The world is aging much faster than we had expected, even 10 years ago. Following the pandemic, the average life expectancy continues to rise around the world. In other words, we intend to live longer than before. On average, some of these extra years are healthy, but increases in the year when the health is poor.
In almost all countries, the birth rate is rapidly declining. To put it simply, there are few babies in the world with several social changes that promote this result. The following table shows changes in the native birth rate of the selected countries based on data from the United Nations (Un).1。
| country | 2014 | 2024 |
| Australia | 1.84 | 1.64 |
| Canada | 1.61 | 1.34 |
| China | 1.59 | 1.02 |
| India | 2.63 | 1.96 |
| British | 1.89 | 1.55 |
| united states of america | 2.06 | 1.63 |
Considering that 2.1 birth rate is needed to exchange population, most countries are currently on track to reduce population at some point in the future. China's population is already declining.
However, before the population declines, the first result is a population that is rapidly aging, with fewer workers, a small percentage of population exceeding the retirement age. “The problem of how to deal with the aging of the population aging to the pension system has returned to the center stage,” said the Economic Cooperation and Development Organization (OECD). It is no longer an option for the government to consider a pension system. It is needed.
However, such reforms are not easy because they affect the expectations of the community in the future. In particular, the decline in pensions, long labor life, and/or pension contributions or taxes may increase.
My research on a pension system for more than 40 years has revealed that some reforms have occurred, but it was often gradual or coincidence without long -term purposes.
2024 Mercer CFA INSTITUTE GLOBAL PENSION Index (MCGPI) has reviewed 48 retirement income systems worldwide. According to validity, sustainability, and integrity, there were only four A -grade systems. They are the Netherlands, Iceland, Denmark and Israel.
MCGPI uses more than 50 indexes, using data from international organizations such as OECD, the United Nations, and World Banks. The balance of the index score depends on the input from pension experts who are familiar with the retirement income systems of each country.
Most of the better systems in MCGPI had most of the following features:
- State pensions for the poor of at least 25 % of the average wages of full -time workers, thereby reducing poverty among the elderly
- At least 65 % of central earners with complete career (including both public and civil years)
- Compensation for at least 80 % of the working -age population ensures the balance between most individual public pensions and private pensions.
- At least 12 % of wages will be invested in the future
- At least 100 % of the current pension assets of GDP
- Frequently protected and well -regulated private pension systems
MCGPI recommended several important reforms to guarantee that retired people will continue to earn appropriate income from systems that can continue to provide community trust in this changing world. Recommended reforms include:
- The compensation of self -employed employees and the private pension system should be increased and the pressure on future government budgets should be reduced.
- It gradually increases retirement age and/or state pension age, encourages people to work a little longer, which reduces their retirement period.
- Encourage or need a higher level of private savings inside and outside the pension system so that workers can spread consumption over their lifetime.
- It reduces leakage from the retirement savings system before retirement, which guarantees that funds are saved for retirement purposes.
- Introducing measures to reduce gender pension gaps in many pension systems.
- Improve the governance and transparency in the private pension system and raise the trust level of the members.
These reforms increase the importance of the funded private pension system. Aging population increases, given the increase in health, elderly care, and the increase in the cost of public pensions, cannot be largely dependent on the government in the future. Naturally, the increase in pension funds will create new tasks and opportunities for members of the CFA Research Institute and charter holder.
For example, as the world moves from a defined profit to the contribution pension system defined, investment and other risks move from employer sponsors to individual members. As the average age of pension systems increases, older members tend to be more conservative, which affects the investment strategy of the pension system.
Education and communication with members of the pension system must be carefully performed to avoid negative reactions from the elderly. Do not assume that the current investment approach should last forever.
The aging population provides issues and opportunities to all of us, including the government, policy planners, fund managers, pension systems, and financial advisors. Most countries require pension reform, but outworking of this depends on the economy. There is no single solution. Nevertheless, there are lessons that can be learned from each other so that our future elderly people can have both dignity and confidence during their retirement years.
