(June 9, 2014) – Global pension liabilities could reach as much as $25 trillion by 2050, according to a report by Bank of America Merrill Lynch (BoAML).
Sarbjit Nahal, head of thematic investing at the group, said some countries could face “additional costs of up to 50% of GDP” by 2050 if there is an upward revision to longevity assumptions by just one year, citing research from the International Monetary Fund.
More than a fifth of the world’s population will be aged 65 and above by 2050, according to a UN report cited in the BoAML research, while “older persons are projected to exceed the number of children for the first time in 2047”.
“People aged 65 [and over] will outnumber children under 5 for the first time in human history in 2047, and falling birth rates mean that some countries are heading towards a potentially catastrophic decline in population,” Nahal said. “We believe that all aspects of society and the economy need to be viewed through the lens of this demographic transformation.”
In August last year the Canadian Institute of Actuaries asked pension funds in the country to update their mortality tables, a move which was set to increase costs substantially for some schemes.
BoAML’s report was attempting to drum up support for investment in listed companies which could benefit from the rising number of elderly people in both developed and emerging markets. Among the sectors the report highlighted were pharmaceutical and healthcare companies, and financial services companies which provide retirement income products.
Related links: Longevity Hedging Breaks Records in 2013 & Canadian Pensions Face Longevity Hike