Link the increase in retirement age to longevity automatically, cutting benefits for future public and share risks with private pension plans are some of the recommendations of the IMF to control the rising costs due to aging.
“The risk linked to longevity is an issue that requires more attention and has been underestimated (…). A key reform is to allow the retirement age would go up to the expected longevity,” the IMF in one of chapters of its Global Financial Stability Report.
Economist of the International Monetary Fund (IMF) and the study coordinator, Erik Oppers, explained at a press conference that “countries should raise the retirement age” through a “dynamic and automatic.”
Thus assured, would remove the “political difficulties” for governments to negotiate the retirement age each increase in life expectancy.
If the average life expectancy increased by 2050 three years on the current, aging costs increase by 50%, says the report, which analyzes the financial risks linked to increased life expectancy in the world.
The IMF puts the sum total of these additional costs “tens of billions of dollars.”
The Fund warned that much of the data they work with governments to “underestimate” the current growth rate of global longevity and outdated forecasts are used, so that their calculations include fewer actual expenditures.
“They have small forecasting errors that add up over time to become potentially significant. This has happened in the past,” the study authors emphasize.
In the current context of fiscal adjustment in which are embedded many advanced economies, the consequences are much more severe.
“These risks threaten to undermine fiscal sustainability in the coming decades, and complicate efforts to consolidate in response to current fiscal difficulties,” the three economists international organization.
Among the recipes proposed by the Fund, aside from the automatic lifting of the retirement age, “to increase contributions to retirement plans, with cuts in future benefits.”
States also must “share the risk with the organizers of the pension plans of private sector and individuals, and promote the growth of markets for the transfer of these risks.”
The Fund noted that this risk, which has not been given the “necessary care” not only affects governments through public pension and Social Security, but also has implications for the global economy through the private companies that offer retirement plans and insurance companies for life.
The IMF also submitted another chapter of its financial report, which provides for an increase in prices of financial assets considered safe, such as U.S. Treasuries or German bonds, the result of the increasing demand for these assets and the consequent shortages in a climate of extreme financial volatility.
According to the international organization, 2016, the entire projected sovereign debt, 16%, ie the equivalent of about nine billion dollars, “could no longer be considered safe assets.”
The director of the IMF Monetary Affairs, Jose Vinals, presented the report at a press conference and stated that “the price of the security will increase in coming years.”
However, the study coordinator, Laura Kodres, said that “the adjustment process is not bad, because the pre-crisis prices were too low.”
This report presented today are part of comprehensive financial study will be presented next week as part of the “Global Economic Forecasts”, which the IMF will release as part of their spring meetings to be held from 20 to 22 April in Washington.