The GCC's $400 billion public pension provision is likely to undergo reforms in the coming years as the current system may find it difficult to cope with the retirement needs of the residents according EY's GCC Wealth and Asset Management 2015 report.

Asset managers expect a shift in the retirement ages of GCC nationals and changes in the end-of-service benefit schemes to make them more relevant to the actual retirement needs of expats.

"There will be a lot of opportunity for local providers in the region especially in the Islamic retirement product arena" said George Triplow Mena wealth and asset management leader at EY said in the report.

"Public pension funds in the GCC are only just coming of age just over a fifth is invested in local equities. Two big issues are currently driving significant rethinking in the sector. The first is the sustainability of public pension funds for nationals given the relatively small size of the funds demographics and the gap between contribution and benefit levels. Secondly there is a growing recognition by many employers that end of service benefit payments received by expatriates are neither adequate nor suitable as an alternative to a pension" he said.

Public pension funds in the GCC areworth $397 billion representing nearly a quarter of gross domestic product and $15000 per national. The report said GCC governments must relook at existing models of both public and international pension funds to ensure they are sustainable.

"To address the concerns over the sustainability of the industry Gulf countries will have to relook at the retirement ages benefit levels and contribution requirements. This could require further recapitalisation of the funds and reforms. Where fiscal means are limited it may also involve the kind of three-tier system that is increasingly common elsewhere combining a minimal state pension defined contribution workplace pensions and additional personal contributions - but a wholesale shift in this direction is unlikely" said Triplow.

"More systematic reform is also possible in the most fiscally strapped countries to incorporate additional pension insurance elements. Recent changes in Gulf healthcare with a steady shift towards private insurance may set a precedent for such reforms."

GCC pension funds are much smaller when compared with employer-provided pension funds in other parts of the world the report stated.

In the UK for example these assets are larger than GDP and funds per individual are nearly four times the GCC average.

Kuwait has the best-capitalised fund relative to the size of its economy and citizen population.

This follows an initiative to recapitalise the pension fund from the budget since 2008.

Qatar's pension assets are also sizeable relative to the population following a capital injection from the Ministry of Finance in 2012.

Saudi Arabia has the largest pension fund regionally with assets split between the Public Pensions Agency (for public sector workers) and the General Organization for Social Insurance (for private sector workers).

However about 85 per cent of the kingdom's pension assets are invested abroad mainly in US Treasuries managed by the Saudi Arabian Monetary Authority.

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