LONDON (Financial Times) - The UK should prepare now for a workforce of 80-year-olds and impose faster pension age rises to avoid the pension savings gap blowing out to £25tn, according to the World Economic Forum.
The Geneva-based organization predicted a quadrupling of the current savings gap of $8tn to $33tn (£25tn) by 2050 if urgent action was not taken to tackle the challenges of an ageing population.
In a strongly worded report, which compared the global pensions crisis with the threat of climate change, the WEF identified the UK as one of several countries facing a "pensions time-bomb”.
"The anticipated increase in longevity and resulting ageing populations is the financial equivalent of climate change,” said Michael Drexler, head of financial and infrastructure systems with the World Economic Forum. "We must address it now or accept that its adverse consequences will haunt future generations, putting an impossible strain on our children and grandchildren.”
According to the WEF, ageing populations, falling birth rates and gaps in access to pensions were the main sources of the widening "pension gap”, defined as the shortfall in money needed for a retiree to keep their income at 70 per cent of pre-retirement levels.
The gap widens when income from state, personal and workplace pensions is inadequate to meet this replacement rate. To alleviate a looming pensions crisis, the WEF recommended a retirement age of 70 become the norm by 2050 in countries where future generations have life expectancies of more than 100, such as the UK.