seminario internacional de afi: "¿hacia una crisis global de las pensiones?"

I SEMINARIO INTERNACIONAL DE PENSIONES

I JORNADA INTERNACIONAL DE

PENSIONES23 SEPTIEMBRE 2015

Escuela de

Finanzas

¿Hacia una crisis global de las

pensiones? Cómo afrontar una creciente longevidad

Global trends in and implications of increasing longevity

by James W. Vaupel

Towards a Global Pensions Crisis?

Madrid, 23 September 2015

View 1: Fixed frontier

1557 80 73

1565 95 81

Luigi Cornaroyear age possible

claimed age

1540 56 56

View 2: Secret of longevity

Hans Lundström

View 3: Advancing frontier

Mortality at ages 85, 90 and 95 for Swedish females

0

0.1

0.2

0.3

0.4

0.5

0.6

1900 1920 1940 1960 1980 2000

Ris

k o

f D

eath

Year

Age 85

Age 90

Age 95

The frontier of survival

The frontier of survivalThe decline in chances of death in Germany at ages 85, 90 and 95

1950 1960 1970 1980 1990 2000 2010

0.0

0.1

0.2

0.3

0.4

Age 85

Age 90

Age 95

Year x

q(x

)

Women

1950 1960 1970 1980 1990 2000 2010

0.0

0.1

0.2

0.3

0.4

q(x

)

Men

Nu

mber

of fe

male

s a

ged 1

00+

or

105+

Year

The explosion of centenarians


2010

1369

1985

367

1860

5

Nu

mber

of fe

male

s a

ged 1

00+

or

105+

Year

The explosion of centenarians


2010

2352

1973

12

1985

53

MAJOR DISCOVERY:

The frontier of survival is advancing:

old-age mortality is not intractable

SUPPLEMENTAL DISCOVERIES:

What do we know about human longevity?

1. The frontier of survival is advancing – because senescence

is being delayed, not decelerated.

11/33

Age

Equivalent Age 50 Years Ago

Female Male

France Swe

den

USA Japan France Swe

den

USA Japan

50 42 40 44 23 44 43 44 39

60 49 52 53 43 51 53 51 50

70 59 62 63 53 59 62 60 57

80 71 72 74 67 71 73 73 70

90 83 85 85 79 84 87 85 81

Current age and age of equivalent

mortality 50 years ago.

The postponement of senescence in Germany 1970-2014

65 = 55 1970

2014

0.2%50 65 80

Mo

rtali

ty

Age

10%

1%

55.455


MAJOR DISCOVERY:







2. Life expectancy is rising linearly, with no sign of

a looming limit.

45

50

55

60

65

70

75

80

85

90

95

Germany

Japan

Sweden

Iceland

Norway

Australia

Netherlands

Switzerland

New Zealand

1840 1860 1880 1900 1920 1940 1960 1980 2000 2020Year

Lif

e e

xp

ec

tan

cy in

ye

ars

The life expectancy revolution


20/33

The Rise in Record Life Expectancy at Age 65

Data Source: Calculations based on Human Mortality Database from Roland Rau and James Vaupel (unpublished)

22/233

Sweden

Japan

France

Year of Birth:

104102101

108107105

105104102

201020052000

Data are ages in years. Baseline data were obtained from the Human Mortality

Database and refer to the total population of the respective countries.

Oldest Age at which at least 50% of a Birth Cohort is

Still Alive Christensen, Doblhammer, Rau & Vaupel Lancet 2009, extended

Great Britain 105103102

Germany 103101100

The Failure of Expert Imagination

27/33

Mortality forecasts based on expert

judgment have been less accurate

than extrapolation.

28/33

The Sorry Saga of Looming Limits to Life Expectancy Oeppen and Vaupel Science 2002

1840 1860 1880 1900 1920 1940 1960 1980 2000 2020 204045

50

55

60

65

70

75

80

85

90

95

Life

-exp

ecta

ncy in

ye

ars

Dublin

Dublin & Lotka Dublin

Bourgeois-Pichat

Bourgeois-Pichat, UN Siegel

World Bank, UN

Fries, Olshansky et al.,

World Bank

UN Olshansky et al.

