Living to 100: Is it affordable?

Longer lives means urgent action is needed to tackle the massive global pension shortfall. At what age are you planning to retire? Do you have enough saved up to do so?

This World Economic Forum report on the sustainability and affordability of current retirement systems takes a look at the global challenges we are facing and includes system design recommendations and actions for policy makers.

Key findings

Challenges facing global retirement systems:

  • increasing life expectancies and lower birth rates
    • population over 65 will increase from 600 million today to 2.1 billion in 2050
    • there are eight workers per retiree today, compared to four per retiree in 2050
  • lack of easy access to pensions
    • more than 50 per cent of workers globally are in the informal/unorganized sector
    • forty-eight per cent of the retirement age population do not receive a pension
  • long-term, low-growth environment
    • persistent investment returns are around three to five per cent (equities) and one to three per cent (bonds) below historic averages
    • returns are mis-aligned with benefit projections and individual expectations
    • high costs are eroding investment growth
  • low levels of financial literacy
    • globally, the majority of citizens are not able to correctly answer simple financial literacy questions
    • financial literacy is increasingly important given the trend towards a self-directed approach to pensions
  • inadequate savings rates
    • contributions to DC plans are typically significantly lower than the 10-15 per cent target
    • saving rates are not aligned with individuals’ expectations for retirement income
  • high degree of individual responsibility to manage pension
    • defined contribution plans (individually managed) account for more than 50 per cent of pension assets
    • individuals are required to be their own investment manager, actuary and insurer

Actions recommended for policy-makers:

  • review national retirement age
  • make saving easy for everyone – use technology and automatic features where needed
  • support financial literacy efforts, starting in schools and targeting vulnerable groups
  • provide clear communication on the objective of each pillar of the national pension system and the benefits that will be provided
  • aggregate and standardize pension data to give citizens a full picture of their financial position