This week Mercer launched the 2022 edition of the Mercer-CFA Global Pensions Index (MCGPI) with a series of events worldwide, with an impressive lineup including Martine Ferland and David Knox from Mercer, Mathias Cormann from the OECD, and Gustavo Demarco from the World Bank (replay video here). Nuovalo´s Chief of Global Strategy and Operations, Manuel Garcia-Huitron, is a member of the international academic council of the MCGPI project, set up by the Monash Centre for Financial Studies. The report, now in its 14th year, is a tour de force for anyone wanting to learn more about pension systems around the world.
This year´s report features a special chapter titled “Converting defined contribution benefits into better outcomes for retirees.” The chapter offers a dive into the global decumulation challenge in pension systems. It highlights five desirable features of a decumulation solution: stability, sustainability, flexibility, bequest, and transparency. No single product, by itself, is able to fully deliver each of these elements and attempts to do so come at the risk of high cost and high complexity.
Enter one of the most well-known principles in the financial economists´ toolbox: use optimized instruments for each objective and then find the best allocation to these instruments for each investor. In other words, a portfolio of products tailored to each retiree’s needs. Fortunately, a powerful new tool is now becoming available for use in the portfolio toolbox: Longevity risk sharing, which helps address retiree goals in a new and very cost-efficient way.
The special chapter is also timely, as the need for innovations in the decumulation space is urgent in the face of increasing longevity and a complex economic scenario for traditional decumulation products. Nuovalo believes that the power of longevity risk sharing is a vitally important consideration for retirees and their financial advisors, and we are leading the global development of a new generation of longevity risk-sharing solutions. Learn more by contacting us.