Report on an ageing population

The World Economic Forum has just published “The Future of Pensions and Healthcare in a Rapidly Ageing World: Scenarios to 2030”. 
 
 “A rapidly ageing world population will have profound implications for both developed and developing countries,” said M. Michel Burns, Chairman and Chief Executive Officer of Mercer, who chaired the Advisory Board of the World Economic Forum project.

“How elderly people are regarded and treated is the hallmark of a civilized society. Mercer has worked with the World Economic Forum on this timely report because a secure retirement and access to health care in older age are significant forces for social cohesion. This, in turn, is essential to global and economic stability.”
 
The ratio of elderly persons to the working age population will dramatically increase in coming years in many parts of the world.

With a declining labor force, an ageing population and looming health care and pension benefit costs, employers will play a critical role in shaping public policy and addressing these concerns, Mercer believes.
 
In conjunction with the World Economic Forum report, and influenced by Forum insights and analysis, Mercer has published a special Perspective in which the firm’s leading experts draw upon practical experience consulting in four areas affected by an ageing population.
 
Pension plan design Mercer examines pension plan design under three scenarios identified by the World Economic Forum, 1) The winners and the rest, 2) We are in this together, and 3) You are on your own.

As the harsh realities of funding a traditionally generous social security system for an ageing population are hitting home in many countries, collective thinking in the planning of future pension policies may help to develop systems that produce more equitable and adequate benefits whichever way the world goes.
 
Defined Benefit Plans – implications and action steps for employers
 
Mercer observes that under the “Winners and the rest” scenario, favored employees in developed countries will have good DB benefit security.

In the “We are in this together” scenario, government safety nets will be important in the event of market downturns, while in the “You are on your own” scenario, participants will end up bearing the risk and taking the consequences.

Many, under this last scenario, may face deferral of retirement. But DB plans, whether in a familiar or different form, will have a place in the infrastructure of future retirement provisions, Mercer observes, because “We humans like guarantees.”
 
As the world ages, it seems likely that the funding and provision of health care will become increasingly the responsibility of the private sector and that multinational employers in particular will be forced to play a large and potentially crucial role, Mercer believes.

Governments almost universally are shifting the responsibility for funding and, in some cases, provision, of health care to employers or individuals.

If that prospect of an increased role for employers becomes an inescapable burden, the private sector will have a real motive to address the problems in a thoughtful and effective way, Mercer observes.
 
Given the population trends identified in the World Economic Forum report, it is more important than ever for employers to include an assessment of demographics in their workforce planning.

Workforce planning involves identifying and avoiding potential workforce skills gaps and bottlenecks in key career paths.

Mercer believes employers should consider a number of steps to accommodate an ageing workforce, including rehiring retirees for periods of peak activity, establishing wellness programs targeted at mature employees, considering phased retirement programs, developing talent pools in feeder jobs to critical positions, and implementing retention plans focused on identified at-risk groups. 

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