The CFA Institute and Mercer, in collaboration with the Monash Centre for Financial Studies at Monash University, have published the 15th annual Mercer CFA Institute Global Pension Index (MCGPI). In the index, a study of 47 different retirement income systems from around the world, Canada ranked 12th in 2023, up from 13th place a year ago.

Mercer says the index covers 64 per cent of the world’s population. The Netherlands’ retirement income system ranked number one overall, followed by Iceland and Denmark in second and third place, respectively. Netherlands’ index rating was 85.0, Iceland’s index rating was 83.5 and Denmark’s was 81.3.

In Canada, the index rating came in at 70.2, helping the country to maintain its B rating in the annual study.

“In addition to identifying the world’s top pension systems, the report examines the potential of artificial intelligence (AI) to improve pension and social security systems and provide people a better quality of life in retirement,” the report’s authors state.

Mercer senior partner, David Knox also says AI could lead to more efficient and better-informed decision-making, potentially leading to higher real investment returns. “AI also has the potential to improve member engagement and help individuals make long-term decisions about their financial decisions. Both advances should improve retirement outcomes.” 

Risks, including modelling challenges, ethical concerns and the need for data privacy and cybersecurity are also discussed. “In developing these systems, it is essential that AI models have strong governance and clear accountability to reduce biases and unjustified responses. Safeguards are critical for pension plans to retain their members’ long-term trust,” Knox continues. “AI by itself is not the complete answer. There will always be a need for human oversight.” 

Suggestions for strengthening Canada’s retirement system include increasing coverage of pension schemes, the continued development of accessible and low-fee products for those without pension access, increasing the level of household savings and reducing household debt, all of which the CFA says require robust policy solutions.

“The prevalence of AI is likely to increase significantly over the next decade, impacting every aspect of our pension and social security systems. In the investment industry we’re already seeing AI being used for portfolio and risk management, trading, automated advice and client onboarding, for example,” writes the CFA Institute. 

“CFA Institute recently surveyed its members and found that AI and big data are helping firms by enabling staff to be more productive, providing greater insight that helps lead to better products and services facilitating better decision-making through enhanced modelling. In the report we look at AI’s impact on pension plan operations, member engagement and retirement planning and examine the challenges and risks.”