How can we deal with the fact that people are living longer? Should we earmark a greater portion of our private savings for our retirement?
These questions were the subject of a debate at an international conference (with no politicians) organised by Afi Escuela de Finanzas. And all the answers were unanimous: we need to react quickly to a huge challenge that requires an immediate solution.
London School of Economics’ Public Policies Professor, Nicholas Barr, thinks the answer is to reduce monthly pensions, delay retirements, make bigger social contributions or savings, and increase productivity. Or a mix of all these options.
For the experts, talking about using private savings for retirement should not be a taboo. However much politicians want to avoid this debate, promoting private savings for retirement is a measure which should be implemented.
We should also recognise that, as James Vaupel, Director of The Max Planck’s Demographic Institute has pointed out, gains in life expectancy are lineal and show no signs of slowing down. So people will live longer and healthier lives. This means that we will work more years, but less hours.
Another key aspect for the experts lies in extending the range of savings products on offer ahead of retirement. Traditional products will soon be subject to radical changes as a consequence of new market regulations. Options are going to multiply, but savers will have to take greater control of their finances and investments. So there are years ahead of intense market developments until new products stabilise and there is a new financial scenario for retirement. And this is where financial education will play a crucial role.