Coale,

UN, Frejka

UN

Year

Coale & Guo

The Future Will Be Different from the Past

• In next decade or two, progress against

cancer and dementia and in developing

genotype-specific therapies

• Then progress in regenerating and eventually

rejuvenating tissues and organs

• Accompanied by progress in

replacing deleterious genes

• Aided by nanotechnologies (nanobots)

• Perhaps in a decade or two, probably later,

progress in slowing the rate of aging (as

opposed to further postponing aging).

29/33

The Future will be different from the past

Since 1840, future progress in extending life

expectancy has been different from past

progress.

• The country with the longest life expectancy

has shifted from Sweden to Japan

• The causes of death against which progress

has been made have shifted from infectious

diseases to chronic diseases

• The ages at which mortality has been

reduced have shifted from childhood to old

age

30/33

31/33

41021150

Age group

1850-

1901

1901-

1925

1925-

1950

1950-

1975

1975-

1990

1990-

2009

1-14 12 4 2

15-49 7 4

3 13 11

65-79 2 8 11

16

39 20

19 17

24

80+ 0 1 0 6

20

41 37

17 41

Total 100 100 100 100 100 100

Age-Specific Contributions to the Increase of Record Life Expectancy among Women 1850 to 2009 in %

3214

55 8

25 38

50-64

16

39 20

19 17

24

20

41 37

17 41

3214

55 8

25 38

Data Source: Calculations based on Human Mortality Database by Roland Rau and James Vaupel (unpublished)

The Future will be different from the past

BECAUSE since 1840 future progress in

extending life expectancy has been different

from past progress,

and because experts understand the past but

have difficulty foreseeing future advances,

the best strategy for forecasting the future of

mortality is to extrapolate past trends, which

incorporate all the unforeseen advances and

shocks in the past.

32/33

Healthy Unhealthy

Dead

Healthy Unhealthy

Dead

Will we live longer healthy?

1980 1985 1990 1995 2000 2005 2010Year

1

Death

Rate

s

0.0

20.0

50

.10

.25

0.5

1895

1900

1905

1910

It’s never too late

East

Germany

West

Germany

The life expectancy revolution: Why?

Money?

Medicine?

genetics25%

childhood10%

adult life65%

Determinants of individual longevity


Source:

Listen to

your mother

MAJOR DISCOVERY:







2. Life expectancy is rising linearly, with no sign of

a looming limit.

3. In the future we will work more years of our lives but

fewer hours per week.

-4%15.3416.05USA

-5%14.2815.04UK

-5%11.9612.65Italy

-6%10.9411.69France

-7%12.2513.20Germany

Change20252012Country

H, hours worked per week

per capita

How much do we work?

3.8 billion hours

5.6 million people

Implies 13 hours/week/capita

2.6 million worked, 47%

Those who worked, worked

28 hours/week/worker

How much do Danes work?

Usual workweek 37 hours/week

But vacations, holidays, sick leave

reduce this to 31-32 hours

Some work part time, leading to the

28 hours/week/worker

How much do Danes work?

13 hours/week/capita

2.6 million worked, 47%

Those who worked, actually

worked 28 hours/week/worker

If 5% more Danes worked,

this could be reduced to 25

hours/week/worker

And the official work week

could be reduced from 37 to

33 hours/week

Redistribution of work

MALE FEMALE

World populationby five year age group, in millions

Source: UN

1950

2050

2010

100+95-9990-9485-8980-8475-7970-7465-6960-6455-5950-5445-4940-4435-3930-3425-2920-2415-1910-145-90-4

300 200 100 0 100 200 300 million

2100

MALE FEMALE

World populationby five year age group, in millions

Source: UN

1950

2010

2050

100+95-9990-9485-8980-8475-7970-7465-6960-6455-5950-5445-4940-4435-3930-3425-2920-2415-1910-145-90-4

2100

300 200 100 0 100 200 300 millions

0 5 10 15 20 25 30 35

% Old

World ≤ 15

India ≤ 15

World 65+

2010 2050 2090

% Old when old means:65+ vs. ≤ 15 years of remaining life expectancy.

