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We’ll Live to 100, but Can We Afford It?

As the quality of healthcare has increased during the past century, so too have global life expectancies – but new generations will pay a high price for living longer.



The world’s six largest pension systems will have a joint shortfall of $224 trillion by 2050, imperiling the incomes of future generations and setting the industrialized world up for the biggest pension crisis in history.

This is one of the main findings of the new World Economic Forum report, We’ll Live to 100 – How Can We Afford It?, which shows how the global pension shortfall will soon dwarf global GDP.

To alleviate the looming crisis, governments must address the gaps in access to the pensions system and ageing populations as they are the key sources of the widening pension gap.

Meanwhile, the report also found that millions of future workers may have to wait until they are well into their seventies before they can retire, as countries around the world face a race against time to plug a pensions funding black hole.

Longer life comes at a cost

As the quality of healthcare has increased during the past century, so too have global life expectancies – but new generations will pay a high price for living longer.

Longevity has been steadily increasing since the mid 20th Century, with the World Economic Forum report finding that babies born in 2017 can expect to live 100 years or more.

“The anticipated increase in longevity and resulting ageing populations is the financial equivalent of climate change,” said Michael Drexler, Head of Financial and Infrastructure Systems at the World Economic Forum.

“We must address it now or accept that its adverse consequences will haunt future generations, putting an impossible strain on our children and grandchildren.”

The report calculates the impact of ageing populations on the pension gap in the world’s largest pension markets, which include the United States, United Kingdom, Japan, Netherlands, Canada and Australia.

The gap in those markets is the largest in the US, where a current shortfall of $28 trillion is projected to rise to $137 trillion in 2050. The average gap in the six markets combined is calculated to reach $300,000 per person.

The total gap for all eight markets in the study (which further includes China and India, which have the world’s largest populations) will reach a total of $400 trillion by 2050.

The pensions funding gap will widen dramatically in the years ahead
World Economic Forum

Impact of the savings gap

The rough target for most retired people around the world is to have a pension equal to around 70% of their pre-retirement income. This will provide them with a similar standard of living, as outgoings such as personal savings and tax are often reduced in retirement.

However, for low-income earners the 70% target will not be sufficient and could result in poverty unless savings are increased.

According to the report, an ageing population will continue to drive a pensions funding gap that will grow at a rate higher than the expected economic growth rate, often 4%-5% a year.

“The retirement savings challenge is at crisis point and the time to act is now, says Jacques Goulet, president of health and wealth at Mercer, the lead collaborator on the World Economic Forum initiative.

“There is no one ‘silver bullet’ solution to solve the retirement gap. Individuals need to increase their personal savings and financial literacy, while the private sector and governments should provide programmes to support them.”

Five key steps to plug the pensions gap

Fortunately all is not lost – there are actions governments and other policy-makers can take to reinforce creaking pension systems.

The report highlights the following priorities:

  • Raise the retirement age. As life expectancies increase so too should retirement ages. It’s been suggested that for countries where future generations have a life expectancy of over 100, a real retirement age of at least 70 should become the norm by 2050.
  • Make saving easier. Putting money aside for retirement is not a top priority for many young people, but there are ways to ensure employees are building up a pension pot. One good example of this is the auto-enrolment system that’s been introduced in the UK. From 2019, 8% of an individual’s earnings will be automatically contributed to a pension savings account.
  • Improve financial education. The importance of saving for the future should be taught in schools and then reinforced throughout people’s careers – those who start saving early are less likely to struggle financially in retirement.
  • Provide information on pension limitations. It’s important that people don’t simply rely on a state pension upon retirement, as this may not be sufficient to sustain their lifestyle. In many cases people will need to ‘top-up’ their state pension entitlement via private savings.
  • Introduce a single view on pension data. It can be difficult to keep track of multiple private pension pots. In Denmark savers have access to an online dashboard that provides a holistic view of their various pension savings accounts.

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