Why a Slow-Burn Pension Crisis Is Getting Harder to Fix

As humans live longer, national pension systems need more money to pay for extended retirements. However, across the developed world, the number of people working and paying into these systems is stagnating or even shrinking, and pension managers are struggling to make the numbers add up. Most economists agree that we’ll all need to work for longer, save more or receive less. But watering down these long-established entitlements is fraught with risk. France was shaken by mass protests when the government pushed through a deeply unpopular pension overhaul. Many other countries are delaying action to address what’s possibly the slowest-moving financial crisis of our time, one exacerbated by the Covid-19 epidemic.

In developed economies, because of declining fertility rates, the ratio of older people to those of working age, which was 30 out of 100 in 2021, is expected to reach 48 per 100 in 2050. Japan’s ratio is already around 50 per 100 and is on course to surpass 75 around midcentury. This widening imbalance means the combined state pension shortfalls in eight of the biggest economies could reach $400 trillion by 2050, according to an analysis by the World Economic Forum. That’s around four times global economic output today.