Post by rowdy on Apr 11, 2012 21:30:36 GMT 7
Some good old interfering in our domestic affairs from the crooks (bankers) down at the IMF. Apparently longevity is a financial risk to Governments.
Pension age has to be increased, warns IMF
THE life expectancy of 60-year-olds in Australia is increasing at the rate of nine years every 50 years, threatening to overwhelm the sustainability of pension schemes and retirement funds, the International Monetary Fund has warned.
In a tough message to governments, the IMF has told them to move fast to lift the pension age in line with rising longevity - and allow retirement funds to reduce retirees' benefits to match the income available.
In an early chapter from its half-yearly Global Financial Stability Report, to be released next week, the IMF says that, in just 20 years, life expectancy in Western countries, including Australia, has risen by three years more than was forecast at the time.
While this ''has obvious benefits'', the IMF says, it also has less obvious costs - and they could be massive.
''Unexpected longevity, while clearly beneficial for individuals and society as a whole, is a financial risk for governments and defined-benefit pension providers, who will have to pay out more in social security benefits and pensions than expected,'' it warns.
''It may also be a financial risk to individuals, who could run out of retirement resources themselves.
''If individuals [by 2050] live three years longer than expected, in line with underestimations in the past, the already large costs of ageing could increase by another 50 per cent, representing an additional cost of 50 per cent of GDP in advanced economies.''
The cost of government services rises sharply with age. Half the beds in public hospitals are occupied by over-65s, who form just an eighth of the population. People aged 75 to 84 visit the doctor three times as often as those aged 45 to 54, and run up five times the pharmaceutical bills.
The older people are, the more likely they are to be on the pension - and ultimately, in a nursing home.
Official forecasts have underestimated growth in life expectancy because they assume that the rapid growth in longevity will level off - but the IMF points out that in fact it never has. Medical advances such as treatments for AIDS and some cancers keep raising life expectancy, even for 80-year-olds.
With the proportion of people of retirement age now growing quickly, further rapid growth in longevity could overwhelm public and private retirement funds.
Looking at US pension funds, the IMF found that if life expectancy rises an extra three years, it would increase their liabilities by 9 per cent without a matching rise in assets, capsizing their balance sheets.
It is urging governments to rapidly:
Lift the pension age to match the rise in lifespans, thus capping the time people spend in retirement. Australia has flagged an increase in the pension age, but only from 65 to 67, and only after 2017.
Give pension and retirement income funds the ability to reduce defined benefits if longevity rises faster than expected. Germany, Japan and other Western countries have already introduced such reforms for their pension schemes. Germany also allows benefits to be cut if funds do not have the income to pay them.
Set up mechanisms allowing retirement funds to transfer their ''longevity risk'' to other institutions.
Read more: www.smh.com.au/national/pension-age-has-to-be-increased-warns-imf-20120411-1wsdd.html#ixzz1rk4N0Ijb
Pension age has to be increased, warns IMF
THE life expectancy of 60-year-olds in Australia is increasing at the rate of nine years every 50 years, threatening to overwhelm the sustainability of pension schemes and retirement funds, the International Monetary Fund has warned.
In a tough message to governments, the IMF has told them to move fast to lift the pension age in line with rising longevity - and allow retirement funds to reduce retirees' benefits to match the income available.
In an early chapter from its half-yearly Global Financial Stability Report, to be released next week, the IMF says that, in just 20 years, life expectancy in Western countries, including Australia, has risen by three years more than was forecast at the time.
While this ''has obvious benefits'', the IMF says, it also has less obvious costs - and they could be massive.
''Unexpected longevity, while clearly beneficial for individuals and society as a whole, is a financial risk for governments and defined-benefit pension providers, who will have to pay out more in social security benefits and pensions than expected,'' it warns.
''It may also be a financial risk to individuals, who could run out of retirement resources themselves.
''If individuals [by 2050] live three years longer than expected, in line with underestimations in the past, the already large costs of ageing could increase by another 50 per cent, representing an additional cost of 50 per cent of GDP in advanced economies.''
The cost of government services rises sharply with age. Half the beds in public hospitals are occupied by over-65s, who form just an eighth of the population. People aged 75 to 84 visit the doctor three times as often as those aged 45 to 54, and run up five times the pharmaceutical bills.
The older people are, the more likely they are to be on the pension - and ultimately, in a nursing home.
Official forecasts have underestimated growth in life expectancy because they assume that the rapid growth in longevity will level off - but the IMF points out that in fact it never has. Medical advances such as treatments for AIDS and some cancers keep raising life expectancy, even for 80-year-olds.
With the proportion of people of retirement age now growing quickly, further rapid growth in longevity could overwhelm public and private retirement funds.
Looking at US pension funds, the IMF found that if life expectancy rises an extra three years, it would increase their liabilities by 9 per cent without a matching rise in assets, capsizing their balance sheets.
It is urging governments to rapidly:
Lift the pension age to match the rise in lifespans, thus capping the time people spend in retirement. Australia has flagged an increase in the pension age, but only from 65 to 67, and only after 2017.
Give pension and retirement income funds the ability to reduce defined benefits if longevity rises faster than expected. Germany, Japan and other Western countries have already introduced such reforms for their pension schemes. Germany also allows benefits to be cut if funds do not have the income to pay them.
Set up mechanisms allowing retirement funds to transfer their ''longevity risk'' to other institutions.
Read more: www.smh.com.au/national/pension-age-has-to-be-increased-warns-imf-20120411-1wsdd.html#ixzz1rk4N0Ijb
