Global Pension Crisis: Unfunded Liabilities and How We Can Fill the Gap

CHAPTER 12

A Peaceful Night's Sleep

Let's review the state of affairs. There is a nightmarish scenario awaiting us just around the corner. The Baby Boom generation is just graduating into retirement at its leading edge (those who can afford to). The situation looks bleak in terms of how much money the world (especially the developed world) has set aside for the retirement of this bulge population in the demographic continuum. It looks worse for some countries than others with a key differentiator being both the amount already saved and the general demographic trends of how many retirees there are going to be in the next 40 years versus the working population in those countries. Unfortunately, these demographics hold two disadvantages:

1. The sheer number of retirees versus workers.

2. The one potential saving grace for the budgets of these economies would be economic growth, but that is likely to be significantly curtailed by declining population. The correlation between the two is unavoidable.

But wait; at least we now understand the issue and the underlying math. And the world has wised up since the postwar era when all these defined benefit plan promises were made. Between the creation of ERISA and similar protective legislation promulgated in the United States and around the world, we are fairly protected now (reducing the fraudulent and even non-prudent leakage has great value). We have spent a great deal of time promoting defined contribution plans as a logical replacement ...