Europe’s elder boom and baby bust: Leaders seek innovation to improve retirement security

Business Wire

NEWARK, N.J.--(BUSINESS WIRE)-- Europe’s rising longevity and falling birthrates are pressuring its retirement systems like never before, as its elderly populations grow relative to its working-age populations. By 2050, nearly one in three Europeans will be over the age of 65, a trend that promises to strain the finances of retirees and their families, as well as the societies in which they live.

“Longer life is a gift, but it creates real and profound implications for pension schemes and retirement plans that help people live dignified lives as they grow older,” said Professor David Blake of the Pensions Institute at Cass Business School in the United Kingdom. “Making sure people’s retirement income is both adequate and lasts a lifetime are two of the great challenges of our time.”

To tackle such issues, Professor Blake created and hosts the annual International Longevity Risk and Capital Markets Solutions Conference, referred to this year as “Longevity 14.” This year’s conference, the leading gathering on longevity issues for pension, insurance, capital market, actuarial and academic professionals, as well as policymakers, takes place on September 20-21 in Amsterdam. Leading figures will discuss longevity risk as well as the responses needed by pension funds and insurance companies to manage that risk. Other subjects include intergenerational risk-sharing, and the latest trends in mortality. One key topic: What explains higher mortality rates in recent years, and why are longevity improvements coming at a slower pace than in the recent past?

Amsterdam is an apt location for Longevity 14. The Netherlands has the highest income replacement rate (retirement income as a portion of pre-retirement earnings) among the world’s developed countries (101 percent, OECD 2016), a level greater than Germany (50.5 percent), Japan (40 percent), the United States (49.1 percent), and the U.K. (29 percent). But even the Dutch system is considering major reforms because of the relentless wave of demographic changes that have seen its citizens live longer and its birthrate fall measurably. Many nations are considering shifting more responsibility for retirement away from pension funds and corporations and toward individuals, notably with defined contribution plans.

Amy Kessler, senior vice president and head of Prudential Financial, Inc.’s (PFI) longevity risk transfer business, and a key speaker at the conference, will discuss how nations, including the Netherlands, can support people to save, invest and secure lifetime income, even in retirement systems where individuals are primarily responsible for their own risk. Kessler will discuss how understanding human behavior leads to program design that improves retirement decisions and outcomes. In addition, she will demonstrate that lifetime income solutions can be flexible enough to address an individual retiree’s needs, and prudent enough for insurers and regulators to be confident in their risk profile and management.

“We can create retirement security. It takes time and discipline, but we can do it. For every person we help to achieve financial wellness and a secure retirement, we will dramatically improve the last thirty years of their lives,” says Kessler. “There are best practices we can leverage from work done all around the world to improve the retirement security of real people.”

Since 2005, the International Longevity Risk and Capital Markets Solutions Conferences, organized by the Pensions Institute at Cass Business School, have been the major international events bringing together leading industry and academic representatives, as well as policymakers, to discuss longevity risk, as well as the market and government responses necessary for managing that risk. Since 2011, PFI has sponsored this conference series. The company’s research and thought leadership from this event is widely read among actuaries, insurers, academics and finance professionals.

About Prudential Financial, Inc.

Prudential Financial, Inc. (PFI), headquartered in the United States (NYSE: PRU), is a financial services leader with more than $1 trillion in assets under management as of June 30, 2018, and has operations in the United States, Asia, Europe, and Latin America. The company’s diverse and talented employees are committed to helping individual and institutional customers grow and protect their wealth through a variety of products and services, including life insurance, annuities, retirement-related services, mutual funds and investment management.

Prudential Financial, Inc. of the United States is not affiliated with Prudential plc, a company headquartered in the United Kingdom.

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PFI does not provide legal, regulatory, or accounting advice. An institution and its advisors should seek legal, regulatory, investment and/or accounting advice regarding the legal, regulatory, investment and/or accounting implications of any of the strategies described herein. This document does not constitute an offer or an agreement, or a solicitation of an offer or an agreement, to enter into any transaction (including for the provision of any services).

Insurance and reinsurance products are issued by subsidiaries of PFI and neither PFI nor any of its subsidiaries is authorized to write longevity reinsurance within the European Economic Area.