India 65+

13%

16%

28%

27%

Data provided by S. Scherbov and W. Sanderson

7%

79

70 75 80 852010

2030

2050

2070

2090

Germany

World

China

Year

Age when life expectancy = 15

Data provided by S. Scherbov and W. Sanderson

78 85

65

85=71

Age

Live longer and longer

Live healthier at any specific age

Postpone disability to later ages

Work more years but

Fewer hours per year

Summary: Prospects for the 21st century

Towards a Global Pension Crisis?

No–

If (but only if) a greater proportion of

people work,

including working at higher ages

(for example until

life expectancy -15)

Towards a Global Pension Crisis?

No–

If (but only if) a greater proportion of

people work,

including working at higher ages

(for example until

life expectancy minus 15)

This reform will be so difficult in many

countries that there will be many

pension crises around the world.

MaxO Odense

MPIDR Rostock

MPG Munich

Escuela de

Finanzas

Afi Escuela de Finanzas, 2015. Todos los derechos reservados.




Escuela de

Finanzas



September 23, 2015

The Retirement Income Market:The Old World and the New

Clive Bolton

MD, Retirement Solutions – AVIVA UK&I Life

Escuela de

Finanzas

Afi Escuela de Finanzas, 2015. Todos los derechos reservados. 3

UK Retirement Market 2014-15

0%

20%

40%

60%

80%

100%

2014 2015 2014 2015

Jan to Mar Apr to Jun

Defer Drawdown & Part Cash Full Cash Annuity

Total Individual Annuity Market (£bn PVNBP)Pre April 2015

• Pension funds must be used to purchase a retirement

income product (few exceptions)

• Any funds passed on after death taxed at up to 55%

• Any cash withdrawals taxed at 55%+

Post April 2015

• Added flexibility – more options for customers

• Pension funds can now be withdrawn as cash if desired –

taxed at marginal rate

• Any funds passed on after death taxed at marginal rate

Customer Demand

• Call volumes in April over 150% of 2014 levels

• Many customers had been waiting to access cash

• Over 65% of April transactions were customers taking full or

part cash

• This demand is decreasing but still high (40%+) Not yet

clear what stable state will be

Customer Outcome

2013

£12bn2014

£7bnQ1 2015

£1bn

Changes announced in budget

Escuela de

Finanzas


A snapshot of the changing retirement market

4

25000

30000

35000

40000

2013 Q1 2013 Q2 2013 Q3 2013 Q4 2014 Q1 2014 Q2

Average annuity premiums Indicative Annual Platform Net Flows (£bn)

40

53

6056

5250

45

Range of 50+ estimates based on the assumption of 60% -

80% of net flow comes from 50+

Source: Marakon analysis

<50 yrs

50+ yrs

Source: ABI

Q1 ‘13 Q2 ‘13 Q3 ‘13 Q4 ‘13 Q1 ‘14 Q2 ‘14

£30k

£35k

£40k

£25k

Annuities Platform-based investments

Escuela de

Finanzas


How are customers feeling?

