CFA Institute Report Addresses Investment Professionals Growing Concern for Global Retirement Security

New York - 8 July 2015

Report outlines ten principles for an ideal retirement system

In an era of an aging population and increased attention on retirement systems around the world, CFA Institute, the global association of investment management professionals, has released An Ideal Retirement System, a report prepared by Mercer for CFA Institute. 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. The 10 principles are designed to be a foundation for dialogue and debate among the investment profession to consider and assess what changes are needed in pension and retirement systems.

“Retirement is an issue that is too big not to address,” said Paul Smith, CFA, president and CEO, CFA Institute. “In this year’s annual CFA Institute Global Market Sentiment Survey, nearly 35 percent of responding members showed concern about retirement issues, such as the impact of aging populations, pension plan shortfalls and low levels of retirement savings. Our members have spoken, we have listened, and we look forward to an industry-wide debate that brings us closer to solutions for the benefit of society.”

An Ideal Retirement System outlines the following 10 principles:

  1. Clear objectives for the whole retirement system, including the complementary roles of each pillar of income or financial support.
  2. A minimum level of funding should be made into a pension system for all workers with contributions by employers, employees and the self-employed.
  3. Cost-effective and attractive default arrangements before and after retirement.
  4. Administration and investment costs should be disclosed with some competition present to encourage fair pricing.
  5. Flexibility as individuals’ personal and financial circumstances vary, and retirement will occur at different ages and in different ways across the population.
  6. Benefits provided during retirement should have an income focus but permit some capital payments, without adversely affecting overall adequacy.
  7. 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.
  8. 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.
  9. The governance of pension plans should be independent from the government and any employer control.
  10. Appropriate regulation, including prudential regulation of pension plans and some protection for pension scheme members.

In addition to An Ideal Retirement System, CFA Institute offers a number of other tools to equip investors and members with information to make informed decisions about the retirement system. They include:

Essentials of a More Secure Retirement: Tools, planning insights, and suggestions to help individual investors save for retirement, and to help investment managers in advising clients how to invest wisely and retire securely.

Financial Analysts Journal 70th Anniversary Issue: This issue on retirement includes 10 of the most influential articles on the subject and offers a retirement template for the future.

Pension Trustee Code of Conduct: An ethical framework to guide board members to serve the best interests of pension participants and beneficiaries.

A Primer for Investment Trustees: An online course introducing basic investment principles for responsible trusteeship.

An Ideal Retirement System is a result of the organization’s Future of Finance initiative, a global effort to shape a trustworthy, forward-thinking financial industry that better serves society. 

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