Navigating Challenges in Public Pension Management

Interesting comment from the former pensions minister about quality of data and pensions dashboards. I spend about half of my week thinking about pensions dashboards, and honestly data quality is the least of my concerns right now. What would be higher on my own list? - Huge practical challenges about how to actually comply with regulations, because DB pension schemes are complex with many moving parts, sometimes across multiple providers, while regulations assume they are simple and can be neatly summarised in a couple of figures - Lack of final standards, which mean that pension schemes and providers are still in the dark on crucial aspects of what they need to do and how they need to do it. Even data standards that tell schemes what they need to send to dashboards are still changing - Tens (maybe hundreds) of millions of pounds being spent by schemes preparing calculations that have never been needed before, don't actually help members, and serve no purpose other than to meet a legislative requirement - The idea that on a given day, perhaps in 2026, 40m individuals will be given access to dashboards on the same day, leading to a massive spike in demand which will cause huge problems and lead to the most newsworthy story on dashboards being about how they cannot cope with initial demand - Concern about members misunderstanding what they see, leading to bad decisions and complaints. Also concerns about potential for cyber incidents and “scam” dashboards, as well as genuine dashboards pushing paid-for services to unsuspecting members in order to recoup their investment There is a longer list, but I’ll stick with that for now. Don’t get me wrong – despite my gripe list I’m 100% supportive of pensions dashboards. It’s absolutely the right policy, and is essential to bring pensions into the digital age. And data quality is essential for them to succeed. But the implication that data is the main challenge facing the project is overly simplistic. I expect the former minister recognises this, and the comments in the article are no doubt just a small part of what was discussed in a longer interview. But greater recognition of the wider issues, and the unresolved challenges caused by the regulatory environment itself, would be refreshing. https://lnkd.in/e6qGZrDE

Last week, I was honored to take some new pension scheme Trustees through the Funding & Investments module at the TDPK (Trustees Development Program of Kenya). We had an interesting conversation around the evolution of the Funding space in our Kenyan Retirement sector. While citing the 3 key sources of funding as Employer (Sponsor), Employee (Member) and Investment Income, there was a coinciding nod that each of these sources is currently undergoing its own challenges in this fiscal dispensation. EMPLOYERS are no longer focused on the 'Adequacy' of the funding framework. The focus has since shifted to costs, affordability & sustainability. MEMBERS are confused between what is a "deduction" and what is a "contribution" in their pay slips. CONTRIBUTIONS are not seen as achievements. Caught up in the myriads of challenges, we continue seeing undue pressure on the fund managers as the focus shifts to INVESTMENT INCOME. This is the last straw to clutch on as Retirement journeys drown in low Income Replacement Ratios. The big question, (which I now bring to the wider public) is whether we are to disrupt our present-day fund management approaches. As a market, are we ready to review the entrenched single-mandate investment management frameworks? A few pension funds have taken the progressive step of onboarding shared-mandate investment management frameworks, but aren't they simply replicating the same portfolio distribution across the number of fund managers? Is it time we started considering an Asset-specific fund management model? Guided by the provisions of the scheme's Prudent Investment Policy (PIP) or (IPS), will this help the Trustees to onboard several fund managers? Not to replicate the same portfolio structure across them, but to carefully analyze their strengths and then appoint each of them to manage only what they are extremely good at. The one who is good at Fixed Income investments will be given the Fixed Income book to handle. The one who demonstrates outstanding capabilities in managing Equities will be given the Equity book to handle. The one who has demonstrated a good track record with Offshore investments will be given the Offshore assets to manage..........and so on. With this, I see THREE key positive outcomes as our market matures: 1. A rise in specialization with more Asset-Specific Fund Managers 2. An entrenchment of "Investment Advisory" as a key function across schemes (Currently, this is sadly being consumed as a fast-food. They come in, do the PIP document, and exit. They resurface again after 3 years when the current PIP has exhausted its shelf-life. During that period, there is no solid capacity to help monitor the soundness of the Manager's decisions) 3. Better Fund Management Evaluation Tools with heightened appreciation of local industry surveys. The 'jacks of all' but 'masters of none' will soon be weeded out. The era of 'passive' Fund Management will soon end. What do you think?

