GLOBAL – The head of the Organisation of Economic Cooperation and Development says the funding shortfall in pension schemes worldwide could be as large as one trillion dollars.
“The emergence of astonishingly large pension funding gaps has been a source of major concerns for financial policymakers in 2003,” said OECD secretary general Donald Johnston.
“The size of funding shortfalls speaks for itself: on a worldwide basis, it has been estimated that the shortfall was close to one trillion dollars at the end of last year.” He said a “major societal crisis” looms unless something is done.
“The full impact of ageing is now expected to hit our economies very soon, beginning the next decade in many countries,” Johnston told a symposium on global demographic change organised by the Federal Reserve Bank of Kansas City.
“Still it is not certain that our policy-makers have taken the full measure of its consequences: we are talking here about the sustainability of our future social and economic system. If substantial and sustained action is not undertaken we may face a major societal crisis.”
He said: “We at the OECD are extremely concerned by the potential impact of this ‘time bomb’: The funding gaps may just be an advanced flavour of an unprecedented societal crisis if future pension liabilities – which will be exacerbated by the arrival of baby-boom cohorts on the retirement market —are not matched due to inappropriate funding.”
“The ‘early warning’ provided by the gaps issues that have emerged in the past three years need to be taken into consideration very seriously.”