I’m writing this at around 17:30 UK time, but I’m actually on an airplane heading to Seattle, Washington, to attend my sister’s wedding. As always, travelling makes you think about how small the globe has become. I can get on a plane in London and ten hours later I’m across the world on the West Coast of the US!
As the world shrinks, our similarities and differences become clearer. We are all grappling with ageing populations and what that means for funding state pensions. Many countries are struggling with the long-term affordability of Defined Benefit promises. But the ways we respond are often very different.
Take state pension ages, for example:
- The UK and Australia are steadily increasing retirement ages to 67 and beyond.
- Meanwhile, in France, attempts to raise the pension age sparked mass strikes and national protests. It is now only rising by two years, to age 64, by 2030, with no plans for later increases.
Or saving systems:
- In the US, the 401(k) model puts retirement saving squarely on the individual’s shoulders.
- In Denmark, occupational pensions are often mandatory and well-integrated with state provision.
Public reactions vary too:
- In Australia, employers make compulsory superannuation contributions, and the system is broadly accepted.
- In the UK, employees are auto-enrolled into pensions; despite some grumbling, participation remains high.
- In some countries, pension reform is politically explosive; in others, it quietly evolves.
I’m not sure anyone can say they have truly cracked the pensions puzzle. For years, we looked admiringly at the Netherlands’ Collective Defined Contribution system, only for it to be dismantled and replaced with a more individualised approach. Singapore’s mandatory savings scheme is often cited as a model of good practice, but even there, around 30% of older Singaporeans have insufficient retirement savings, particularly among lower-income groups.
Meanwhile, in the UK and beyond, the best pension minds are wrestling with the next wave of challenges:
- How do we manage millions of small deferred member pots left behind by a mobile workforce?
- How do we help young people access affordable housing so they can avoid high housing costs in retirement?
- How do we encourage higher saving rates in an era of squeezed household budgets?
Culture, regulation, history, and economics all play a role in shaping pension systems. Globalisation has allowed us to learn from each other, but it has also highlighted just how deeply local our solutions must be. Perhaps that’s the real lesson of a shrinking world. In pensions, as in life, there are no one-size-fits-all answers. Only shared challenges, and a few good ideas worth borrowing.
Leave a Reply