Cost of ageing rising faster than expected

2012-04-12 08:19

kalahari.com

Washington - People worldwide are living three years longer than expected on average, pushing up the costs of ageing by 50%, and governments and pension funds are ill prepared, the International Monetary Fund said.

Already the cost of caring for ageing baby boomers is beginning to strain government budgets, particularly in advanced economies where by 2050 the elderly will match the numbers of workers almost one for one. The IMF study shows that the problem is global and that longevity is a bigger risk than thought.

"If everyone in 2050 lived just three years longer than now expected, in line with the average underestimation of longevity in the past, society would need extra resources equal to 1% to 2% of GDP per year," it said in a study to be released in its World Economic Outlook next week.

For private pension plans in the United States alone, an extra three years of life would add 9.0% to liabilities, the IMF said in urging governments and the private sector to prepare now for the risk of longer lifespans.

Demographers for many years have assumed that the lengthening of lifespans would slow in developed countries. But with continual advances in medical technology, that has not happened as acutely as expected. In emerging economies, rising standards of living and the expansion of health care also are adding to lifespans.

To give an idea of how costly this could prove, the IMF estimated that if advanced economies were to plug the shortfall in pension savings of an extra three years immediately, they would have to stash away the equivalent of 50% of 2010 GDP, and emerging economies would need 25%.

These extra costs fall on top of the doubling in total expenses that countries can expect through 2050 from an aging population. The faster countries tackle the problem, the easier it will be to handle the risk of people living longer, the IMF said.

Steps to take

These estimates cover only pensions. They do not account for healthcare costs, which also rise the longer someone lives.

In a December 2009 study, the MacArthur Reearch Network on Aging estimated that Americans are living between three and eight years longer than commonly expected, adding $3.2 trillion to the Medicare and Social Security, the government-backed healthcare plan for the elderly and pension program.

In North America and advanced Europe, lifespans increased by eight years between 1970 and 2010, and are projected to increase by an additional four years through 2050 - that's about five weeks more per year.

At the same time old-age dependency, or the ratio of population over 65 to those in the prime working ages of 15 to 64, is expected to increase from 24% to 48% of the total population in advanced economies by 2050 - in other words roughly one worker for every retired person.

Emerging Europe has seen lifespans grow more slowly by 1.1 years in the 40 years to 2010 but can expect longevity to rise sharply by 6.8 years in the next 40 years, the IMF said. For emerging economies, their old-age dependency ratios are expected to rise from 13 percent today to 33% by 2050.

Steps governments can take to manage the risk of people living longer are to raise the retirement age, increase taxes to fund public pension plans and lower benefits - all steps most advanced economies are already considering.

They also could help the private sector by educating citizens better on how to prepare for their retirements and by promoting retirement products that protect people against the risk that they outlive their assets.

"Although longevity risk is a slow-burning issue, it increases the vulnerability of the public and the private sector to various other shocks," the IMF said in its study.

Read more on:    imf  |  us
NEXT ON NEWS24X
SHARE:

Read News24’s Comments Policy

24.com publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
0 comments
Add your comment
Comment 0 characters remaining
 

Inside News24

 
/News

Jobs in Cape Town [change area]

Property [change area]

Travel - Look, Book, Go!

Magical Massinga

Spend 5 nights at the gorgeous Massinga Beach Lodge in Mozambique and only pay for 4 from R13 220 per person sharing. Includes return flights, accommodation, transfers and romantic turndown. Book now!

Kalahari.com - shop online today

Camping gear!

We’ve got all your camping must have’s right here at mind blowing low prices. Check them out now!

Herbex – buy 3 & get 1 free!

Fat burn packs, appetite control chewies, stretch mark cream and more. Offer valid while stocks last. Shop now.

30% off Jinger Jack handbags

Spice up your wardrobe and save 30% on stylish Jinger Jack handbags. Offer valid while stocks last. Shop now!

Buy 3 books & pay for 2

The cheapest of the 3 books will be free. Offer valid while stocks last. T&Cs apply. Shop now!

Deal of the week!

Hisense 40” Full HD LED Television now R3999. Offer valid while stocks last. Buy now!

OLX Free Classifieds [change area]

Samsung Galaxy s4

Mobile, Cell Phones in South Africa, Western Cape, Cape Town. Date October 24

Best bargain in big bay

Real Estate, Houses - Apartments for Sale in South Africa, Western Cape, Cape Town. Date October 25

VW Golf 6, 1.6 Trendline (Excellent condition)

Vehicles, Cars in South Africa, Western Cape, Cape Town. Date October 25

Horoscopes
Aquarius
Aquarius

Today is a good day to network and share your ideas and thoughts with your colleagues and friends. Information overload is...read more

There are new stories on the homepage. Click here to see them.
 
English
Afrikaans
isiZulu

Hello 

Create Profile

Creating your profile will enable you to submit photos and stories to get published on News24.


Please provide a username for your profile page:

This username must be unique, cannot be edited and will be used in the URL to your profile page across the entire 24.com network.

Settings

Location Settings

News24 allows you to edit the display of certain components based on a location. If you wish to personalise the page based on your preferences, please select a location for each component and click "Submit" in order for the changes to take affect.








Facebook Sign-In

Hi News addict,

Join the News24 Community to be involved in breaking the news.

Log in with Facebook to comment and personalise news, weather and listings.