You’ll need to work until you’re 70 to fund the impending pension crisis, says WEF

The retirement age in the countries with the six biggest pension saving systems will need to rise to 70 by the middle of the century if we are to avoid the biggest pension crisis in history, according to the World Economic Forum (WEF).

Deficits in the pension systems of the US, the UK, Japan, the Netherlands, Canada, and Australia will more than quadruple by 2050 unless people work longer and save more. Include China and India, which have the world’s largest populations, and the combined savings gap for the eight countries reaches a sum five times the size of the current global economy.

With people born today facing a life expectancy of more than 100, the cost of providing security in retirement for a rapidly aging population is the financial equivalent of climate change, according to the WEF. 

The WEF’s estimates are based on every person receiving a retirement income equal to 70% of their pre-retirement income, meaning their standard of living shouldn’t change once they stop work.

Britain’s retirement age is due to rise to 67 between 2026 and 2028, but the WEF believes that further increases are needed to forestall a predicted increase in the pension savings’ gap by 2050. The gap in the US is forecast to rise almost fivefold.

Marek Góra has written about redesigning pension systems for IZA World of Labor, he agrees that “[p]ension systems need to be redesigned to accommodate demographic changes. Postponing adjustment simply increases the economic and social costs. The interests of workers (wages) and retirees (benefits) differ. Governments need to make pension systems more transparent and make adjustments to reduce the burden on workers, returning pension systems to a social role.”

Read more of our articles on the aging workforce and pensions reform.