5

Escuela de

Finanzas


Two specific customer segments

6

The ‘persistently passive’The ‘new breed’ investor

• New to the investment market

• £50k - £100k

• Traditionally bought an annuity

• Doesn’t relate to concept of an IFA

• Aware of new retirement choices

• Wants to engage but doesn’t know how

• No engagement with pension

• No understanding of value of pension

saving or investments

• Keeps concept of retirement at arms

length

• High level of mistrust of financial

services industry. Tars all with same

brush

http://findicons.com/icon/69381/user1

Escuela de

Finanzas


The new breed investor

7

£211

£236£261

£289£317

£0

£50

£100

£150

£200

£250

£300

£350

2% 3% 4% 5% 6%

65 year old with savings of £50kMonthly income over 25yrs at different yields

http://findicons.com/icon/69381/user1

Escuela de

Finanzas


Product Developments

8

• Fixed Term Annuity supports 92% of

Lifetime Annuity Income

• Fixed Term Annuity offers some flexibility

• Drawdown outperforms Fixed Term

Annuities in most scenarios

• Fixed Term Annuity does not provide

significant downside mitigation

• Drawdown customers should consider

longevity risk

• Increased life expectancy increases

required yield

• Annuity purchase can be delayed

• Or longevity risk mitigation could be

bought in advance

Fixed Term

AnnuityIncome based on market

rates

Multi Asset

Drawdown (40%

equity)Withdrawals based on annuity

income

£0 £17,577

£102,380 £110,734

Residual

fund/ death

benefit

Cumulative

income taken

Return to average life expectancy (91) – Male aged 65 - £100k fund,

median performance scenario

Longevity Buy Out for Drawdown customers

Fixed Term Annuity – not a priority in the new world

Total fund returned to average Life Expectancy – Male aged 65 - £100k

fund

Escuela de

Finanzas


Can a single product generate returns and provide guarantees?

9

• Starting income lower under VA

• Need to outperform risk free rates materially to

cover charges and increase income

• Higher equity exposure = higher guarantee

costs

Income levels under annuity and VA on median performance

Male, age 65, £100k fund

Equity backed VA with 1% guarantee charge

• Blends of annuity and drawdown have better

returns in median scenarios

• Only annuity outperforms blend in poor

investment conditions

• Blends provide effective downside protection

• Lifetime annuity is the most efficient method for

generating guaranteed income

Total returns to average life expectancy Male, age 65,

£100k fund

Escuela de

Finanzas


• UK has seen a massive shift in the options at retirement

• Customers will have to take far greater control of their finances and

investments

• It will take several years for the new environment to stabilise and a long

term view to emerge

• Customers who will have to use a significant proportion of their capital in

retirement are not well served

• There are some product gaps and some redundancy

• The infrastructure to tailor solutions is not yet mature

• There is a significant opportunity for organisations that crack the problem

Summary

10

Escuela de

Finanzas


© 2015 Afi. Todos los derechos reservados.

Escuela de

Finanzas





Escuela de

Finanzas

Towards a global pension crisis? Coping with increasing longevity

Madrid, September 23rd, 2015

Are we heading towards a global pension crisis?

Nicholas BarrLondon School of Economicshttp://econ.lse.ac.uk/staff/nb

Escuela de

Finanzas


Are we heading towards a global

pension crisis?

1. The backdrop

2. What are the problems?

3. What are the solutions?

4. Redefining retirement: Later and more

flexible retirement

5. Conclusion

Nicholas Barr, September 2015 3

Escuela de

Finanzas


1 The backdrop

Objectives of pension systems

• For the individual• Consumption smoothing

• Insurance

• Additional objectives of public policy• Poverty relief

• Redistribution


Escuela de

Finanzas


Main argument

• Talks with journalists over the years

• Not a crisis: a problem, but a problem with

a solution

• Though it would have been an even better

solution if implemented gradually starting a

long time ago (since when have we known

about the baby boom?)


Escuela de

Finanzas


It’s not a crisis

• There is no ‘ageing problem’, nor a

‘pensions crisis’

• People are living longer – a great good

news story; not a problem but a triumph

• The problem is not that people are living too

long, but that they are retiring too soon


Escuela de

Finanzas


2 What are the problems?


Escuela de

Finanzas


2.1 Uninsurable risks

Competitive insurance is efficient if

1 Probabilities are independent

2 Probability is less than one

3 Probability is known

4 No adverse selection

5 No moral hazard• Endogenous probability

• Third-party payment problem


Escuela de

Finanzas


Can insure against individual risk

but not against• A common shock (probabilities not

independent): example, average life

expectancy

• Uncertainty (probability not well known):

example, longevity

• Note that these statement are not attacks on

insurance, but technical arguments about the

nature of the actuarial mechanism


Escuela de

Finanzas


2. 2 Demographic change

• The problem is not the baby boom

• The main cause of the ‘crisis’ is a failure to adapt to long-term trends

• Many pension systems face a series of trends:• A long-term trend of rising life expectancy

