Pension funds around the world are being squeezed from two sides at once: people are living longer, and fewer children are being born. One pension executive calls the result a “ticking time bomb”.

The warning, reported by CNBC, landed alongside fresh data on the state of global retirement systems, which confirm that the future of this category of funds is increasingly at risk. Both factors put pressure on the money set aside for pensions and raise a hard question about whether funds can keep paying future generations.

Demographics turn against pension funds

The CNBC article that carried the warning noted that pension systems generally fall into two categories: defined benefit plans, which guarantee retirees a preset income, and defined contribution plans, whose payouts depend on accumulated savings and investment returns.

Sebastien Betermier, executive director at the International Centre for Pension Management, told CNBC the problem “is enormous, and it is becoming more pronounced over time.” Some funds, he said, still have members who retired nearly 50 years ago and are now 107 or 108 years old.

The problem is above all a financial one. A fund paying an annuity for far longer than it projected must hold enough resources to sustain those payments.

“The higher the longevity, the longer pension funds have to guarantee benefits and, as a result, liabilities increase immediately,” Betermier said.

He added: “Think about the costs this imposes on the next generation: it’s a ticking time bomb.”

The numbers behind the warning

The 2026 Marsh CFA Institute Global Pension Index (MCGPI), published on October 20, 2026 by Marsh and CFA Institute with the Monash Centre for Financial Studies, backs him up.

Of the 55 pension systems covered by the index, 43 have fertility rates below the generational replacement threshold of 2.1 children per woman, and in 23 cases the rate is below 1.5.

In the most advanced economies, life expectancy at age 65 has risen 50.9% since 1950, to roughly another 20 years of life.

Benefits must therefore be paid out for considerably longer periods, even as the number of workers supporting the elderly population is set to fall sharply.

What a pension fund is, and why the worker-to-retiree ratio matters

A pension fund is a supplementary retirement savings vehicle: a way to build up savings during a working life to top up the state pension.

A worker pays contributions into the fund at regular intervals, possibly alongside employer contributions. The money is invested and, at retirement, funds a supplementary pension in the form of a periodic annuity and, within set limits, a lump sum.

The MCGPI report put the arithmetic plainly: “ funding future pensions and elderly care becomes increasingly critical as the ratio of workers to retirees declines.”

Funds short of cash are reaching for riskier assets

The report did not soften its verdict: “In their current configuration, very few systems can be considered secure .”

As members retire and start drawing benefits, some funds pay out more than they take in from new contributions. That leaves them running into liquidity problems that could force a rethink of their investment strategies. The rethink, it appears, is already under way.

Market observers have noted that pressure on funds is now severe enough that some, to lock in their liquidity levels and meet growing member demands, are moving into more complex and riskier investments.

Jean-Pierre Aubry, associate director of state and local research at the Center for Retirement Research at Boston College, said funds are betting more heavily on riskier assets.

The MCGPI report pointed the same way: “in the future, benefit outflows will exceed the level of contributions or premiums.. and this financial pressure is bound to increase.”

US public funds hold just 20% in bonds

“Everyone is dialing up risk a little, wherever they can,” Aubry said, because “costs are rising, because of this demographic change.” Funds, as a result, have to find a way to finance the payouts owed to their members.

The danger in chasing high returns is that funds end up holding assets that could, in the event of sharp market corrections, produce losses rather than returns.

Aubry pointed to US state and local government pension funds, which hold only about 20% of their assets in bonds. The rest sits largely in equities and unlisted assets.

That leaves US public pension funds far more exposed to market risk than their European and Canadian counterparts.

Not every manager accepts that an aging population justifies taking on greater risk.

David Elias, chief executive of the Australian pension fund Hostplus, also spoke to CNBC. He argued that demographic change is only one of many factors shaping investment decisions.

Elias stressed the importance of keeping a portfolio diversified across different asset classes, geographies and industry sectors, and of making sure potential returns adequately compensate for the risks taken.

Older funds now lean on returns and accumulated assets

Elias also expressed confidence in governments: “I don’t underestimate governments’ ability to find extremely creative solutions to problems of this kind,” he said, adding that “it is nonetheless clear that they (governments) will have to step in to address them.”

Many long-established funds are already paying out more in benefits than they receive in contributions. They are increasingly forced to rely on investment returns and on accumulated assets.

The strain is sharpest in pay-as-you-go pension systems, where contributions from today’s workers largely finance benefits for today’s retirees. Those systems are particularly vulnerable to a shrinking workforce.

The strains are already visible in the United States. The Old-Age and Survivors Insurance Trust Fund, which funds retirement and survivor benefits for tens of millions of Americans, is projected to exhaust its reserves in the fourth quarter of 2032, according to the latest report from its trustees.

Fully funded pension systems, in which worker and employer contributions are invested to finance future retirement benefits, are not immune either.

In Australia, about one third of supplementary pension funds (superannuation funds) recorded negative net cash flows from activities over a three-year period, according to a 2025 report by the Australian Prudential Regulation Authority. Benefits paid out exceeded contributions taken in.

But what could change for someone with a pension fund in Italy? The demographic crisis does not automatically mean cuts to benefits across all supplementary pension funds.

But for anyone enrolled in a defined contribution plan, the accumulated capital and the future annuity also depend on investment returns. If the fund invests in risky assets and books losses, the supplementary pension could turn out to be lower.

Anyone deciding to channel their TFR (severance pay) into a pension fund — in Italy, employees can choose to have this accrued end-of-service payout paid into a supplementary pension fund instead of leaving it with the employer — should weigh the alternatives and their respective revaluation rules.

The risk does not come only from riskier investments. Even a diversified fund can lose money. Outcomes also depend on the chosen investment line and the time horizon.

Editor’s note

This article was originally published in Italian on money.it by Laura Naka Antonelli on October 26, 2026 as «Fondi pensione, “una bomba a orologeria” in tutto il mondo a causa della crisi demografica». It has been translated and adapted for an international audience by the Money.it International desk.