Innovation in pension funding with longevity bonds pushed

 A CUHK professor called for fresh strategies to manage growing "longevity risk" as populations age rapidly across the region.

Innovative financial tools like longevity bonds could play a crucial role in safeguarding the future of pension systems across Asia-Pacific, according to Professor Johnny Li, Tan Bingzhao Professor of Actuarial Science at The Chinese University of Hong Kong Business School.

Speaking at the Economist Impact’s Sustainability Week Asia in Bangkok, Li called for fresh strategies to manage growing "longevity risk" as populations age rapidly across the region.

By 2050, more than 25% of Asia-Pacific’s population will be aged over 60. Life expectancy in the region has increased by three years in just the past decade, while fertility rates in many developed economies have fallen below replacement levels.

Li warned that pay-as-you-go schemes, which rely on current workers funding existing retirees, are becoming increasingly unsustainable.

Defined-benefit plans are also under stress as retirees live longer than anticipated, stretching the promised payouts over a longer period than originally forecasted.

Alongside innovation in capital markets, Li emphasised the need for individuals to take more responsibility for their retirement readiness. He urged workers to become more informed about their pension options, maximise contributions, and make full use of available tax incentives.

Li also called for stronger collaboration between the public and private sectors, highlighting the World Bank’s three-pillar framework—public pensions, mandatory private savings, and voluntary individual savings, as still highly relevant.

He encouraged governments to support innovation through regulatory incentives and tax frameworks.