The Political Economy of State-Based Pensions: A Focus on Innovative Reforms

1. Introduction

The phenomenon of population ageing will have profound consequences for governments and societies all over the world, and not just for pension systems. Capital flows are likely to shift dramatically, as older societies sell their assets to younger ones to finance consumption in retirement. Worldwide immigration flows may accelerate, as older, developed nations become more dependent on workers from abroad to perform jobs that cannot be filled with domestic employees alone. The balance of geopolitical power may also shift over time, as emerging and younger powers become more dominant economically, allowing them to demand a greater say in world political affairs.
But it cannot be denied that the implications of population ageing are seen first and most clearly in the long-term projections of state-based pension systems. In a sense, actuarial projections of pension systems were, and are, canaries in the coal mine, providing advance warning of the coming demographic shift that will fundamentally alter the political and economic landscape.
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