• A long-term trend of declining fertility

• A long-term trend to earlier retirement

• These are more important than two more recent phenomena:

• The baby boom

• Increase in the scale of pension systems since World War 2

• There would be a problem of paying for pensions even if there had not been a baby boom


Escuela de

Finanzas


Age pyramids 2050, China, India, USA (Barr and Diamond, 2008, pp 9-11)

A g e P y r a mi d f o r U n i t e d St a t e s , 2 0 5 0

40000 30000 20000 10000 0 10000 20000 30000 40000 50000

0- 4

10- 14

20- 24

30- 34

40- 44

50- 54

60- 64

70+

P o p u l a t i o n ( i n 0 0 0 ' s )

M al e Femal e

Sour ce: U.S. Census Bur eau, Inter nat i onal Data Base

A g e P y r a mi d f o r C h i n a , 2 0 5 0

150000 100000 50000 0 50000 100000 150000 200000

0- 4

10- 14

20- 24

30- 34

40- 44

50- 54

60- 64

70+

P o p u l a t i o n ( i n 0 0 0 ' s )

M al e Femal e


A g e P y r a mi d f o r I n d i a , 2 0 5 0

150000 100000 50000 0 50000 100000 150000

0- 4

10- 14

20- 24

30- 34

40- 44

50- 54

60- 64

70+

P o p u l a t i o n ( i n 0 0 0 ' s )

M al e Femal e


Nicholas Barr, September 2015

11

Escuela de

Finanzas


3 What are the solutions?

• If there are problems paying for pensions there are four and only four solutions

• Lower average monthly pensions

• Later retirement at the same monthly pension (another way of reducing pensions)

• Higher contributions

• Policies to increase national output

• Any proposal to improve pension finance that does not involve one or more of these approaches is illusory

• I will focus on later retirement


Escuela de

Finanzas


4 Redefining retirement: Later

and more flexible retirement


Escuela de

Finanzas


4.1 What is the purpose of

retirement?• Mandatory full retirement made sense

historically, to clear out dead wood

• Since then, two changes• People are living longer healthy lives, and so are able to

work longer

• But society is also richer; thus we can afford to give people a period of leisure after working life

• Thus the purpose of retirement has changed. It is a social institution to give people a period of leisure after working life


Escuela de

Finanzas


4.2 Later retirement

• Gains in life expectancy should be shared

between longer working life and longer

retirement

• Thus on average people will work longer

than their parents but also be retired for

longer than their parents


Escuela de

Finanzas

Afi Escuela de Finanzas, 2015. Todos los derechos reservados. Nicholas Barr, September 2015 16

Later retirement: Why?

• Longer healthy life + constant or declining retirement age creates problems of pension finance

• The problem is not that people are living too long, but that they are retiring too soon

• The solution: pensionable age should rise in a rational way as life expectancy increases

• Most work is less physical than in the past

• The ‘lump of labour’ fallacy

• Response to the crisis: another way of sharing risk; if they have to bear some of the cost, many pensioners would prefer a shorter duration of retirement to lower living standards in retirement

Escuela de

Finanzas


The UK as an illustration

16.2

14.1

47.6

53.1

20.1

10.8

0 10 20 30 40 50 60 70 80 90

2004

1950

Education, work and retirement

Life course, men retiring in 1950 and 2004

Escuela de

Finanzas


18

Later retirement: How

• Changes should be announced a long time in advance

• Rules should relate to date of birth, not date of retirement

• Changes should be made annually (or monthly), to avoid large changes across nearby cohorts

• The rules should be explicit

Escuela de

Finanzas


4.3 More flexible retirement

• Given the changed social purpose of pensions, increased choice about when to retire, and whether fully or partially is desirable for its own sake, irrespective of any problem with pension finance

