The Pension Conundrum Around the Ageing World is Typically Worrisome!

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  • This phenomenon is not only reflected in some of the most advanced nations but also in every developing and many poor country as well. Mind you, it is the responsibility of the state to take care of the needs of its people, especially the retired and aged population, who would be expecting not only monetary support in terms of pensionary benefits but also healthcare needs. Remember that retired personnel would have served the country during their most productive years contributing to the growth of the nation to the best of their abilities. With the unbelievable improvements in the field of medicine ensuring our life expectancy grows manifold, the government around the world are bound to grapple with the huge pensionary outflow.

PC: freepik

  • As you are aware, the Indian government – both the centre and the states – has a huge budgetary allocation for the pensionary needs of retired employees. In the absence of satisfactory social security apparatus in India, millions of retired employees entitled to the pensionary benefit are growing in numbers. No wonder, the calls for quotas and reservations in government jobs have not come down one bit, but keep growing by the day, despite the private sector making tremendous progress in literally every field. Let’s look at how a developed country like France is bracing for massive protests led by its unions against highly unpopular pension reforms. Note that the country’s pension system is one of the most generous in the world.
  • However, it has long been known to be unsustainable. The entire system cost Paris just under 14% of the GDP in 2021. Plus, a report last year by the Pension Advisory Council – a French state body – predicted the system will run into a deficit in the not-too-distant future. For example, by 2027 the pension deficit will be almost $12 billion. While this may not seem high compared to the total pension outgo of $381 billion, it needs to be juxtaposed with the fact that French public debt reached record-high levels of 115% of the GDP last year. Additionally, the Ukraine war has put extra strain on European economies that are not battling high inflation and energy crunches. So, President Macron is right in seeking an increase in the minimum retirement age from 62 to 64.

PC: freepik

  • Given increasing life expectancy, the ratio of French senior citizens to the working-age population is slated to jump from 37:100 in 2020 to 55:100 by 2050. And Franch is not alone. Faced with burgeoning public debt and demographic decline, Germany, Spain, the Netherlands, and Belgium all plan to lift the minimum retirement age to 67 over the coming years – the UK will lift it to 68. This is a classic catch-22 situation for France while playing a more robust geopolitical role and also boosting its economy to make it more vibrant. There is a lesson here for India too as the burgeoning pension bills will be a big fiscal concern going forward. And Indian politicians’ move to revert to the old pension scheme and discard the new pension scheme is simply untenable.