Rising life expectancies and falling fertility rates have led to aging populations becoming a reality in many countries across the globe. Governments worldwide will have to address questions associated with aging societies and start establishing pension systems for future generations.

Rising life expectancies has primarily been an issue in developed countries, but this has also become a concern for the developing world. Hence, governments have to look into ensuring financial security for a growing number of retirees and establishing a sustainable pension system for future generations. In its latest report, the Credit Suisse Research Institute (CSRI) takes an in-depth look at the most important pension and retirement-related questions and trends.

«Pension systems are under pressure to provide retirees with financial security in old age, whilst addressing the challenges of increasing life expectancy and demographic change. Each country faces a unique challenge in ensuring that pension systems are sustainable and typically a mixture of measures are required so that pensioners can continue to enjoy the standard of living they are accustomed to. We need to redress the way we look at retirement and the collective effort required to ensure an equitable and sustainable future is possible for all,» said Oliver Adler, chief economist Switzerland at Credit Suisse, in a media statement on Tuesday.

Specific Findings:

  • Start pension reforms: Changing demographic profiles are putting pressure on existing pension systems around the world. Policymakers have faced increasing opposition to reform pension systems. However, the longer the debate is delayed, the more difficult it will become to reverse the negative consequences of postponement.
  • Improve Sustainability of Pension Provision: The most expedient approach to increase the sustainability of pension provision should be a gradual increase in retirement age. This would simultaneously extend the savings phase and shorten the average pension-payment period.
  • More Dimensions About Age: Chronological age (determined by the calendar date a person was born and measured in days, months and years) fails to capture information about the well-being of an individual. Basing normal retirement age on a universal and rigid threshold does therefore not live up to the multidimensionality of age. 
  • Provisions for New Forms of Work: The traditional concept of the three-stage lifecycle – education, working life and retirement – should be reconsidered and increasing provisions made for new forms of work (e.g. part-time or temporary employment) and further education that can ease the transition into longer working life.
  • Introduce Flexibility in Pension Systems: Many pension systems are still too rigid to respond to the needs of a changing society and will have to become more flexible to cover a wide range of different cases – particularly for those in non-standard work arrangements. These workers tend to have lower or even no occupational pension coverage.
  • Working Beyond Normal Retirement: A cross-country survey of attitudes toward retirement shows rising concerns about the sustainability of social security. Especially in developed countries, younger cohorts expect retirement provision to become less important as a source of income in old age and see earnings from work more and more as their savings plan for the future. The wish to continue working beyond normal retirement age is more pronounced in developing countries. This can be put down to existing pension schemes providing little or no financial support at old age. At the same time, people in these countries have been less used to retirement as a work-free stage of life.