The World Economic Forum is calling on policymakers, financial institutions, pension plans and individuals to address the challenges posed by aging populations.

The organization published a report Wednesday that focuses on issues of financing retirement and healthcare amid demographic change.

The report, prepared in collaboration with Mercer and the Organization for Economic Co-operation and Development, points out that aging populations are challenge already facing many developed countries, and will soon be impacting developing nations, too. “By 2030, it will be a major issue in most of today’s emerging economies, and by 2050, few countries will be unaffected,” it says.

“With an ageing population, a declining labour force, and alarming healthcare and pension benefit costs, concerted effort from government, private sectors and civil societies is essential to address these concerns,” the report notes.

Among the strategies in proposes for dealing with these challenges, it recommends improving financial literacy and the access to planning advice. “Literate individuals are more likely to plan their finances responsibly for their old age. Improving awareness and understanding of private pensions and retirement saving products enables people to make informed choices and take effective action to ensure an adequate retirement income,” it says.

However, it also stresses that policymakers and pension plan sponsors and providers, “must also acknowledge that financial education alone may not be sufficient to overcome behavioural biases such as a tendency to procrastinate about retirement savings decisions. Moreover, the complexity of investment decisions is such that complementary regulations on investment choices and default options are critical.”

The report also calls for governments to facilitate higher levels of retirement savings, the conversion of property into retirement income, the extension of the micro-finance movement to micropensions (a combination of micro-insurance and micro-savings products), and efforts to improve annuities markets to help hedge longevity risk.

Additionally, it suggests that people will have to face longer working lives, that there should be more emphasis on disease prevention and wellness in the healthcare system, and that cost effectiveness and efficiency in healthcare must be improved.

“The report makes a compelling case for immediate and collaborative action by the private and public sector. Even more impressive, the analysis sets out a pragmatic blueprint for transformation, by identifying the most promising 11 strategies and providing three key scenarios of the future against which to consider the effectiveness of each,” states Michele Burns, chairman and chief executive officer, Mercer, and chairperson to the steering committee of this project.

“The state has a central role to play in providing adequate pensions and healthcare, but it needs to better engage other stakeholders through effective collaborative mechanisms. We are happy to have contributed to this report, which is intended to inform public debate by identifying a set of key strategies to deliver pension and healthcare programmes that are both financially sustainable and effective. The report highlights innovative solutions that could be applied to different contexts and countries,” said Angel Gurría, secretary-general, OECD.

IE