There are potentially onerous co-financing requirements for the state across pension schemes in the GCC. Longevity is a key cost lever and more research is needed to better understand it. Exposure could be reduced through refinements to the existing benefit structures or a more fundamental switch to defined contribution amounts. The solution could also be a combination of a slimmed-down defined benefit pension designed to meet primary living costs with a supplementary defined contribution pot behind it. A sensible investment strategy is an important requirement in any of these configurations.
The article first appeared in the July/August 2015 edition of Middle East Insurance Review (MEIR).
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Addressing the long-term costs of GCC state pension schemes
GCC nationals have protection when it comes to state-managed pension schemes, but the risk of the accumulated contributions being insufficient to meet the cost of the benefits is borne by the state.