Author: browneconomy

The Economic Voice: Economist Debate: This house believes that retirement in its current form should be abolished.

There is an interesting debate in The Economist about the future of retirement.

Quote: "If you were hoping to retire in comfort, you should have bowed out 10 or 20 years ago. The late 20th century was the best time ever to become a pensioner. The developed countries had become rich enough to pay state pensions that were mostly decent, and private occupational schemes were usually the defined-benefit, final-salary kind that provided people with a predictable retirement income for as long as they lived. To make things even more cushy, lots of people were being positively encouraged to go early.

No longer. With the huge post-war baby-boomer generation now beginning to retire, governments have looked at their future pension liabilities and recoiled in horror. Many private pensions have already become much less generous and more uncertain. Because people, at least in the rich world, are having ever fewer babies and living ever longer, the proportion of over-60s around the globe is due to double between now and 2050, from 11% to 22%. In the rich countries the figure is likely to rise from 22% to 33%, meaning that around one person in three will be a pensioner.

The potential liabilities are immense. The International Monetary Fund (IMF) recently measured the fiscal costs of the financial crisis against that of ageing populations and found that in the advanced G-20 countries the adverse impact of ageing on the fiscal balance would be ten times as big as that of the crisis by 2050. In most rich countries the bulk of that will come from pension spending, which by 2050 will typically equate to 10% of GDP, and often more. The fiscal impact of the crisis, says the IMF, "thus reinforces the urgency of entitlement reform". End Quote

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