Asians must wake up to the hidden costs of retirement
It is no secret that global debt levels are rising, and now stand above 300% of overall gross domestic product, to the consternation of at least some investors.
Less well known is the equally disturbing fact that retirement liabilities — future commitments covering pensions, health and social care costs — are also rising rapidly and, in some countries, they already dwarf current debt levels.
Today, this is primarily a problem for the developed world, including the U.S., Europe and Japan. But the very rapid aging of Asia’s population, means that the region as a whole could face even bigger challenges than the West, where demographic change came much more slowly giving more time to adjust.
Above-average economic growth in Asia gives the region the chance to develop cost-effective and economically sustainable ways of financing the retirements of increasing numbers of people with ever-rising life expectancy. But Asian governments cannot delay in dealing with problems ranging from unacceptable early retirement ages, overgenerous pensions (including in China), a historic dependency on families caring for their elders, and poorly managed public investment funds.
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