Pension Economics and the Four Pillars: Success in a Never-Ending Challenge

1. Introduction

Pensions economics is a complex field to work in, not least because of the many dimensions it covers beyond the already complex economic questions, particularly in the social and political sphere. The question as to how best (whatever this might mean in the discussion in question — and there has been a lot of confusion in the past over the target definitions) set up, finance and organize old-age security has been with us in its modern form for about a century, since Bismarck’s landmark introduction of the German social security schemes at the end of the 19th century.
It can only be described as odd that arguably the biggest achievement of modern societies during the 20th century, an enormous improvement in the mean life expectancy in nearly all countries, is often perceived as one of the fundamental ‘problems’ that we currently have to solve — from an economic but also social point of view3. We routinely speak about the ‘ageing’ of populations in a manner that, where not negative, is full of adverse and antipathetic connotations. Tabloid headlines range from “The Ageing Problem” to “Old-Age Time Bomb”. The fact that the wider public is being made aware of a complex set of issues that our old-age security systems and our societies at large are and will be facing is certainly to be welcomed. However, we must be very careful about avoiding two things:
a) allowing the tone of the debate to further entrench in the public mind’s existing misconception, namely that our societies are ageing in the sense of increasing the existing proportion of elderly, presumably handicapped, more frail and invariably more dependent people; and
b) falling into the trap of sticking to some traditional and long-established misconceptions that can cloud our understanding of the true problems and potential solutions to the extent of making us work on the right issues in the wrong way.
We have to remember that solutions to the problems which our current (and future) systems will encounter can only succeed and be of lasting and positive impact if they are efficient enough to solve the problem at hand while at the same time being robust enough to survive a decent period into the future without causing undue stress to the social or the financial fabric.
The Geneva Association, the leading global think-tank of the private industry, has been researching the issues of old-age security and pension economics almost since its inception in 1973. In the following article, we will explain some of the initiatives that have marked the past and some activities that we are currently pursuing.
“Not many issues will have such a profound and long-term impact on our lives as the intelligent organization of an employment and retirement system that takes into consideration the key demands of a modern society benefiting from an extraordinarily increasing life-expectancy”. Patrick M. Liedtke, Secretary General of The Geneva Association, in discussion with the German Chancellor Gerhard Schröder.

2. Summary of the Four Pillars Research Programme

The Four Pillars Research Programme of The Geneva Association is a research programme set up in 1987 with the aim of studying the key importance to the new service economy of Social Security, Insurance, Savings and Employment. The programme focuses on the future of pensions, welfare and employment. The main triggers for this programme have been:
• Changing demography and its impact on financing,
• Complementarity between social security and insurance,
• The changing perspective on the welfare state, employment and the life cycles.
The Geneva Association launched its Four Pillars Research Programme with a view to identifying possible solutions to the issue of the future financing of pensions and, more generally, for organizing social security systems. Demographic trends — especially increased life expectancy — could be seen as positive if we were able to devise ways of enabling ‘ageing in good-health populations’ to make a valid economic and social contribution to the functioning of our service economies over the decades to come.
The research programme has had four main objectives:
• analysis of the key elements in organizing old-age security systems;
• research of conditions for multi-pillar systems of pension financing;
• encouragement of multiple and complementary solutions to the challenges of a changing welfare state;
• understanding the role of insurance in the provision of old-age security systems.
Over the years, our main activities have included:
• Undertaking research on key issues and contributing to research undertaken by international networks (European Commission, GINA, Avenir Suisse, etc.).
• Stimulating pension and similar experts in reconsidering main-stream research and encouraging alternative views and approaches.
• Organizing seminars and conferences on these topics and participating in international events (European Commission, OECD, CSIS, insurance companies, national governments, universities, research centres, etc.).
• Publishing numerous materials: books, special issues of The Geneva Papers on Risk and Insurance (one issue every two years), The Four Pillars Newsletter (two a year, 34 to this date), dedicated issues of our working papers Etudes & Dossiers, brochures in English and French for a wider public, contributions to academic and professional reviews, etc.
The medium and long-term impact of the Four Pillars Research programme for the insurance sector is manifold and includes achieving:
• a better knowledge of demographics and life expectancy prospects, and of the economic challenges and opportunities of an ‘ageing’ society;
• a better knowledge of social security, in particular pension issues and reforms, and thinking on the key role insurance can play in organizing systems;
• a better assessment of the importance of developing and reforming the Four Pillars of pensions worldwide and of the potential for the industry;
• a better assessment of the positive measures to deal with the ‘ageing’ of the workforce in our economies and in particular in the insurance sector.

1 Article for the Risk Institute’s (Trieste) special publication on the new welfare state, January 2005.
2 Patrick M. Liedtke: Secretary General and Managing Director, The Geneva Association (
3 See e.g. the special issue of the Geneva Papers on Risk and Insurance – Issues and Practice on Pensions and Employment, October 2003, Vol. 28, no. 4, London; or ‘Driving Potential Pension Solutions’ by Patrick M. Liedtke in: Insurance Research and Practice, vol. 16, part 2, July 2001, The Chartered Insurance Institute, London.

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