In many countries around the world, there are growing gaps in pension coverage and increasing numbers of people are not saving enough to maintain their standard of living when they retire. At the same time, many maturing economies are faced with rapidly ageing populations and social security systems that are both unaffordable for the government and insufficient for the recipients.
The statistics are worrying. Most company pension schemes have seen their finances suffer over the last year, and according to a recent survey by Hewitt Associates, pension plan assets on a global level plummeted by US$4 trillion between the last quarter of 2007 and the first quarter of 2009.
The world's largest pension funds were far from immune to the financial crisis and have been set back a number of years. Despite some pension funds having fared better than many other funds, they will now be focusing even more on risk management and reassessing their governance arrangements to ensure investment returns are more secure in future.
There is also a growing inequality in pensions. While the average employee's pension rights are getting worse, many company directors remain in gold-plated final salary schemes, where they take fewer working years to accrue lucrative pensions.
Transparency and education are essential. Children need to be educated at a young age to understand financial issues, and there should be full transparency both with the employee and the citizen regarding the value of their pensions. In many countries in the West, especially the US and UK, there has to be a cultural shift towards a savings economy and people need to take responsibility for providing for their old age.
However, it is currently the case that public confidence in pensions and the financial markets is at an all-time low. This is unlikely to encourage people to take out pensions or invest time in gaining a thorough understanding of them.
The statistics are worrying. Most company pension schemes have seen their finances suffer over the last year, and according to a recent survey by Hewitt Associates, pension plan assets on a global level plummeted by US$4 trillion between the last quarter of 2007 and the first quarter of 2009.
The world's largest pension funds were far from immune to the financial crisis and have been set back a number of years. Despite some pension funds having fared better than many other funds, they will now be focusing even more on risk management and reassessing their governance arrangements to ensure investment returns are more secure in future.
There is also a growing inequality in pensions. While the average employee's pension rights are getting worse, many company directors remain in gold-plated final salary schemes, where they take fewer working years to accrue lucrative pensions.
Transparency and education are essential. Children need to be educated at a young age to understand financial issues, and there should be full transparency both with the employee and the citizen regarding the value of their pensions. In many countries in the West, especially the US and UK, there has to be a cultural shift towards a savings economy and people need to take responsibility for providing for their old age.
However, it is currently the case that public confidence in pensions and the financial markets is at an all-time low. This is unlikely to encourage people to take out pensions or invest time in gaining a thorough understanding of them.
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