By 2050, people aged 60 years and above will make up 21% of the world’s population – in 2015 it was 12%. Looking deeper at those numbers, they are even worse for Europe at 35% while Asia and USA reach 24% and 28% respectively. Individual country statistics are alarming in some cases.
The need for adequate and diversified sources of retirement income creates problems for governments and opportunities for financial service providers.
Climate change, ageing population, urban explosion and the rise of technology are some of the most debated issues around the globe. This is not surprising, since the consequences of not being adequately prepared for these changes are likely to be painful. At present, these structural trends include some of the world’s biggest challenges and opportunities.
The rise of technology will generate thousands of new jobs, provided the required level of worker re-skilling or upskilling is in place.
Similarly, the challenges posed by an ageing population are wide-ranging and anticipating the future income needs of an ageing population is difficult. This has exposed the need for individuals to possess adequate and diversified sources of retirement income.
The major source of retirement income in the past has been the national pension schemes. But increasing life expectancies and lower birth rates are placing a great strain on many such systems across the globe.
Pension systems alone will not be sufficient; because there is a growing gap between what is required during retirement and what is available, even among countries with developed pension systems. By 2050, the world’s pension gap is projected at US$400 trillion*.
Modernisation has led to changing expectations for each generation. Today’s working adults are far more affluent and educated and expect to maintain their standard of living in retirement compared to those retiring today. They are also more likely to have to be responsible for their own retirement income rather than turn to government. Are they now putting aside enough to support their future lifestyle?
*World Economic Forum, We’ll Live to 100 – How Can We Afford It, as at May 2017.