1. Longevity and Public Policy: Ad Hoc
Responses or Structural Reform?
Dalmer Hoskins
International Federation on Ageing
Prague, 2012
2. Pension Reform at a Crossroads
• Longevity is driving pension reform:
Men: + 7.9 years of added life by 2050
Women: +6.5 years of added life by 2050
• “Savings” of recent benefit cuts could be wiped
out by longevity
3. Falling birthrates and shrinking
labor force
• In OECD countries, labor force will drop from 4
workers for 1 pensioner to 2 workers by 2050
• Most dramatic increases in life expectancy will
be in developing countries, China and India
4. Life expectancy after pensionable age in
selected OECD countries, men
30
25
20
# of Years
15 1958
2010
2050
10
5
0
France Ireland Switzerland U.K. U.S.
Country
Source: Pensions at a Glance 2011, OECD
5. Acceleration of pension reform
• Fiscal pressures have forced governments to
tackle pension reform: Greece, Hungary, Italy,
Spain, etc.
• Globalization of pension reform: financial
markets react to national pension issues
6. Lessons learned from pension reform:
• Pension reform is not just changing the law, but
also changing human behavior (work, savings,
and family)
• The issue for 2050: Rising poverty and income
inequality among the elderly
• Extension of public pension coverage is stalled
in the developing world
7.
8.
9.
10. The search for new solutions:
• Privatization of old-age pensions is not the
magic bullet
• Raising social security contributions is mostly
off the table (15-20% of earnings and no more)
• Traditional social security models may not work
in developing economies
11. Will countries prefer the ad hoc
approach or restructuring their
retirement income security?
Option I: Strengthening the long-term solvency
of the public retirement program
• Link the retirement age (not benefits) to
increases in life expectancy (single most effective
tool)
• Encourage workers to stay in the labor force
longer
• Discourage early retirement
12. Option 1 (continued)
• Equalize pensionable age between men and
women.
• Support the development of complementary
retirement savings
• Improve government capacity to collect taxes,
maintain records and pay benefits as promised
13. Ad hoc or structural reform?
Option 2: Shift retirement savings gradually
from the public purse to the individual, but what
works?
• Mandatory second-pillar coverage: Australia,
France, Switzerland, Netherlands
• Voluntary tax deferred retirement savings
(Canada, USA, Ireland and most of Asia and
L.A.)
• Government matching of retirement savings
(Germany, New Zealand)
14. Ad hoc or restructuring?:
Option 3: Coherent strategies to alleviate old-
age income poverty
• Social pension/social floor advocated by
UN,WHO and ILO: What is the retirement
future for 3/5 of the world’s population?
• Minimum benefits for all pensioners
• Will this century see re-emergence of poverty
among the elderly as a political issue around the
world?
15. What is the public understanding of
longevity increases/demographic
aging?
• Is the current economic crisis an opportunity or
a barrier to addressing long-term retirement
reform?
• Do we see evidence that the political leadership
can reframe the “social contract” for an aging
population?
