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This unprecedented demographic change leads to a widening gap between the social security contributions collected and the pension payments made, thus increasing the burden on public finances. Most countries have already introduced reforms to increase resilience of public pensions, but these have generally resulted in lower expected pension benefits and/or a higher retirement age. In turn, this entails a significant risk of old-age poverty.
In addition, pension adequacy is also a particular concern for certain categories of the population, such as the rising number of workers in non-standard forms of employment, who are likely to have more limited access to public pension and social protection systems.
GFIA therefore takes the view that that governments around the world should further foster funded pensions alongside traditional Pay-As-You-Go public pensions to ensure pensioners throughout the world benefit from adequate pension.
GFIA is convinced that life insurers, as main providers of occupational and personal pensions, can play a greater role in this globally ageing society. Insurers are able to offer a wide range of pension and insurance products tailored to embrace the different savings cultures, demands and needs across the world.
However, for insurers to fulfil their role, i.e. to offer attractive pension products with long-term perspective to citizens, the right conditions need to be in place. Specifically, the regulatory framework applicable to insurers should strike the right balance between prudential and market development objectives. Concretely, this means that the capital required for life insurance products should reflect prudent consumer protection objectives, but also ensure that investments in long-term assets (eg infrastructure) should not be discouraged by regulation.
This issue is particularly important given the role of insurers as institutional investors. With a better ability to invest in long-term assets, insurers would be in a position to play a greater role in the area of quality infrastructure investment, which is another priority for the G20 Finance Track under the Japanese presidency.
In order to tackle the ageing issue, especially to prevent old-age poverty, GFIA is of the view that multi-pillar pension systems, consisting of funded private pension pillars complementing public pensions, should be further fostered. Indeed, such systems have for years now proven to be the most effective way to ensure both the sustainability of pension systems and the adequacy of retirement provision and should therefore be promoted throughout the world.