I am excited to share the second article in my series on pension reforms, titled "Deferred Dreams: Navigating Pakistan's Public Sector Pension Crisis" for Consortium for Development Policy Research. This piece goes a step deeper into Pakistan's escalating pension crisis and explores valuable lessons from global pension reform experiences that can benefit us. Pension reforms are complex and fraught with challenges everywhere, but more so in a context like ours, characterised by polarised politics and fiscal instability. However, as history has shown, transformative reforms are possible. By learning from countries that have successfully transitioned from unsustainable pay-as-you-go systems to financially stable contributory schemes, we can find a way forward. In this article, I examine the pioneering model of Chile, which was way ahead of its times and drastically transformed its pension landscape under the guidance of José Piñera in 1981. The article also looks into India's phased approach to pension reform and its establishment of a robust regulatory framework with the Pension Fund Regulatory and Development Authority (PFRDA). Key takeaways from these global examples include the importance of: - Shouldn’t be too hardwired or prescriptive: Implementing a flexible and evolving pension system - Blessing in disguise: Utilising periods of economic or fiscal crisis to drive reforms - Build trust: Establishing strong regulatory frameworks to protect pensioners' savings - Transparency is the key: Building consensus and trust through transparency and stakeholder engagement - Go for a multi-pillar structure: Combining public pension contributions, voluntary private savings, and occupational pensions to distribute financial risks Drawing on these lessons, I propose broad contours for overhauling Pakistan’s pension framework, ensuring it meets the needs of our rapidly growing public sector workforce. Stay tuned for the final piece in this series, where I will outline a new pension system structure tailored for Pakistan. Read the full article here: https://lnkd.in/gRxm3adG #PensionReform #PublicSector #FiscalSustainability #Pakistan #GlobalInsights #PolicyReform #EconomicGrowth -- Hasaan Khawar email: hasaankhawar@gmail.com | tel: +92 300 402 9997  Skype: hasaan.khawar | Twitter: @hasaankhawar

(07/07/2025) Insightful presentation by OECD Business and Finance's Pablo Antolin Nicolas and Jessica Mosher on “Addressing the Challenges for Asset-Backed Pensions in Indonesia.” Indonesia has made significant progress in expanding pension coverage since the introduction of mandatory asset-backed schemes (JHT and JP) for formal private-sector workers. ✅ However, the OECD - OCDE report highlights key remaining challenges: 🔹 Many informal workers remain uncovered, with limited opportunities to save for retirement. 🔹 Pension fund investments remain overly conservative, with more than half of assets allocated to government bonds and only ~15–18% to equities and other long-term growth instruments. 🔹 Early withdrawals are widespread – in 2022, over 75% of contributions were withdrawn before retirement, undermining pension adequacy. ✅ OECD’s key recommendations include: 🔹 Harmonise rules and strengthen contribution incentives – align benefit accrual formulas, contribution caps, and retirement ages to encourage higher and longer-term savings. 🔹 Expand lifetime income options – promote annuity products or non-guaranteed income options, and consider public provision to protect against longevity risk. 🔹 Diversify investments and improve transparency – ease minimum government bond requirements, adopt lifecycle investment strategies, and enhance reporting of fund performance benchmarks. 🔹 Limit early withdrawals to exceptional cases such as death, disability, or involuntary unemployment to protect long-term retirement security. 🔹 Strengthen DB funding and DC governance to ensure sustainable benefits and robust risk management. Feel free to download the full OECD report here: https://lnkd.in/gwgxmCgm

Under difficult circumstances what steps taken by the Management to stream line the issues? When management faces difficult circumstances, they must adopt a structured approach to streamline issues effectively. Here are some steps they can take: 1. Assess the Situation Root Cause Analysis: Identify the underlying problems causing the difficulties. Data-Driven Insights: Use key performance indicators (KPIs) and data analytics to pinpoint inefficiencies or gaps. 2. Prioritize Issues Categorize problems based on urgency and impact. Focus on "high-impact, low-effort" areas to generate quick wins. 3. Transparent Communication Share the situation and proposed steps with stakeholders, ensuring everyone understands the challenges and the path forward. Foster an open environment for feedback and ideas. 4. Engage the Workforce Involve employees in brainstorming and decision-making to foster ownership of solutions. Offer support, training, or re-skilling to help them adapt to changes. 5. Develop a Clear Action Plan Define clear goals, responsibilities, and timelines. Break down the plan into short-term milestones for ease of execution and monitoring. 6. Implement Automation and Technology Use tools like Robotic Process Automation (RPA) to streamline repetitive processes and reduce manual errors. Invest in technology that enhances productivity and provides scalable solutions. 7. Monitor and Adapt Continuously track progress using metrics and dashboards. Be flexible and ready to adapt strategies as new information or challenges arise. 8. Cost Optimization Cut non-essential expenses while ensuring critical operations remain unaffected. Negotiate with vendors or partners for better terms. 9. Strengthen Relationships Reassure customers, clients, and partners by showing commitment to overcoming challenges. Seek external advice or collaboration if necessary. 10. Celebrate Progress Acknowledge achievements, no matter how small, to maintain morale and motivation during tough times. By combining strategic foresight with a hands-on, flexible approach, management can navigate challenges and streamline operations effectively.