• Why does a policy with such obvious advantages not happen? Answer: there are impediments

• Important to identify those impediments; once recognised, they can be acted upon


Escuela de

Finanzas


Impediments that discourage

individuals from working longer1. Well-informed preferences, in which case there is no

problem

2. Attitudes• State pension age is an important signal

• We are all systematically badly-informed

3. Rigidities in labour markets: the key rigidity is the extent to which labour markets are still heavily geared to a binary choice – no work or full-time work

4. Rigidities in pension design• Binary choice: no option to draw partial pension (contrast

Sweden)

• Pure final salary is death to downshifting


Escuela de

Finanzas


Impediments that discourage

employers from hiring older workers1. Age discrimination: but mistaken to obsess

as though that was the entire problem2. Fixed costs of employment

• Medical insurance, travel insurance or life insurance militate against part-time work

• Premiums that rise with age militate against employing older workers

3. Legal impediments• May make it hard for wages to reflect a move to less-

demanding work• Legal uncertainties can create a hassle factor for

employers where older workers want to negotiate a reduced workload


Escuela de

Finanzas


Cont’d

4. Rigidities in labour markets (e.g. flexible

pay)

5. Skills of older workers are an issue (though skills have a shorter life than in the past)

6. Health: reality v employer perception


Escuela de

Finanzas


Policies to assist later and more

flexible retirement• Policies to change attitudes:

• Increasing pension age important because of the signal it gives

• Thinking more intelligently about the age of society

• Policies to encourage workers to continue• Provide access to training for older workers

• Avoid a pension penalty from continuing work

• Partial deferral

• Policies to facilitate employers hiring older workers• Age discrimination: enforce the law rigorously

• Avoid fixed costs of employing a worker

• Review employment law to reduce transactions costs and legal uncertainty where a worker wishes to downshift

• If health is an issue, consider some sort of subsidy


Escuela de

Finanzas


What about youth

unemployment?

• ‘Lump of labour’ fallacy

• Economic theory: labour markets adjust

• Evidence: if later retirement led to higher

youth unemployment, countries with later

retirement would have more youth

unemployment. That is not the case


Escuela de

Finanzas


5 Conclusion

• The main cause of the pensions ‘crisis’ is

a failure to adapt to long-term trends

• The main solutions to pension finance are

a combination of lower monthly pensions,

later retirement, higher contributions and

output growth

• Main policy conclusion: later and more

flexible retirement


Escuela de

Finanzas


ReferencesFor a summary of the issues

Barr, Nicholas (2012), The Economics of the Welfare State, OUP, Ch. 7

Barr, Nicholas and Diamond, Peter (2009), ‘Reforming pensions: Principles, analytical errors and policy directions’, International Social Security Review, Vol. 62, No. 2, pp. 5-29

For broader discussion

Barr, Nicholas and Diamond, Peter (2008), Reforming pensions: Principles and policy choices, New York and Oxford: OUP.


Escuela de

Finanzas



Escuela de

Finanzas



September 23, 2015

Gestión de la longevidad, innovación social

y cambios culturales

Elisa Chuliá(UNED and Funcas)

Escuela de

Finanzas


Framing longevity: the sake cup anecdote

Title

3

A callous consequence of society’s ageing or an adaptive response to rising longevity?

Escuela de

Finanzas


Nearly nine out of ten Japanese citizens

consider aging as a major problem

4

Escuela de

Finanzas


Four reasons for why old age appears to be unhappy:

(1) It withdraws us from active pursuits

(2) It makes the body weaker

(3) It deprives us of almost all physical pleasures

(4) It is not far removed from death

(1) It is not by muscle, speed, or physical dexterity that great things are achieved, but by reflection, force of

character, and judgement; in these qualities old age is usually not only not poorer, but is even richer.

(2) … it is our duty… to resist old age; to compensate for its defects by a watchful care; to fight against it as we

would fight against disease; to adopt a regimen of health; to practice moderate exercise…

(3) … in pleasure's realm there is not a spot where virtue can put her foot. … if reason and wisdom did not

enable us to reject pleasure, we should be very grateful to old age for taking away the desire to do what we

ought not to do.

