As the world has moved away from traditional defined benefit pensions towards more individual- led defined contribution plans, greater responsibility has shifted to each individual member to ensure that they can finance their desired level of income in retirement. Due to this transformation, a heightened focus has been placed on encouraging people to save and invest for their own futures. The financial services industry has developed savings and investment vehicles to meet this need. However, in many countries, particularly those where retirement income is largely dependent on defined contribution systems, one challenge remains – how do people convert their savings into a suitable source of income that can last them through their later years? How can they navigate the process of “decumulation”? Dignity in old age requires access to adequate and sustained retirement income. As more people globally are retiring from defined contribution plans, individuals in many countries are being pushed to make decisions about their retirement income that would traditionally have been left to institutions. This shift is particularly relevant in countries where defined contribution systems dominate retirement savings, such as the United States, Australia and the United Kingdom. (Notably, in countries where retirement income is automatically structured through collective risk-sharing models – such as the Dutch collective defined contribution system (see Section 1.3) or Singapore’s lifelong income approach (see Section 2.3) – these challenges are mitigated, as individuals do not bear the responsibility of managing decumulation.) Should individuals consider purchasing an annuity or retain more flexibility by slowly withdrawing money from their savings? What is an appropriate asset allocation in retirement? How much should be left for future generations? How best to combat the behavioural fears of seeing bank balances decline while also watching as the costs of healthcare and other services rise? This starts from an assumption that the individual has retirement savings outside of their public pension system. However, one in three Europeans are not saving for retirement;24 one in five Americans aged over 50 have no retirement savings;25 and in Australia, one in four men and one in three women lack a superannuation account.26 The 2024 Global Retail Investor Survey found that 44% of individuals worldwide fear outliving their savings, with younger generations more concerned than the generation closest to retirement age. Given retirement benefits have generally declined over time, younger cohorts anticipate lower replacement rates than their predecessors.2.1 The case for action Individuals fear not having enough savings – but hesitate to spend their savings in retirementFIGURE 3 The decumulation dilemma Yet, on average, retirees retain of their pre-retirement savings after almost two decades of retirement*80%In the United States of individuals worry about outliving their savings44% NOTE: This statistic may include individuals who are also receiving retirement income from defined benefit plans. SOURCE: World Economic Forum. (2024). Global Retail Investor Survey. https://wef.ch/investoroutlook25; BlackRock. (2024). Spending and Investing in Retirement. https://www.blackrock.com/us/individual/insights/retirement/spending-and-investing-in-retirement Future-Proofing the Longevity Economy: Innovations and Key Trends 1515

Future Proofing the Longevity Economy 2025