Some pension funds now have members who have been collecting a retirement cheque for close to 50 years. Sebastien Betermier, executive director of the International Centre for Pension Management, says a few of those retirees are 107 or 108. Every extra year of life is a liability someone has to cover. The pension funds ageing crisis is, at bottom, a story about millions of people quietly succeeding at living longer than the sums assumed.

Speaking to CNBC, Betermier called the situation "a ticking time bomb" and pointed to the bill it leaves for younger generations. Pension specialists have been wary of loud phrases for decades, and with reason. Still, the numbers behind this one are hard to wave away, and the history of how pension promises were made helps explain why.

Most of the large retirement systems in rich countries were designed in the middle of the twentieth century, when life after work was short, families were larger and the working-age population was swelling. Those assumptions were reasonable at the time. They have not aged well.

What the index counted

The latest edition of the Global Pension Index, produced by Marsh and the CFA Institute and known as the MCGPI, was released last week. It covers 55 pension systems. In 43 of those countries, the average woman has fewer children than the 2.1 needed to hold a population steady without migration, and in 23 the average is below 1.5. Meanwhile, someone who turns 65 in the more developed regions can now expect roughly two more decades of life, a gain of 50.9% on the 1950 figure.

The arithmetic bends the wrong way from both ends. Fewer workers feed the system, and more years of benefits flow out of it. The report warned that the ratio of workers to retirees will keep falling, and it delivered a verdict that reads like a footnote: "Very few systems, as they currently operate, are secure."

It is worth being careful about what an index of this kind can and cannot say. It scores systems on adequacy, sustainability and integrity, and it relies on published rules and projections rather than on a live view of each fund's books. A low score signals structural vulnerability, not imminent failure. Reforms that raise retirement ages or contribution rates can shift a country's position quickly, as several European governments have shown over the past two decades, usually after considerable political pain.

Two kinds of promise, two kinds of trouble

Pension plans mostly come in two designs. Defined-benefit schemes promise a set income in retirement. Defined-contribution plans pay out whatever the member managed to accumulate, plus investment returns. Ageing hurts each differently. The first accumulates liabilities as retirees survive longer than expected. The second leaves individuals exposed to the risk of outliving their money, which leans harder on how well the underlying investments perform.

Pay-as-you-go systems, where today's workers largely pay for today's retirees, are the most exposed to a shrinking labour force. The United States offers a live example. In their latest report, the Social Security trustees project that the reserves of the fund that pays retirement and survivor benefits to tens of millions of Americans will be depleted by late 2032, six years from now. Even then, incoming payroll taxes would cover a majority of scheduled benefits, so the likely outcome is a cut rather than a halt, though a cut of that size would be felt keenly by the households that depend on those cheques.

Fully funded schemes, the ones that invest contributions to pay future benefits, aren't safe either. As their memberships mature, some will start paying out more than they take in. The MCGPI cautioned that benefit payments will increasingly exceed incoming contributions, and that the strain will grow. A fund in that position needs cash from its portfolio, on schedule, when the bills arrive, and returns alone won't supply it.

When payouts outrun inflows

In some places this is already happening. In Australia, according to a 2025 report from the Australian Prudential Regulation Authority, about a third of superannuation funds paid out more in benefits than they received in contributions over a three-year period. Such a fund can't simply invest new money and let compounding do the work. It has to sell assets, or earn enough income, to meet the monthly outflow.

That matters because of what funds have been buying. Illiquid holdings look attractive when a fund is a net recipient of cash and can afford to wait. They look different once it becomes a net payer and has to raise money in a bad quarter. A manager who must sell a stake in a private company or a loan book to cover pensions is selling into whatever market exists that week, which may bear little resemblance to the one on the spreadsheet.

I'd argue this is the least discussed part of the story. Headlines tend to fixate on the size of the shortfall. The order in which money comes and goes may prove the sharper risk. Economists call it sequencing risk when it afflicts an individual retiree who draws down savings during a market slump; the same logic applies, at vastly greater scale, to an institution whose members are all drawing down at once.

The reach for yield

The pressure to earn more has pushed some funds toward private equity, infrastructure and private credit, according to industry observers cited by CNBC. "You can try to earn higher returns on your investments," Betermier said, "but that's going to require taking on greater levels of risk." Jean-Pierre Aubry, who directs state and local research at Boston College's Center for Retirement Research, described a broad drift in the same direction, though he noted the extent varies a great deal from market to market.

The move comes just as parts of private credit, particularly lending concentrated in software companies, are drawing closer scrutiny, as CNBC reported. Funds are planning to hold more of an asset class whose quality is being questioned just when they most need it to perform. Nobody has shown that those loans are about to sour. But rising allocations alongside rising doubt is the kind of arrangement that looks sensible in a committee room and uncomfortable in hindsight.

There is a fair counterargument. Pension funds are long-term investors, often with horizons of decades, and illiquid assets have historically paid a premium for patience. Diversifying away from public markets isn't reckless in itself. The open question is whether funds with maturing memberships still have the patience to collect that premium.

Who pays

The choices ahead are limited and unpopular. Governments and plan sponsors can raise contributions, trim benefits, lift retirement ages, or ask investments to work harder. Each shifts cost onto someone: current workers, current retirees, future taxpayers, or the savers whose balances ride on the returns. Aubry's reading was blunt enough: as demographic change makes retirement income more expensive to provide, every party in the system is trying to push a bit more of the uncertainty onto someone else.

The cash-flow data deserves attention before the headline funding ratios do. Regulators like APRA now publish it, and it shows which funds are living on their income and which are living on their assets. Private credit is the second thing to watch. If the strain there deepens just as mature funds lean on it, the demographic bill will arrive through a door few planned for.