How AI is driving the modernization of retirement and pension systems

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David Knox

Lin Shi

Marsh McLennan

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Protecting benefits: AI can recommend a minimum eligibility age to help reduce benefit leakage.
Retaining vested pensions vs. transferring pensions: AI can help simulate various scenarios for both retaining and transferring your pension benefits.
Developing retirement benefits: AI can create the optimal combination of lump-sum payments and annuity payouts.
Division: AI can propose fair asset distribution plans during divorce proceedings.
Continuous accumulation: AI can assess the impact of benefit accruals when employees are unable to work.

2. Sustainability

Population and economic changes could impact the long-term viability of pension and social security systems. Some individuals may deplete their retirement savings nearly 20 years ahead of schedule—unless they either extend their working years or secure additional support from the retirement income system. Meanwhile, factors like inflation and government debt further contribute to an uncertain future.

AI could drive more forward-thinking decision-making to create more sustainable pension and social security systems. It may also boost productivity among people of all age groups, helping more individuals enter the workforce.

3. Integrity

Fully implementing a retirement income plan means ensuring members receive adequate value at a reasonable cost, while also maintaining complete transparency. AI can enhance the integrity of the plan by strengthening cost control, improving outcomes, and boosting communication with members. Additionally, AI can streamline administrative tasks, making plan management more affordable. And with generative AI, personalized member interactions become possible—further enhancing value and deepening understanding.

Ethics and integrity are inseparable, yet the potential applications of AI in pensions and social security raise several ethics-related challenges. For instance, should AI be given the authority to restrict retirement plans for certain members? And what kind of governance and human oversight will be needed to ensure fairness, transparency, and accountability in these systems?

The Potential Role of AI-Driven Investing

Investment returns are a key source of retirement income. These returns depend on a variety of factors, including investment strategies, economic conditions, and government regulations.

Many investment professionals are exploring the future potential of AI. Mercer's research shows that 91% of investment managers are either already using AI—specifically, 54%—or plan to adopt it in the near term—37%—for developing investment strategies or conducting asset-class research. Investors are already leveraging AI to analyze data, assess risks and identify trends, enabling them to spot patterns and market signals, monitor risks, and anticipate market behavior.

The development of AI has also introduced new investment challenges. Low-quality data, fabricated content, and malicious actors can all lead to AI spreading misinformation and false information—this is identified as the number one risk in the World Economic Forum’s Global Risks Report. Cyber risks represent another major concern. As AI becomes more widespread, it’s crucial to remain vigilant through robust governance and data security measures.

Financial Health in the Workplace

People face complex financial decisions when it comes to retirement. It starts even in the workplace: choosing which retirement plans or programs to participate in, deciding how much to save or contribute, and ultimately defining their retirement goals.

Most employees don’t want to make these important long-term decisions on their own. Today, globally, only 45% of workers feel their future savings are sufficient, while two-thirds believe their employers will help them plan for retirement effectively.

Employers can leverage AI to provide employees with more data-driven training and cost-effective benefits programs, ensuring financial stability. AI can help analyze individual circumstances, guide people through the benefits ecosystem, and even draft personalized benefit notifications to keep employees informed. Given that access to trusted financial advice can be expensive, AI also opens up greater opportunities—and delivers better guidance—for underserved groups who might otherwise have to make decisions on their own.

Ensuring a brighter future through AI

AI could support modern retirement income systems, forward-looking investment decisions, and even enhance employee benefits that contribute to long-term financial well-being. However, given the challenges outlined above, placing too much trust in AI—especially too soon—still carries significant risks. After all, any system or effort impacting health, wealth, and careers requires the application of human expertise, robust data security measures, and the development of comprehensive governance frameworks.

AI is advancing every day. The road ahead is long, but one thing is certain: today’s financial and welfare leaders exploring AI will undoubtedly reap the rewards in the future.

The above content solely represents the author's personal views.This article is translated from the World Economic Forum's Agenda blog; the Chinese version is for reference purposes only.Feel free to share this on WeChat Moments; please leave a comment below the post if you’d like to republish.

Translated by: Di Chenjing | Edited by: Wang Can

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