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Pensions agencies can explore proactive transformation steps to support future generations.
The world’s population is aging, and few pensions systems have taken action to prepare for the fast-changing future. Citizens are wondering what’s next. Eighty-two percent of respondents to the Accenture Global Retirement Services Survey say that they are worried about their financial situation after retirement, and 57 percent believe that their standard of living will drop when they stop working.1
This short paper explores four myths that uncover true realities for pensions systems:
Pensions systems have a ripe opportunity to move past the myths and take action to explore comprehensive active aging policies.
1 Accenture report, “Global Retirement Services Survey: Consumers See the Light as Retirement Shortfall Looms”; July 17, 2012.
The world’s population is aging, as birth rates drop and people live longer. The global median age is expected to increase from 29 today to 38 in 20502. Population aging is a global trend that affects businesses, families and economies, but few pensions systems have taken action to prepare for the fast-changing future.
Four major myths about aging populations reveal opportunities for pensions systems to take proactive transformation steps to support generations to come. By investing the time now, they will be more productive, save money in the future and be better equipped to support aging populations in the future.
2 United Nations press release, “World population to exceed 9 billion by 2050,” March 11, 2009.
Myth 1. The State will no longer support people in retirement.
Reality: The State will coordinate and/or offer more holistic support for retirees.
Many citizens fear that public pensions support will shrink for seniors. Trends in public service suggest the contrary may happen. Service levels will likely expand as governments begin to adopt more holistic support for seniors that connects the broader ecosystem of healthcare, pensions, housing and social services.
Myth 2. Work life ends. Retirement begins.
Reality: The line between work and retirement is blurring.
People are extending their “work life,” some opting to volunteer to support various causes and others choosing to work part-time. Many are working later in life. The employment rate is increasing for 65 to 69 year-olds, moving from 8.8 percent in 2005 to 10.5 percent in 20113. And rates will continue to rise. Between 2000 and 2030, the share of the workforce comprising people over age 60 will more than double, from 6.1 percent to 13 percent.
Myth 3. Training is for the young.
Reality: Seniors will be both trainers and trainees.
Seniors will be trainers for young workers, as older generations can impart knowledge that often cannot be learned through a textbook. Seniors will also be the trainees, as they need to learn fresh skills to meet evolving technology and work practices, and to prepare for new roles and responsibilities.
Myth 4. The old will be reliant on the young.
Reality: There will be dual-dependency.
In a recently published report on innovation unveiled by the French Prime Minister, citizens aged 60 and above have on average incomes that are 30 percent higher than those of the rest of the population.4 They own 60 percent of the wealth and 75 percent of the stock portfolio. In the United States, 75 percent of the wealth is owned by people aged 55 and above. There will be interdependencies among these groups until wealth distribution is more uniform—and it may never be.
3 http://www.eurofound.europa.eu/pubdocs/2012/59/en/2/EF1259EN.pdf4 Report entitled “Un principe et sept ambitions pour l’innovation” (« One principle and seven ambitions to support innovation »).
There are numerous steps pensions agencies can take to face the new realities:
Move toward integrated, coordinated, holistic services. With this approach, countries will be better positioned to serve the future elderly population.
Connect with citizens earlier in life—and more often. The earlier citizens begin to plan for their financial future, the less they will be dependent on State support.
Support the desire for older people to remain an active part of the workforce. Pensions systems can, for example, offer more flexible plans that allow people to take time outs at different points in their lives, such as to have children or to pursue further education.
View education as a lifelong concept. Older generations show a hearty appetite for learning. Organizations might offer more educational, creative and leisure opportunities for those no longer in full-time employment.
Design flexible services that meet the needs of the young and the old. Flexible pensions fund withdrawal options will assist families at different stages in life. Working parents may want to release funds to a child who is buying his or her first home, or who is entering university. In turn, the young will earn income that can support their parents in later years.
January 21, 2014
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