The effects of longevity on financial vulnerability, Think Forward Initiative Summit 2008

Living longer sounds good news, but it brings about important challenges. This study estimates the effects of longer life expectancy on future poverty and inequality in 6 Central European countries, in which the pension systems were reformed into a defined contribution scheme. Since lower pensions are expected under this new pension system, incentives for additional savings should arise among the working population of today to finance their retirement. The results suggest, however, that many individuals will not foresee or will not be able to do so. Savings will not increase enough, income and consumption inequality will grow and, poverty rates could double when the generation of Millennials retires. Fostering access to saving instruments could then help reducing poverty and wealth inequality in the future.