Continuing this short series on Europe’s pension challenge, each country brings a different perspective. In France, we often approach pensions as a binary debate : pay-as-you-go versus capitalization (or solidarity mechanism versus markets). This is the wrong lens. All international evidence points in the same direction: the most resilient systems are hybrid. And yet, France still relies on pay-as-you-go for more than 95% of retirement income. At the same time, the demographic equation is deteriorating rapidly: the ratio of contributors to retirees is expected to fall to 1.4 by 2070. So the question is no longer if we need capitalisation. It is how we build it. Transition must be gradual, inclusive, and collective. We already have strong foundations: - nearly €230bn in employee savings and retirement assets - millions of savers engaged through company schemes - proven mechanisms combining performance and long-term discipline The next step is acceleration, in a context where (i) resources are scarce (ii) the State can’t afford to spend more money. Still, public authorities will need to calibrate the proper transitioning to ensure the weight of the system rebalancing is not disproportionally beard by some generations (loss of pension rights, additional contributions from individuals and/or employers, employer top-up…) To make it right, we need to scale both collective savings - through employers - and individual savings, with the right incentives and clarity. A first simple measure is to partially redirect allocated annual money from medium term collective savings (PEE) to Retirement (PER). As insurers and asset managers, we carry a responsibility: to make these solutions accessible, understandable and efficient over decades. Because the objective is simple: preserve our social model by modernising it. Virginie Korniloff, Virginie Delaunay, Emmanuel Gendreau Nicolas Deschamps (He/Him)

Labour conference this week highlighted three approaching policy challenges for the DC pension sector:   -Investment Ministers really want more pension capital allocated to the UK. Ideally, that would happen without things getting nasty, with the sector offered some carrots to reward compliance. But Emma Reynolds is clear – she used to term twice, to make sure everyone heard – Government could use “a stick” instead. Others in government say they’re not rushing towards mandatory investment rules, but nor are they ruling it out. To some in pensions, this is troubling. Fiduciary duty, they argue, prevents favouring any particular asset for anything other than financial reasons. It’s not as if managers have reduced UK equity allocations because they hate Britain; it’s just about returns. But that’s a complicated, long-term argument, pitted against the simpler, more immediate political imperative to get more capital flowing into UK plc. -Decumulation It was striking to hear the Minister describe decumulation as “a minefield” that leaves DC retirees alone to make very difficult decisions. Also striking still was hearing Emily Shepperd of the FCA say the regulator “desperately” needs to end the advice-guidance debate and push providers to offer  decumulation products.  (Shepperd:  “This is one area where we want to lean in more. A lot of the pension companies don’t do decumulation....That is something we desperately need to clear up.”) Reynolds favours more default decumulation products, maintaining the direction of travel for policy established by the last government. But this week’s focus from policymakers points to the inevitable rise of decumulation up the agenda as more and more DC-only members of Generation X start nearing retirement. So far, decumulation has been something of a fringe issue but the weight of numbers of people directly affected will mean it rolls slowly towards centre-stage.    -Innovation and low-income households I’m willing to bet that the Budget sees moves to rebalance savings policy away from wealthier people to those with little or nothing saved. In Liverpool I lost count of the Labour people who repeated the factoid that a quarter of households have less than £100 saved. Labour wants to change that. This is clearly an issue for the savings industry: Cash ISAs will surely be trimmed, perhaps in favour of equity savings products. But it could open up possibilities for pensions too. Reynolds is interested in “new products” that combine savings and pensions, and not just sidecars. What about an account that starts out offering conventional savings then, in her words, “tips over” into a pension at a certain point?   In other words, the lines between “pensions” and “savings” are likely to blur further in future. All three of these areas offer opportunities as well as challenges to the industry. But navigating this terrain will require great care and agility. Are you ready?        

🚨 Lessons from AIMCo: The High Cost of Risky Bets in Pension Fund Management 🚨 AIMCo’s recent journey has highlighted key lessons for anyone involved in institutional investment, especially in public pension fund management. After a $2.1 billion loss from a high-risk volatility trading strategy (VOLTS) in 2020 and underperformance during rising interest rates in 2022, AIMCo’s story underscores a critical principle: stability and long-term security should always outweigh short-term gains in public funds. 📉 What Went Wrong? VOLTS Strategy: AIMCo’s bet on market stability backfired in 2020, resulting in significant losses during COVID’s market turmoil. Interest Rate Exposure: In 2022, AIMCo’s large fixed-income holdings were hit hard by rapidly rising rates, challenging its overall returns. Illiquid Assets: Private investments like real estate offer long-term value but are risky during economic instability. Future write-downs could add to AIMCo's challenges. 🔍 Takeaway: These setbacks reveal the importance of aligning strategies with the long-term goals of pension funds, where stability is paramount. 🤖 A New Frontier with AI: Looking ahead, integrating AI and machine learning into fund management could help avoid similar pitfalls. By leveraging machine-driven insights, pension funds can better anticipate market shifts, optimize asset allocation, and reinforce a systematic, disciplined approach to managing public assets. 💼 Pension funds can embrace technology not only to enhance returns but to uphold their fundamental mission—delivering stable, long-term growth for all stakeholders. #PensionFunds #InvestmentManagement #RiskManagement #AIinFinance #AIMCo #InstitutionalInvestment #Finance #Alberta