attacks on pension member data.