Pensions are a time bomb with a funding gap that will explode in the coming decades. According to the study by the World Economic Forum entitled 'We will live to be 100, how can we afford it?', the six largest social security systems in the world, namely the USA, Great Britain, Japan, Holland, Canada and Australia, will have a 'gap' 224 trillion dollars by 2050. If we then add China and India, the countries with the largest populations on the planet, the overall 'gap' from 70 trillion in 2015 will leap to 400 trillion, i.e. it will be five times the size current global economy. The impact of aging - warns the research - sets the stage for the worst pension crisis in history in the industrialized world. 'The expected increase in longevity and the consequent aging of the population is the financial equivalent of climate change,' comments Michael Drexler, head of finance and infrastructure at the WEF.
Children born today actually have a life expectancy of over 100 years (104 in France, Italy, the USA and Canada and 107 in Japan). The study suggests raising the retirement age, which in some countries is 60, in line with life expectancy. In the US, UK, Canada and Japan 'a real retirement age of at least 70 should be the norm by 2050'. In the absence of changes in the retirement age or birth rate, the global dependency ratio (that is, the ratio of those in work to retirees) will skyrocket from the current 8 to 1 to 4 to 1 by 2050. A burden that the global economy it is unable to bear, underlines the study, which recommends policy-makers to immediately consider how to favor the lengthening of working lives. The financial deficit - explains the WEF - is calculated on the basis of the amount needed in each country (including contributions from the Government, individuals and employers) to provide a retirement income equal to 70% of the pre-retirement income, it being understood that for the lowest incomes even that 70% could result in poverty. The biggest 'gap' for pension systems will occur in the US where the current 'gap' of 28 trillion should rise to 137 trillion.
The United Kingdom will go from a 'gap' of 8 trillion to 33, the Netherlands from 2 to 6, Japan from 11 to 26, Canada from 3 to 13. For China, the deficit will jump from 11 to 119 trillion and for India from 3 to 85 trillion. To have a reasonable level of retirement income, according to the study, 10-15% of an average annual salary must be saved, while today in most countries the savings rate is lower and it should therefore be facilitated to raise it. Financial literacy efforts must also be supported, starting with schools and the most vulnerable groups, clear communication must be given on the objectives of each pillar of national pension systems and the benefits they will provide and, finally, data on pensions must be aggregated and standardised. so that citizens have a complete picture of their financial position.
