Micropensions amongst top solutions for combatting effect of global aging

14-Oct-2010    By 2050, the older will out number the younger for the first time in the world’s history. Due to a globally declining birth rate, having too many people on the planet is no longer demographers’ chief worry. Now, having too few is.
This worry comes forth out of a declining global population growth rate: from 2 percent in the mid-1960s to roughly half that today. Many countries are no longer producing enough babies to avoid falling populations, and of the 59 countries now producing fewer children than needed to sustain their populations, 18 are characterized by the United Nations as “developing,” i.e., not rich.
The declining demographic trend brings with it specific problems for developed as well as developing countries. During the World Economic Forum in 2009, Mercer together with the OECD, presented the results of the effects of these problems, in a report titled 'Transforming Pensions and Healthcare in a Rapidly Ageing World' (this report can be downloaded at the bottom of this page).
This report is the result of a two-year global research project, which addressed the following important questions:
  • How will the financing of pensions and healthcare evolve globally between today and 2030? And what will be the role of governments, the private sector and individuals?
  • What are the most promising strategies today for improving sustainable financing of healthcare and pensions in ageing societies?
  • How can governments, the private sector and individuals be mobilized to action and their interests aligned to achieve collaborative efforts that yield transformational changes to pensions and healthcare financing?

Set-up of research

The starting point of the research project conducted by the World Economic Forum, Mercer and the OECD is marked by the predictions regarding the world's demographic developments. The worldwide share of population aged 65 and older is projected to more than double to over 16% by 2050: 

This increase in worldwide ageing population results in both a decrease in working-age population and an increase in old-age dependency-ratio. Not only in Western Europe and the United States, but also in Latin America, Africa and Asia:
Since the burden of cost of pensions and health provisions is increasing in an ageing world, the financing of these provisions will be a massive challenge, both for governments, as well as for employers and individuals / citizens:
Although the above chart only shows the projected increase in age-related public spending for the Western world and Japan, estimates predict that in 2050, 80% of the worldwide share of population aged 60 and older will be living in low-income countries.
Urgent action is needed. Governments and employers cannot assume that the increasing burden of ensuring the productivity and retirement security of the world’s workforce can be passed on to the next generation. Many governments and employers are reducing their role in retirement and healthcare provision due to financial constraints, shifting responsibility to employees.
Chronic disease is increasingly affecting workforce productivity levels. Employees are becoming less healthy, and many are not saving or planning for retirement. There is a scarcity of financial and human resources to address the situation, worsened by the recent financial crisis. From an employer’s point of view, there is a need to create (and monitor) an employer strategy for ensuring a healthy and productive workforce, employee involvement in health and retirement planning decisions, and financial sustainability of benefit plans. 
A movement needs to be made from a tactical focus on managing the cost of health benefits and adequacy of income at a retirement age to a strategic focus on employee health and retirement planning at earlier stages of the lifespan.
The role of micro pensions
Out of a broad range of options, the researchers have identified 11 strategies for improving sustainable financing of healthcare and pensions in ageing societies, ranging from existing − but under appreciated − to highly innovative strategies:
In order to strenghten funding and savings, the stimulation of micro-insurance and micro pensions for the poor is mentioned (point no. 7). As an extension of the micro finance movement, micro pensions are a combination of micro-insurance and micro savings products which have retirement income as their primary objective. Micro pensions target poorer households: although the amounts contributed may be very small, micro pensions provide a stable income after retirement, which allows for:
  • a significant reduction in the probability that individual households with a pension recipient will be in poverty;
  • a significant impact on reducing poverty and vulnerability among households with older people;
  • an increase in poor older people’s access to services, particularly health care;
  • a reinvestment of resources in education of children, breaking intergenerational poverty cycles;
  • a substantial impact on child well being, and contribute to increased school attendance and better nutrition among children.


More information on Mercer's partnership with the World Economic Forum and the OECD can be found on the website of Mercer, which also offers a summary of the research project on the future of pension and healthcare provisions.

More information on the World Economic Forum's strategies to address the challenge of financing retirement and healthcare in a rapidly ageing world, can be found on the website of the World Economic Forum.


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