Addressing the problem of aging populations around the world, CFA Institute has partnered with Mercer to produce a report and infographic identifying 10 key principles of an ideal retirement system.
The study considers, through a set of 10 principles, what the investment management profession can do for clients to deliver adequate benefits that can be sustained and trusted by the community. They are:
- Clear objectives for the whole retirement system, including the complementary roles of each pillar of income or financial support.
- A minimum level of funding should be made into a pension system for all workers with contributions by employers, employees and the self-employed.
- Cost-effective and attractive default arrangements before and after retirement.
- Administration and investment costs should be disclosed with some competition present to encourage fair pricing.
- Flexibility as individuals’ personal and financial circumstances vary, and retirement will occur at different ages and in different ways across the population.
- Benefits provided during retirement should have an income focus, but permit some capital payments, without adversely affecting overall adequacy.
- Contributions (or accrued benefits) at the required minimum level must have immediate vesting. These benefits should be accessible only under certain conditions, such as retirement, death, or permanent disability.
- Taxation support from the government in an equitable and sustainable way, providing incentives for voluntary savings and compensating individuals for the lack of access to their pension savings.
- The governance of pension plans should be independent from the government and any employer control.
- Appropriate regulation, including prudential regulation of pension plans and some protection for pension scheme members.
Read: Canada’s retirement income system ranks high
“Retirement is an issue that is too big not to address,” says Paul Smith, president and CEO of the CFA Institute. “In this year’s annual CFA Institute Global Market Sentiment Survey, nearly 35% of responding members showed concern about retirement issues, such as the impact of aging populations, pension plan shortfalls and low levels of retirement savings.
A version of this story originally appeared on our sister site, Advisor.ca.
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