In a recent discussion with the World Economic Forum (WEF), Yie-Hsin Hung, chief executive officer of State Street Investment Management, addressed the global retirement savings gap, estimated to have hit some US$50 trillion ten years ago and forecast to reach around $400 trillion by 2050. The US is expected to account for 33% of the $400 trillion, China, 30%, and India, 20%.

In the US, those who are 45- 60 years old or Generation X save on average around $150,000 which, according to Hung, is far less than what they need in retirement, with 40% having no savings at all. She attributed this to increasing instability in the “three-legged stool” of retirement provision – government pensions, employer contributions, and personal savings.

She said all of these require reinforcement, with a universal pensions system on the government side, and policies such as the UK’s National Employment Savings Trust to increase coverage by employers. As for individuals, she said financial education is important to encourage them to both save and invest appropriately.

The Longevity Economy Principles published last year are aimed at addressing concerns about the retirement gap. Mercer worked with the World Economic Forum and about 35 other international institutions to develop the six principles.

They are: ensure financial resilience across key life events; provide universal access to impartial financial education; prioritise healthy ageing as foundational for the longevity economy; evolve jobs and lifelong skill-building for a multigenerational workforce; design systems and environments for social connection and purpose; and intentionally address longevity inequalities, including across gender, race and class.

Hung noted that average lifespans are now in the mid-80s with many people living much longer, which has to be factored into personal decisions over when to retire and how to save accordingly, and into financial products designed to cover extended retirement periods She said lower birth rates and the growth of the gig economy may mean that social security may not be there for younger generations, once again increasing the need for investor education.

However obvious and pressing the challenges, finding solutions will be hard. But “I feel like there isn’t a problem out there that can’t be solved…with intent, with the right people around the table, with a big goal in mind, you can find the right solutions”, Hung said.

Source: asiaasset

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