[yt_dropcap type=”square” font=”” size=”14″ color=”#000″ background=”#fff” ] T [/yt_dropcap]he 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.
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. These are the main findings of the new World Economic Forum report, We’ll Live to 100 – How Can We Afford It?, released today, which provides country-specific insights into the challenges being faced at a global level and potential solutions.
“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 is the latest study to calculate 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 (for more details please see the appendix to this release). 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 8 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. All numbers are summarized in the graph below:
The savings gap resembles the amount of money required in each country (including contributions from governments, individuals and employers) to provide each person with a retirement income equal to 70% of their pre-retirement income. Outgoings such as personal savings and tax are often reduced in retirement and targeting 70% of pre-retirement income, in line with OECD guidelines, is a crude guide to provide people with a similar standard of living in retirement as they had before retirement.
For low-income earners the 70% target will not be sufficient and could result in poverty unless savings are increased. The funding gap will continue to grow at a rate higher than the expected economic growth rate, often 4%-5% a year, driven in part by ageing population effects: a growing retiree population who are expected to live longer in retirement.
“The retirement savings challenge is at crisis point and the time to act is now,” said Jacques Goulet, President, Health & Wealth at Mercer, the lead collaborator for this 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.”
The report suggests five high priority actions that governments and policy-makers should take to adapt pension systems to address the challenges:
Review normal retirement age to increase in line with life expectancies. For countries where future generations have a life expectancy of over 100 , such as the US, UK, Canada and Japan, a real retirement age of at least 70 should become the norm by 2050.
Make saving easy for everyone. A good example is the recent reforms in the UK where 8% of earnings will be automatically contributed to pension savings accounts for each individual from 2019. This initiative to automate the act of saving so far has boosted savings for 22- to 29-year-olds and low-income workers, and is estimated to create $2.5 billion in additional pension savings each year.
Support financial literacy efforts – starting in schools and targeting vulnerable groups. Financial literacy education should be offered throughout people’s careers to raise awareness of the importance of saving. A good case study is the media campaign executed in Singapore for the launch of CPF LIFE, the national annuity scheme that focused on translating a simple message easily understood by the average person.
Provide clear communication on the objective of each pillar of national pension systems and the benefits that will be provided. This would give individuals an understanding of the level of income they can expect from government and mandatory occupational systems and whether they need to accumulate their own individual savings to “top-up” income provided from national systems.
Aggregate and standardize pension data to give citizens a full picture of their financial position. A good example is Denmark, where an online dashboard collates pension information to provide individuals with a holistic view of their different pension savings accounts.
The report emphasizes that governments and policy-makers have a central role to play in reforming pension systems to ensure we can adapt to societies where living to 100 is commonplace.
“Because retirement outcomes unfold slowly over decades, emerging problems are very hard to see and are virtually unchangeable once they occur,” said Robert Prince, Co-Chief Investment Officer, Bridgewater Associates and part of the World Economic Forum’s Retirement Investment Systems Reform Project Steering Committee. “Good outcomes require effective approaches and good decisions applied consistently over decades. Ineffective actions taken over decades will put a weight on society and economies that will be virtually impossible to lift once it occurs. Given ageing populations and increasing lifespans, effective reforms are required now.”
The report was prepared by the World Economic Forum in collaboration with Mercer, a global consulting leader across health, wealth and careers.
Wide Variations in Post-COVID ‘Return to Normal’ Expectations
A new IPSOS/World Economic Forum survey found that almost 60% expect a return to pre-COVID normal within the next 12 months. including 6% who think this is already the case, 9% who think it will take no more than three months, 13% four to six months, and 32% seven to 12 months (the median time). About one in five think it will take more than three years (10%) or that it will never happen (8%).
Views on when to expect a return to normal vary widely across countries: Over 70% of adults in Saudi Arabia, Russia, India, and mainland China are confident their life will return to pre-COVID normal within a year. In contrast, 80% in Japan and more than half in France, Italy, South Korea, and Spain expect it will take longer.
