{
  "title": "The Impact of Aging Worldwide on Pensions and Public Policy",
  "sourceUrl": "https://www.imf.org/en/publications/fandd/issues/2020/03/impact-of-aging-on-pensions-and-public-policy-gaspar",
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  "summary": "As societies age worldwide, pensions and public policies must adapt, argue David Amaglobeli, Era Dabla-Norris, and Vitor Gaspar of the IMF.",
  "sections": [
    {
      "heading": "Overview and key findings",
      "content": "- Today there are, on average, 3.4 working-age people to support the retirement of every person 65 and older; by 2050 that number is projected to dwindle to just 2.\n- Japan is already nearly at that point; by 2050 more than 35 other countries (about 7 percent of the world population) will join Japan.\n- Aging is driven by two main factors: people are living longer and having fewer children.\n- Demographic stages differ across regions: many Northern Hemisphere countries, particularly Japan, are in a more advanced stage; many African countries are in the early stage.\n- Countries in advanced stages face a shrinking labor force and higher burdens on pay-as-you-go pension systems; countries in early stages need to create a large number of new jobs every year to absorb a rapidly growing working-age population.\n- By 2050 there will be stark contrasts between regions (for example, Europe and sub-Saharan Africa)."
    },
    {
      "heading": "Impact on savings",
      "content": "- Life-cycle saving behavior implies societies at more advanced stages of aging are likely to see lower aggregate savings.\n- Recent IMF research (Amaglobeli and others 2019) shows that in advanced economies both private and public savings (effectively the government fiscal balance) are projected to decline as a result of more pension spending during the next 30 years (all else equal).\n- Younger cohorts will need to save significantly more and postpone retirement by a number of years to maintain pension benefits similar to today’s retirees.\n- In emerging market economies and low-income developing countries collectively, relatively young populations will lead to higher private saving; this increase is expected to outweigh an expected decline in public savings due to rising public pension spending.\n- Pension-system design features materially affect saving outcomes:\n  - Overly generous public pensions lower both public and private savings, all else equal.\n  - Less generous public pensions can drive up private saving as individuals self-fund more of their retirement.\n  - Defined-contribution plans (dedicated pension savings accounts) are associated on average with increased private savings compared with countries without them (example cited: individual retirement accounts in the United States)."
    },
    {
      "heading": "Pension reforms and system design",
      "content": "- Recent reforms aim to contain growth in the number of pensioners by changing key parameters (increase statutory retirement age, tighten eligibility).\n- Examples cited:\n  - Proposed reform in France aims to raise the full-pension retirement age to 64.\n  - Reform adopted in Brazil in October 2019 increases retirement ages to 65 for men and 62 for women from 56 and 53, respectively.\n  - Cyprus, Denmark, the Netherlands, and Portugal legislate increases in statutory retirement age in line with rising life expectancy.\n- Reforms have also reduced benefit generosity via:\n  - Modifying benefit calculation formulas (for example, inflation indexation components).\n  - Rewriting valorization rules.\n  - Changing accrual rates in defined-benefit plans.\n- Trade-offs and distributional consequences:\n  - Reducing generosity and delaying retirement attenuate long-term fiscal vulnerabilities and moderate the decline in aggregate saving but have distributional consequences and require careful calibration.\n  - Linking retirement-age increases to improvements in life spans can slow inflow of new retirees and encourage older workers to remain in the labor force.\n  - Effective provisions to prevent old-age poverty are important when tightening pensions."
    },
    {
      "heading": "New models and broader policy responses",
      "content": "- Rethink pension system architecture; one option is public defined-contribution programs (assuming necessary preconditions).\n- Stimulate voluntary retirement saving through financial-sector instruments; priority differs by financial sector development:\n  - Less developed financial systems should first increase financial inclusion (globally, 31 percent of adults still do not have bank accounts; the majority of the unbanked population lives in sub-Saharan Africa).\n  - Financial literacy can foster a culture of saving and better retirement planning.\n  - Countries with developed financial sectors could use tax-preferred retirement saving vehicles (example cited: 401(k) plans in the United States) or tax-preferred general or education savings accounts.\n  - Participation of middle-income households is essential to generate additional saving rather than displacement of existing saving."
    },
    {
      "heading": "Labor-market and social policies to offset demographic pressures",
      "content": "- Policies to counteract expected declines in the labor force include:\n  - Closing gender gaps in labor force participation (example cited: Italy and Spain have enacted such reforms).\n  - Globally, only 50 percent of women participate in the labor force, compared with 80 percent of men (Dabla-Norris and Kochhar 2019).\n  - Promoting access to high-quality, affordable childcare to increase labor-force participation of young mothers.\n  - Encouraging older workers to keep working by reconsidering taxes and benefits that favor early retirement.\n- In countries with inadequate retirement systems, policy priorities include:\n  - Expanding coverage of social security systems.\n  - Raising social pensions (pure cash transfers to the elderly).\n  - Enhancing targeted social assistance transfers to reduce old-age poverty and household precautionary saving (examples: China and the Republic of Korea cited as having high saving rates and social security systems with low coverage and generosity)."
