Home Special report – Pensions: an inevitable paradigm shift

GEAB 142

The monthly bulletin of LEAP (European Laboratory of Political Anticipation) - 15 Feb 2020

Special report – Pensions: an inevitable paradigm shift

For the last ten years we have been told that, while the world economy took a hit during the Global Financial Crisis (GFC) of 2008/9, it is now recovering well. Mario Draghi did his magic, the Fed saved the day and American securities, in particular, are now going from strength to strength. Climbing well above their 2007 highs, the New York Dow and S&P500 have shored up any investment fund deficits and secured the capitalist promises of comfort and security for the retiring baby boomer generation. However, while that may be true for many wealthier investors in the USA, it is not the whole story. Many who were once considered the middle classes of Europe and across the democratic west are now facing a new decade of uncertainty as negative bond yields have hollowed out the foundations beneath many national, corporate and private pension provisions.

We must now ask if the recent search for yield and the growth in index funds achieved anything more than building a new house of cards? One that, in time, will undermine the very security that our pensions were intended to provide. If so, then can we see this as an opportunity to re-evaluate our expectations for old age – to innovate and bring in change?

Taking a step back, pausing to see the bigger picture, leads us to anticipate that the coming year will, in fact, be possibly seen as the last “hurrah” of the present retirement paradigm. Assaulted on all sides by declining investment income, fiscal deficits, populist revolts and waning immigration, western economies will be forced to revisit the whole concept of retirement. It is possible that we are on the verge of a much-needed transition towards a flexible, yet perhaps uncertain, future for our ageing populations.

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