How Could Pension System Design Features Help Lower Public Pension Spending?

In both developed and emerging economies, public pensions are typically the most significant items of social expenditure. Increasingly challenging demographic and economic environments have fuelled pressure for governments to spend more on pensions.

How can governments respond to these challenges? Recent experience and practice suggest that carefully designed reforms to pension systems can go a long way toward mitigating the impact of ageing populations on pension system sustainability.

In this study, we investigate how pension system design features could help diminish the impact of population ageing on public pension spending, considering country-specific retirement system objectives and constraints. We use a dataset produced by the annual Mercer CFA Institute Global Pension Index (the MCGPI dataset) under a partnership among Mercer, CFA Institute, and Monash University.

Our analysis of data covering 43 pension jurisdictions globally yields several key findings with significant implications for policymakers on how to mitigate the effects of ageing populations and other emerging pressures on public pension expenditures.