Ageing population requires rethinking pension beliefs

Pensioner-with-caneGovernments need to revisit fundamental beliefs on pensions to cope with a decline in the working age population of up to 6% in some countries. Analysis by investment consultancy Mercer says the proportion of the population of Hong Kong aged between 15 and 64 will drop six percentage points to 70% by 2020. In Canada, Japan and Russia, the decline will be 4%, while in China, the UK and the United States the decline will be 2%. “While the changes seem small in percentage terms, one must remember that this is a dramatic demographic shift over the next eight years, represents hundreds of millions of workers, and can have a major impact on state pension systems,” says Deborah Cooper, partner in Mercer’s retirement business. The trend for governments to raise retirement ages or dispense with default retirement ages will need to continue, says the consultancy, while auto-enrolment into corporate pension schemes should be encouraged to provide extra help from the private sector. For developing economies such as Pakistan, which is likely to have 3% growth in its working age population by 2020, there is not an urgent need to reform pension systems. There are other obstacles to overcome, though. “Emerging economies face their own challenges,” says Fergal McGuinness, senior partner in Mercer’s retirement business. “Will their populations get old before they get rich?” ©2012 funds-europe

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