(4) …my old age sits light upon me (…), and not only is not burdensome, but is even happy. And if I err in my

belief that the souls of men are immortal, I gladly err, nor do I wish this error which gives me pleasure to be

wrested from me while I live.

Cicero: De Senectute

5

Escuela de

Finanzas


Missing trust in economically comfortable old age

6

Escuela de

Finanzas


Are concerns justified? Yes

- Crisis of confidence in future pensions despite recent reforms.

- Family change, mobile workforce and likely decreasing informal caregiving

capabilities.

- Pervasive unemployment.

Are social attitudes consistent with these concerns? No (not yet).

- Unscathed welfare-statism (WS may be financially under pressure, but not

ideologically or politically).

- Maintained (or even increased) demand of public services.

- No public debate about how to manage rising longevity from an economic, social

and individual perspective.

Focus on the Spanish case

7

Escuela de

Finanzas


Source: CIS (www.cis.es)

(Surveys administered in July 2013 and 2014)

8

Total population Students

Spaniards pay on taxes… 2013 2014 2013 2014 much 69 69 59 57 moderate 25 25 29 25 little 3 2 5 2 Don’t know 3 4 8 16

Total Population Students Pensioners The state devotes too few resources to …

2013 2014 2013 2014 2013 2014

Social Security/ pensions 58 65 57 66 51 55 Health 66 68 60 65 64 64 Dependency 69 73 63 69 59 63

Public opinion on welfare: the more, the better

http://www.cis.es/

Escuela de

Finanzas


• “The traditional welfare state has in fact placed us on a path where it is difficult to

turn back” (Morley- Fletcher, 2002:49). This is true not only for technical reasons,

but also for social and political reasons.

• Structural reform packages and radical policy innovation are unlikely in European

countries in the short and medium term, even under conditions of economic

recession and intense reform pressure. If the EU institutions refrain from taking

“aggressive action” (f.i., through regulatory Social Security framework), policy

change will be probably patchy and path dependent, more or less effective in

terms of cost containment.

• Eppur si muove! Longevity is already changing labor market and employment

behavior. Longer working lives could also favor changes in the long-term care

markets and social innovation among elderly people.

Institutional solidity and social change

9

Escuela de

Finanzas


Adapting to longevity: Progressive delay in retirement age

10

Average effective age of retirement

Source: OECD

Escuela de

Finanzas


Adapting to longevity: Changes in the Spanish

elderly workforce

11

[Data calculation and graph design by Prof. Luis Garrido (UNED)]

Escuela de

Finanzas


Adapting to longevity: Changes in the Spanish

elderly workforce

12

Source: LFS [Data calculation and graph design by Prof. Luis Garrido (UNED)]

Employment rate of Spanish men and women born in Spain (53-64) by level of education

Escuela de

Finanzas


• The rise in longevity is too often framed in terms of “the ageing problem”. Though

unsound, this prevailing perspective is understandable since many people reasonably

fear that old age will bring economically tough times. These fears should be effectively

countered through information and persuasion about the need of social and individual

adaptation to longevity.

• In general, European governments and sociopolitical actors, trapped in the dynamics

of electoral politics, have not helped citizens to understand the magnitude of the

demographic change and its social and economic implications. Despite the crisis of

confidence in future pensions, welfarestatism remains strong in many countries and

encumbers appropriate policy change in a sort of vicious circle.

• Nevertheless, changes in labor market and employment behavior suggest that old age

cohorts are already responding to increasing longevity through later retirement and

longer working lives. The supply of jobs for people in the final work career stage may

be a challenge, particularly for low-skilled workers. But given the expected massive

demand in care services during the next decades, governments could incentivize a

privileged access of these workers to caregiving jobs.

Final remarks

13

Escuela de

Finanzas



Goya, Aún aprendo [I’m still learning]

ca. 1828

seminario internacional de afi: "¿hacia una crisis global de las pensiones?"

Economy & Finance