At a global level, expectations about how long it will take before one’s life can return to its pre-COVID normal and how long it will take for the pandemic to be contained are nearly identical. These findings suggest that people across the world consider that being able to return to “normal” life is entirely dependent on containing the pandemic.
An average of 45% of adults globally say their mental and emotional health has gotten worse since the beginning of the pandemic about a year ago. However, one in four say their mental health has improved since the beginning of the year (23%), about as many that say it has worsened (27%).
How long before coronavirus pandemic is contained?
Similar to life returning to pre-COVID normal, 58% on average across all countries and markets surveyed expect the pandemic to be contained within the next year, including 13% who think this is already the case or will happen within 3 months, 13% between four and six months and 32% between seven and 12 months (the median time in most markets).
Majorities in India, China, and Saudi Arabia think the pandemic is already contained or will be within the next 6 months. In contrast, four in five in Japan and more than half in Australia, France, Poland, Spain, and Sweden expect it will take more than a year.
Change in emotional and mental health since beginning of the pandemic about a year ago
On average across the 30 countries and markets surveyed, 45% of adults say their emotional and mental health has gotten worse since the beginning of the pandemic about a year ago, three times the proportion of adults who say it has improved (16%)
In 11 countries, at least half report a decline in their emotional and mental health with Turkey (61%), Chile (56%), and Hungary (56%) showing the largest proportions.
African fisheries need reforms to boost resilience after Covid-19
The African fisheries sector could benefit substantially from proper infrastructure and support services, which are generally lacking. The sector currently grapples with fragile value chains and marketing, weak management institutions and serious issues relating to the governance of fisheries resources.
These were the findings of a study that the African Natural Resources Centre conducted from March to May 2020. The centre is a non-lending department of the African Development Bank. The study focused on the impact of the Covid-19 pandemic in four countries – Morocco, Mauritania, Senegal and Seychelles. The countries’ economies depend heavily on marine fisheries. The fisheries sector is also a very large source of economic activity elsewhere in Africa. It provides millions of jobs all over the continent.
The study dwells on appropriate and timely measures that the four countries have taken to avoid severe supply disruptions, save thousands of jobs and maintain governance transparency amid the ongoing global uncertainty and crisis.
Infrastructure shortcomings include landing facilities, storage and processing capacity, social and sanitary equipment, water and power, ice production, and roads to access markets.
Based on the findings, researchers made recommendations to strengthen the resilience of Africa’s fisheries sector in the context of a prolonged crisis, and looking ahead to a post-Covid-19 recovery.
The report strongly advocates for:
– Increased acknowledgment of the essential role of marine fisheries stakeholders and the right of artisanal fishermen to access financial and material resources.
– Strengthening the collection of gender-disaggregated statistical data in a sector that employs a vast number of women and youth.
– Establishing infrastructure and support services at landing and processing sites of fishery products, with priority access to water.
– Investing in human capital to ensure high-level skills in the different areas of fisheries management.
– Improving governance frameworks by encouraging the private sector and civil society to participate in formulating sectoral policies and resource management measures.
The study recommends urgent reforms to make marine fisheries more resilient and enable the sector to contribute sustainably to the wealth of the continent’s coastal countries.
Marine fisheries are a crucial contributor to food security and quality of life in Africa. Good nutrition is a key factor to quality of life, and the marine fisheries sector supports the nutrition of more than 300 million people, the majority of whom are children, youth and women. It also provides more than 10 million direct and indirect jobs.
Dominated by artisanal fishing and traditional value chains, the fisheries sector in Africa is mainly informal and is rarely considered in public policies or in assessing the wealth of countries.
Like other sectors, the African fisheries sector has been severely hit by the Covid-19 pandemic. Covid has affected supply markets and regional trade. This has resulted in substantial economic losses for most households that depend on fisheries.
Top Trends Impacting Global Economy, Society and Technology
The new technologies of the Fourth Industrial Revolution, such as artificial intelligence (AI), the cloud and robotics, are changing the way we live, learn and do business at a rate unprecedented in human history. This seismic shift is playing out in a world characterized by unreliable political landscapes and increasing environmental instability.
Scenario planning in this environment can be very difficult for businesses, affecting their ability to plan for the future, and properly assess the risks and opportunities that may present themselves. The Technology Futures report, released in collaboration with Deloitte, provides leaders with data analysis tools to scenario plan and forecast future technology trends.
“The rapid pace of technological change, alongside the global crisis caused by COVID-19, means that leaders today need new tools to understand challenges and develop strategies in the face of an increasingly uncertain future. This report provides three new analytical tools for business leaders to think about the future in a dynamic environment,” said Ruth Hickin, Strategy and Impact Lead, Centre for the Fourth Industrial Revolution, World Economic Forum.
“We are delighted to collaborate with the World Economic Forum to take a disciplined look into the future, particularly as we emerge from a world-altering event, like COVID-19,” said Mike Bechtel, Managing Director and Chief Futurist, US Consulting, Deloitte, and lead author of the report. “We hope that by providing a clearer picture of how today’s nascent technologies will impact our future, we can play a meaningful part in driving innovation, collaboration and economic growth that improves life for all people.”
The report breaks down future trends into four categories for business leaders and provides some examples of what is likely to remain constant in the years ahead.
- Information: With the volume of accessible data exploding and more of our personal lives lived online, the report projects the probable implications for remote learning, remote working and healthcare.
- Locality: Since the onset of COVID-19, even more of our interpersonal interaction is virtual and physical experiences have dwindled. The report projects more niche, readily available virtual experiences available to consumers.
- Economy: The report forecasts a growing likelihood that flexible and clean energy production will continue rising.
- Education: Personalized education will likely grow, along with the availability of digitized and virtualized content.
In addition to strategic modelling, the report gives leaders a baseline history of how the Fourth Industrial Revolution has progressed. It highlights just how fast technology is evolving and outlines one way risk management could evolve to better address and adapt to it.
Wide Variations in Post-COVID ‘Return to Normal’ Expectations
A new IPSOS/World Economic Forum survey found that almost 60% expect a return to pre-COVID normal within the next 12...
The 25-year China-Iran agreement
On March 27, 2021, a document entitled “Comprehensive Document of Iran-China Cooperation” was signed by Javad Zarif, Iran’s Foreign Minister,...
Bringing cultural and creative industries back in the game
The lockdown and social exclusion interventions have highlighted the value of arts and culture for people’s mental wellbeing – and,...
Russia lacks sufficient number of migrants to fulfill its ambitious development plans
Despite various official efforts, including regular payment of maternal capital to stimulate birth rates and regulating migration policy to boost...
War to End or War to Follow?
“It’s going to be hard to meet the May 1st deadline”. These were the recent words of US president Joe...
Norwegian scientists finally find good news from Norilsk Nickel
The state of the environment in the border areas is the main topic of the «Pasvikseminaret 2021», organized by the...
President of Malta at the Vienna Process: No Europe without its Neighborhood
On the historic date of March 08th – International Women’s Day, a large number of international affairs specialists gathered for...
Energy3 days ago
East Mediterranean Gas Forum and Turkish expansion
Tech News3 days ago
Deloitte Introduces ReadyAI™ Artificial Intelligence-as-a-Service Solution
South Asia2 days ago
US-China Developing Confrontation: India and QUAD
East Asia2 days ago
The Xinjiang-Uyghur issue
Africa3 days ago
SADC Summit Ends With Promises of More Meetings
Africa3 days ago
African agriculture is ready for a digital revolution
Human Rights2 days ago
Migrants left stranded and without assistance by COVID-19 lockdowns
African Renaissance3 days ago
The Simplicity Of Reading Matters