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Pension Crisis Essay

910 words - 4 pages

`THE DEVELOPED WORLD IS AGEING AND IS THERFORE FACING A PENSION CRISIS`

WORDS COUNT: 797

DATA: 10/03/2012
Going back through human history elderly people were only tiny minority of the population. In 1935 when Social Security Scheme was introduced to prevent poverty in old age elderly people accounted for only 3 to 4%of the population. Nobody suspected that in the future the developed world would face pension crisis caused by shifting demographic. Rising longevity and falling birth rates would cause a lower ratio of workers per retire,which will result in difficulty in paying for state or federal pension. Nowadays people are living longer than ever before and retirement pensions ...view middle of the document...

By 2050 there will be only 2 workers for every pensioner which will lead to a possible pension crisis in the future.

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Another reason for demographic transition is raising longevity, reflected in an increase in the number of old people. Today elderly people constitute 16% of developed countries population; there are predictions that it will increase to 30% by 2050.Rising life expectancy is a result of higher living standards, better sanitation, improved nutrition as well as better control over epidemics. Those are the reasons why people are living longer; which increases the number of elderly people. Jackson and Howe, (2008) point to estimated increase in life expectancy from 76 years at present to 83 years by 2050 in the developed world. An aging global population will exert pressure on public budgets such as pensions and health care. Working adults will have to finance extra spending for pensions and health care by paying higher taxes to government. This is because the principle of Public Pension Pay As You Go model is that today workers’ pay for today pensioners in believes that this will continue when the time comes for the next generation to do the same.However Jackson, (2002) claims that at present public retirement system is crumbling. Even though people are living longer the retirement rate in most of the countries stayed the same as well as the retirement age has not been raised. The developed world is ageing and reforms have to be made to prevent the future generations from pension crisis.

As a possible solution the retirement age should be increased to 68 years. “There also should be an increase of the number of contributed years needed to qualify for a pension” (Slater, 2008) “Young people mostly accepted that they will have to work for longer and...

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