Their The Pension Gap Epidemic report shows that ageing populations and a drop in fertility rates, combined with a low interest rate environment since the financial crisis, has created a ‘perfect storm’ for private and public pension systems.
The insurance industry think tank believe that, in developed countries, advances in medical technologies will add approximately three years to the life expectancies of 60-year-olds in 2050, further exacerbating the issue.
Their Global Ageing research programme director, Ronald Klein, said: “While longer lives are a tremendous human achievement, their occurrence alongside a widespread and persistent drop in fertility rate and inadequate funding is exerting extreme pressure on an already stressed pension system.”
“There is potential to address the issue but the window of opportunity for reform is closing rapidly.
“As populations in most countries continue to age, the political climate will change with them as they favour policies and governments that keep their existing benefits intact.”
When deducting pay-as-you-go (PAYG) contributions, which is the estimated finance that the working generation will give to help provide the benefits of pensioners, the global pension gap is cut by more than half to $41trn.
The Geneva Association believe that Japan has the highest current pension gap due to their life expectancy being the second longest in the world (Monaco is first), along with one of the lowest fertility rates.
Although the US have the fourth largest pension gap behind China and Japan and Germany, before deducting PAYG contributions, their very high GDP virtually eliminates this gap when you adjust the figures to include this extra finance.
The pension gaps for the top 5 countries are: