White Paper
We’ll Live to 100 – How
Can We Afford It
May 2017
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3We’ll Live to 100 – How Can We Afford It
Contents
3 1. Executive Summary
4 2. Introduction
5 3. Retirement System Challenges
7 4. How Big is the Retirement
Savings Gap
9 5. Key Findings and Principles for
Retirement System Design
11 Principle #1: Adapt to the
changing workforce
12 Principle #2: Incorporate
measures to reduce the gender
imbalance
13 Principle #3: Share risks to
reduce the burden on individuals
14 Principle #4: Be conscious of
other fnancial needs
16 6. Actions for Policy-Makers
17 7. Acknowledgements
18 8. APPENDIX – Supporting Materials
18 DC System Framework
19 DC System Assessments
22 Size of the Gap Calculation
Methodology
23 Footnotes
The challenges we face to provide our ageing societies with a fnancially secure
retirement are well-known. In most countries around the world, standards of living
and healthcare advancements are allowing people to live longer. This should be
celebrated, but we should also consider the implications for the fnancial systems
that have been designed to meet our retirement needs, which in many countries
are already under severe strain.
This report has been produced as part of the Forum’s Retirement Investment
Systems Reform project that has brought together pension experts to assess
opportunities for reforms that can be adopted to improve the likelihood of our
retirement systems adequately and sustainably supporting future generations. The
issues and fndings discussed are the result of numerous interviews, discussions
and workshops.
With this in mind, we would like to thank our project partner Mercer as well as the
input from our Steering Committee and Expert Committee which has allowed us
to draw on unique expertise from different communities and knowledge networks.
Richard Samans
Head of the Centre for the Global Agenda,
Member of the Managing Board
1. Executive Summary
4We’ll Live to 100 – How Can We Afford It
2. Introduction
Since the middle of the last century, life expectancy has been
increasing rapidly. On average, it has been increasing by one
year, every fve years (see Figure 1). Babies born today in
2017 can expect to live to over 1001, or in other words, they
will live to see the year 2117.
While increased longevity is a positive step for individual and
societal health and productivity, this change has a profound
impact on the traditional make-up of our societies and the
social protection systems that are designed to support us in
our old age.
In Japan, which has one of the world’s most rapidly ageing
populations, retirement can begin at 602,3. This could result
in a retirement of over 45 years for those who will live to the
current life expectancy of 1071 (see Figure 2). What is the
impact of a population that will spend 20%-25% more time in
retirement than they did in the workforce How do we rethink
our retirement systems that were designed to support a
retirement of 10-15 years to prepare for this seismic shift
One obvious implication of living longer is that we are going
to have to spend longer working. The expectation that
retirement will start early- to mid-60s is likely to be a thing of
the past, or a privilege of the very wealthy.
Figure 1: Longevity has been increasing steadily since the
middle of the 20th century4
Figure 2: Oldest age at which 50% of babies born in 2007
are predicted to still be alive
FIGURE 2
2007 103
BORN IN LIFE EXPECTANCY
1997 100
97 1987
1977 94
1967 91
1957 88
1947 85
Source: 100yearlife
FIGURE 3
103
LIFE EXPECTANCY
2007 104
103 2007
2007 107
2007 104
2007 102
2007 104
Global
US
UK
Japan
Italy
Germany
France
COUNTRY
2007 104 Canada
Source: Human Mortality Database, University of California, Berkeley (USA) and Max Planck Institute for Demographic Research (Germany). Available at mortality
Source: 100yearlife
Source: Human Mortality Database, University of California, Berkeley
(USA) and Max Planck Institute for Demographic Research (Germany).
Available at mortality
key role to play in helping workers reskill and adapt their work
styles to support a longer working career.
This paper focuses on the sustainability and affordability of
our current retirement systems. To protect against poverty
in old age, we believe that retirement systems should
be designed to provide a level playing feld and equal
opportunity for all individuals. A well-designed system needs
to be affordable for today’s workers and sustainable for future
generations to ensure that all fnancial promises are met.
Healthy pension systems contribute positively towards
creating a stable and prosperous economy. Ensuring that
the public has confdence in the system, and that promised
benefts will be met, allows individuals to continue to
consume and spend through their working and retired years.
If this hard-earned confdence is lost, there is a signifcant
risk that retirees will moderate their spending habits and
consumption patterns. Such moderation would have a
negative impact on the overall economy, particularly in
countries where the size of the retired population continues
to grow.
Action is needed to realign our existing systems with
the challenges of an ageing population. Those who take
proactive steps will be better equipped in the years ahead.
In this short paper, we will share fndings on:
– The challenges we are facing and the current savings
shortfall
– System design recommendations for policy-makers
– Actions for policy-makers
Absent any change to retirement ages, or expected birth
rates, the global dependency ratio (the ratio of those in the
workforce to those in retirement) will plummet from 8:1 today
to 4:1 by 2050. The global economy simply can't bear this
burden. Inevitably retirement ages will rise, but by how much
and how quickly demands urgent consideration from policy-
makers.
Given the rise in longevity and the declining dependency
ratio, policy-makers must immediately consider how to foster
a functioning labour market for older workers to extend
working careers as much as possible. Employers also have a
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