    },
    {
      "heading": "Combined policy implications",
      "content": "- Pension system, financial, and labor-market policies together can:\n  - Damp projected declines in national saving.\n  - Improve sustainability of pension systems.\n  - Ensure decent living standards in retirement.\n\nDavid Amaglobeli, Era Dabla‑Norris, and Vitor Gaspar; F&D Magazine, March 2020.\n\n---\n\n Content in this bundle\n\n- التمويل والتنمية\n  - التمويل والتنمية (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - التمويل والتنمية (PDF){rel=\"external\" type=\"application/pdf\"}\n- Envejecer sin empobrecer ● Finanzas y Desarrollo ● Marzo de 2020\n  - Envejecer sin empobrecer ● Finanzas y Desarrollo ● Marzo de 2020 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Envejecer sin empobrecer ● Finanzas y Desarrollo ● Marzo de 2020 (PDF){rel=\"external\" type=\"application/pdf\"}\n- The Impact of Aging Worldwide on Pensions and Public Policy – IMF F&D\n  - The Impact of Aging Worldwide on Pensions and Public Policy – IMF F&D (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - The Impact of Aging Worldwide on Pensions and Public Policy – IMF F&D (PDF){rel=\"external\" type=\"application/pdf\"}\n- 如何让人们体面地老去 - 金融与发展 - 国际货币基金组织季刊 -2020年3月号·第57卷·第1期\n  - 如何让人们体面地老去 - 金融与发展 - 国际货币基金组织季刊 -2020年3月号·第57卷·第1期 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - 如何让人们体面地老去 - 金融与发展 - 国际货币基金组织季刊 -2020年3月号·第57卷·第1期 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/fandd/issues/2020/03/impact-of-aging-on-pensions-and-public-policy-gaspar"
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    "Authors: DAVID AMAGLOBELI, VITOR GASPAR, ERA DABLA-NORRIS",
    "Published: March 1, 2020",
    "Today there are, on average, 3.4 working-age people to support the retirement of every person 65 and older; by 2050 that number is projected to dwindle to just 2.",
    "Japan is already nearly at that point; by 2050 more than 35 other countries (about 7 percent of the world population) will join Japan.",
    "Aging is driven by two main factors: people are living longer and having fewer children.",
    "Demographic stages differ across regions: many Northern Hemisphere countries, particularly Japan, are in a more advanced stage; many African countries are in the early stage.",
    "Countries in advanced stages face a shrinking labor force and higher burdens on pay-as-you-go pension systems; countries in early stages need to create a large number of new jobs every year to absorb a rapidly growing working-age population.",
    "By 2050 there will be stark contrasts between regions (for example, Europe and sub-Saharan Africa).",
    "Life-cycle saving behavior implies societies at more advanced stages of aging are likely to see lower aggregate savings.",
    "Recent IMF research (Amaglobeli and others 2019) shows that in advanced economies both private and public savings (effectively the government fiscal balance) are projected to decline as a result of more pension spending during the next 30 years (all else equal).",
    "Younger cohorts will need to save significantly more and postpone retirement by a number of years to maintain pension benefits similar to today’s retirees.",
    "In emerging market economies and low-income developing countries collectively, relatively young populations will lead to higher private saving; this increase is expected to outweigh an expected decline in public savings due to rising public pension spending.",
    "Pension-system design features materially affect saving outcomes:",
    "Recent reforms aim to contain growth in the number of pensioners by changing key parameters (increase statutory retirement age, tighten eligibility).",
    "Examples cited:",
    "Reforms have also reduced benefit generosity via:",
    "Trade-offs and distributional consequences:",
    "Rethink pension system architecture; one option is public defined-contribution programs (assuming necessary preconditions).",
    "Stimulate voluntary retirement saving through financial-sector instruments; priority differs by financial sector development:",
    "Policies to counteract expected declines in the labor force include:",
    "In countries with inadequate retirement systems, policy priorities include:",
    "Pension system, financial, and labor-market policies together can:",
    "**التمويل والتنمية**",
    "**Envejecer sin empobrecer ● Finanzas y Desarrollo ● Marzo de 2020**",
    "**The Impact of Aging Worldwide on Pensions and Public Policy – IMF F&D**",
    "**如何让人们体面地老去 - 金融与发展 - 国际货币基金组织季刊 -2020年3月号·第57卷·第1期**"
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