Poorly Funded Retirement Programs: a Global Problem

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A new study warns of an international “retirement crisis” with many pension and savings programs unfunded or underfunded in both the public and private sectors.

“Social Security systems, national pension plans, private sector pensions, and individual retirement accounts are unfunded or underfunded across the globe,” says the report by Citigroup Inc. “Government services, corporate profits, or retirement benefits themselves will have to be reduced to make any part of the system work. This poses an enormous challenge to employers, employees, and policymakers all over the world.”

Citi estimates that unfunded and underfunded government pension liabilities for 20 OECD countries total $78 trillion, noting that this is far above the $44 trillion in total published national debts of those countries.

The report adds that “corporations have also not consistently met” their pension obligations. Most corporate pension plans in the U.S. and the U.K. for example, are underfunded.

Key factors cited in the overall problem are health care improvements, longer life expectancies, and smaller working-age populations.

Among the report’s recommended solutions: Publishing underfunded government pension obligations, raising the retirement age, providing greater incentives for private pension savings and encouraging plan sponsors to make their full pension contributions on time.

External links:
The Coming Pensions Crisis (Citi)
Study Finds Public Pension Promises Exceed Ability to Pay (NYT)
Pensions Outlook 2014 (OECD)

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