By Douglas Appell, Paulina Pielichata

Emerging markets policymakers’ uphill battle to ensure a comfortable retirement for their fast-aging populations became considerably more daunting last year as the coronavirus ripped through the global economy.

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Creative approaches to asset allocation and structural changes to keep retirement systems from morphing into rainy day funds are topics policymakers could find themselves grappling with as they look to move forward again after a year that saw many running just to stay in place, analysts said.

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If much about the outlook remains uncertain, it’s clear debt-laden governments will be more constrained and capital market returns will be less generous over coming years — a tough backdrop as rapidly aging societies make the need for reforms more urgent, said David Knox, Melbourne-based senior partner with Mercer Australia and lead author of the annual Mercer CFA Institute Global Pension Index.

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Meanwhile, India’s government in September approved changes to the country’s labor codes, paving the way for bringing gig employees and more workers from India’s huge, 500 million-strong informal sector into retirement savings vehicles, noted Vishal Grover, Mumbai-based practice leader, India, with Aon India’s retirement solutions business.

Governments in developed as well as developing countries responded last year by letting citizens tap their retirement savings to get through the crisis.

Stopgap measures allowing hardship withdrawals have long been in place in Latin America, but withdrawals on the scale of the past year haven’t been seen before, said Ernesto Brodersohn, CEO of non-profit network Pension Policy International and a consultant for the World Bank, speaking in a personal capacity.

A lot of the people withdrawing retirement savings now are dropping out of the formal sector of the workforce into the informal sector, Mr. Brodersohn noted. “There needs to be a more overarching pension policy and pension reform discussion about helping the informal sector build resilience,” he said.

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