Download powerpoint on pensions and inter

Is this our future too?
• “Away from the pleasant, tree-lined streets the price of Japan's
transformation into the world's greyest society is being paid by a growing
number of people who live, and die, in complete isolation.
• In 1960 not a single Tokiwadaira resident was aged over 65, but its
demographics, like Japan's, are changing fast. Now, almost a third of the
5,360 residents are elderly; in 10 years they will make up around 40%.
• "It has changed beyond recognition," says Yutaka Sakai, head of a local
group that reaches out to at-risk residents. "Tokiwadaira has become a
cheap place for old people who live alone. They move here when they
retire and find it difficult to make friends. In many cases they're dead
within a few years.“(Source: Guardian April 17th 2007)
Causes of Ageing Population
• People are living longer – the first trend
• Women are having fewer children – the later
trend
Fertility rates
The ageing population
UN Forecast for 2050
• One person in three will
be a pensioner
• Nearly one in ten will
be over 80.
Is it very useful to simply project
this trend?
Longer and longer lives?
• But life expectancy in more than 40 countries is anticipated
to be lower in 2010 than in 1990.
• In Russia women’s life expectancy fell from 74 to 71 in the
ten years to 1994 and men’s fell from 64 to 57
• In sub-Saharan Africa, life expectancy has dropped by 10-20
years in the past two decades. This is largely because of
AIDS. Because the young are dying, populations are “ageing
proportionality”
• Also as more people become obese while others overuse
alcohol and drugs, subsequent generations in several
countries may not live, on average, longer than previous
generations. The WHO predicts a surge in deaths around
the world from diabetes, heart disease and cancer.
27% of US medicare costs are for people in the
last year of their lives
• “while end-of-life care itself may be cheaper both in terms of treatments
and lower in-patient costs per day than hospital treatment, as people live
longer and are more likely to spend several years with the conditions that
will eventually kill them, the cost of end-of-life care as a percentage of
overall healthcare spending is likely to rise sharply.....”
•
The Quality of Death – Economist Intelligence Unit Report
Make Old People Work Longer?
• Raising the age at which people can retire and
draw a pension as a way of reducing the cost
of pensions assumes that there are jobs and
training available.
• In the UK, some 40 per cent of the one million
people aged between 50 and 65 who want to
work are unable to find employment,
according to a 2004 National Audit Office
study.
Take over of pensions by the
finance sector
• Pension funds and their assets are largely controlled by
international financial institutions, such as banks and
insurance companies. The trustees appoint fund
managers and often an "external" investment firm,
such as a bank insurance company or an independent
investment company, that charges management fees
for the service.
• Such managers are often in fact divisions of huge
financial corporations such as Citigroup or Merrill
Lynch, and as such seek to promote the interests not
only of the fund but also of their parent company.
The Theory of (Private) Pensions
• People save out of earnings.
• The savings are invested and make the
economy more productive.
• That allows people to live on the extra
productivity of the economy through
corporate earnings in their old age..........so
much for the theory.....
The reality of private pensions (1)
• Private pension schemes don’t significantly affect
savings – has been shown in research
• Most people cannot afford to save enough anyway
• For the private sector to provide reasonable pensions,
it has been calculated that every adult in the UK would
need to save 15 per cent of their income for 45 years of
their working life. Such saving is beyond the capacity of
most people, particularly if they also have to pay for
student loans, mortgages, school fees, health care and
credit card debt
• Pension funds shifting their money around on a vast
scale destabilise financial markets anyway and......
The reality of Private Pensions (2)
• Fees charged by private fund managers can almost
halve the growth of a personal pension over a 40-year
period according to some research. (Robin Blackburn,
Finance and the Fourth Dimension, New Left Review
39, May-June 2006 )
• The actions of fund managers working with huge assets
have been a major cause of financial instability – which
then wipes out the value of pensions
• The stock market crash of August 2011 wiped £250bn
from the value of ordinary peoples’ pensions, whilst
the Financial Times calculated that on average savers
had lost one fifth of their pensions.
There is an even bigger problem..
There is an even bigger problem..
• Most business and investing strategies by the
pensions industry have ignored “limits to
growth issues” and have often piled
investment into industries and economic
sectors that are unsustainable
Action of Climate Change and
Pensions
• The overweighting of the UK stock market towards fossil fuel
companies means that UK pension funds are at particular risk of
any sudden reassessment of the viability of high-carbon energy
sources, according to a leading analyst.
• According to the most likely projections by climate scientists, “at
least one-half of fossil fuel assets will have to be left in the ground,”
said Nick Robins, head of the HSBC climate change centre of
excellence in London. “We’re still pricing [companies in the
extractives sector] as if they are all going to be exploited.”
• “This is a particular concern for the UK as our stock market is
overweight fossil fuels,” he said, creating the risk of stranded assets.
• http://oilprice.com/Finance/the-markets/UK-Pension-FundsUnhealthy-Overweighting-of-Fossil-Fuel-Stocks.html
This is a bitter irony
• because
Inter-generational Justice and Sustainability
• "Sustainable development is development
that meets the needs of the present without
compromising the ability of future
generations to meet their own needs“ –
Brundtland Commission Definition 1987
Peak Oil and Pensions
• With peak oil, what is likely to happen is that the default
rate on existing debt will rise, so Pension Funds that own
bonds (or other debt instruments) will discover that they
are worth less than they thought, perhaps nothing. Pension
plans will discover that quite a few of their assets aren’t
what they thought–they will never be repaid with interest.
• So insurance companies are likely to stop selling annuities,
because they really can’t make good on long-term promises
any more, if there are too many debt defaults. Pension
plans may then become uncommon. People will figure out
that they really can’t save very well for retirement–they will
have to depend on their friends or relatives, or perhaps a
government program funded by taxes or alternatively...
New models?
• Alternative models may arise in which people invest for
the long term in objects that provide something
ongoing for local communities – e.g. getting a share of
ownership in their local community wind farm –
perhaps taking “their pension” as a certain amount of
energy generated by the wind farm – if denominated in
kWh this would not then be eroded by inflation and
the uncertain value of money...
• In that sense saving and then investing in the wind
farm would be like buying wind energy in advance for
your old age...
Ultimately however
• Security in old age depends on being loved
and supported by others in a reciprocal
relationship where one continues to play a
valuable social role as late as possible and
being in a caring community
• This is not a technical problem of market
returns but a problem for communities and
for “the provisioning economy....”
So, for example,
older people work in ‘unseen’ ways
• Age Concern, estimates that the childcare
provided by grandparents in the UK would
cost about £3.9 billion in childminding fees.