Pensions

Here is a factor that is a consequence of a number of macro variables:-

1. Demographics, i.e. Japan need more immigrants
2. Economic management (i.e. what liabilitis a government commits to and how they react to the facts, i.e. borrow more or reduce the liabilities by indexing benefits to life expectancy or developing new solutions, i.e. SIPPS where pension costs are incentivised to be done by the individual via tax breaks)

Funded or unfunded pensions
Funded UK, USA, Netherlands (pension assets as % of GDP is Japan 64%, Britain 101%, Australia 103%, Netherlands 134%)
Unfunded most of Europe (pension assets as % of GDP is Germany 14%, France 5%)

If unfunded, means money comes from workers taxes. If funded, they come from investment income

Many states in the US have a balanced budget mandate. If there are pension shortfalls, cuts have to be made elsewhere to keep the commitment

Tax burden set to rise or quality of retirement package will fall.

Unions are strongest in the public sector. The elder population have a large voting block

Fund management companies benefit from more self invested personal pensions

Older population implies more healthcare services

Targets: FUND MANAGEMENT, HEALTHCARE, ELDERLY SERVICE COMPANIES?

Likely a new institution has to be created to police this issue. Many pension providers are running away from the problem leaving it for future generations to solve by increased tax and contributions. We need pensions to be reviewed annually if if contributions or taxes have to be increased now, they should be increased now!

Should consider pension liabilities as high level senior debt. Hence should be discounted at this rate. Often use AA corporate bond rate. Lower discount rate will make the liability look bigger.

Conclusion
INCREASING SAVING RATE to fund the personal pension

HIGHER TAXES to meet past agreed liabilities

LESS CONSUMER SPENDING

Potential slower ECONOMIC GROWTH as shake off the pension burden (as well as the debt burden from over consuming)

Requirement for increased immigration to change the support ratio!

Older people working! Increase productivity as more people at one moment in time working! This can be beneficial for ECONOMIC GROWTH (GDP)!

Less government money in public pensions! More capital to more productive activities! (this requires pension reform and can be positive for freeing up govt spending, but reduces consumer spending. Who is the most efficient?)

More money in risk assets to generate a return. Can reduce dependence on bank financing and more liquidity in capital markets