The global retirement inequality crisis is a significant/pressing issue that affects several countries around the world and threatens the financial security of many millions of people globally. According to the World Economic Forum, women across the globe typically have 30-40% less money than their male counterparts in retirement, despite oftentimes living longer (globally, the average life expectancy for women is ≈5-7 years longer than men). This gender pension gap varies significantly between different countries, ranging from 4% to 49% in emerging economies, with more than half having a gap of 30% or greater. As a result, a third more women are in poverty in retirement than men in European countries (16% vs 12%), for example.
Furthermore, the OECD also highlights many of the challenges facing retirement systems globally, emphasizing the need to close the gap between liabilities and assets to ensure sustainable pension systems. The US alone represents 40% of the current global retirement savings gap, amounting to $28 trillion. One of the key issues contributing to this crisis is the lack of access to pension savings for many workers in developed and developing countries, leading to a shortfall in retirement funds.
As life expectancies increase and birthrates decline in many countries, there is an immense strain being placed on government pension and social security systems that were designed for a different demographic expectation/reality. At the same time, a significant portion of the global population lacks access to any formal retirement savings plans through their employers. This has created an inevitable crisis, where masses of retirees face the prospect of downward mobility and deteriorating standards of living in their golden years.
Policymakers, economists, and financial experts have proposed a number of potential solutions to mitigate the same, with a goal/aim to create better retirement outcomes for all. From overhauling pension schemes, to promoting individual savings and rethinking how we structure retirement itself, a range of bold ideas have emerged to tackle this profound challenge before it’s too late.
According to the 2023 Natixis Global Retirement Index, inflation is a top investment concern for retirees and workers globally, with rising everyday prices being a major worry. Countries in advanced stages of the Demographic Transition Model are grappling with a shrinking labor force, leading to fewer people contributing to pension systems.
Additionally, a survey by Natixis revealed that 82% of respondents globally believe companies should help employees achieve retirement security, supporting the idea of mandatory employer matching contributions and individual contributions to retirement savings. 69% of respondents (82% of Millennials, 59% of Gen X, and 54% of Boomers) believe that individual retirement plan contributions should be mandated as well.
Effectively addressing the global retirement inequality crisis will require coordinated efforts and innovative solutions from policymakers and the private/public sectors alike. For example, policy reforms on outdated pension schemes and social safety nets, increased access to workplace and employer retirement plans (especially for lower-income employees), and financial literacy on the importance of long-term savings for individuals will all be key to mitigating retirement inequalities globally. Only with a shared commitment to creating equitable retirement futures can we together overcome the massive challenges posed by the retirement inequality crisis, that is poised to only worsen/get worse over the coming decades.
