Pressure on Europe's pillar I worse than expected
GLOBAL – The industrialised nations are facing a much larger pensions timebomb than official statistics would suggest, claims the Washington-based Centre for Strategic and International Studies, whose latest report, ‘The Global Retirement Crisis’ says Continental Europe and Japan are particularly vulnerable.
The Citigroup-sponsored research says falling birth-rates coupled with longer life expectancy will exert greater pressure on first pillar provision between now and 2050 than previously thought. The report claims that public pensions in Europe can account for as much as 80% of a retiree’s income.
A spokesman for the centre says Europe’s established pay-as-you-go systems are straining as fewer workers are contributing to them. “There are fewer workers to support those taking retirement. Our research finds that previous predictions about worker/pensioner ratios and the amount of money needed to support them were far too optimistic,” he comments.
In some countries, such as Italy, the report finds there will even be more pensioners than workers by 2050. Others, such as France, Germany and the UK will barely have more than one worker for each pensioner.
He claims the various reform packages across Europe don’t go far enough. “There has been a significant amount of debate in Europe about what it needs to do to ensure adequate retirement provision in the future, and indeed many reform packages have been drafted in various countries. But if our research proves accurate, they will need to do a lot more,” he says.
He warns that few governments across Europe are reacting in time to the magnitude of the challenges of an ageing population. “The advantages of these systems – social solidarity, poverty relief and ‘windfall returns’ are now being outweighed by the statistical evidence that longer living pensioners are draining them dry. However, retirement provision systems can still be strengthened provided the right reforms are implemented soon.”