Future Proofing the Longevity Economy 2025

Resilient public retirement systems are essential for economic stability and intergenerational equity. Public retirement systems are a cornerstone of economic security. As life expectancies increase and birth rates decline, these systems face unprecedented challenges. Addressing these challenges requires innovative solutions that ensure financial stability, intergenerational equity and inclusion for all workers, particularly in informal sectors. –By 2050, the global population aged 65 and older will more than double, reaching 1.6 billion people, creating unprecedented pressure on retirement systems to support longer lifespans.16 –More than half the world’s workforce operates in informal economies, with no access to pensions or retirement savings, leaving millions unprepared for financial security in old age.17 –By 2060, governments globally could face deficits averaging 9.1% of gross domestic product (GDP) if ageing-related fiscal policies are not reformed. Emerging markets are particularly vulnerable, with potential deficits reaching 15.9% of GDP compared to 5.6% in advanced economies.18Retirement systems vary significantly among countries in their design, funding mechanisms and reliance on private savings. Countries such as France and some northern European nations rely on taxation-based, risk-pooled state pensions, while the United States and many emerging economies expect workers to accrue their own savings through private retirement accounts. These differences shape the level of individual financial responsibility and the degree to which government intervention is necessary to ensure financial security in later life. Without robust public retirement systems, millions of retirees could face poverty, and the broader economy could suffer from reduced consumer spending and increased healthcare costs. Countries that fail to act risk growing intergenerational tensions as younger workers bear the financial burden of funding unsustainable systems. These pressures are particularly acute in emerging markets, where coverage gaps and fiscal constraints exacerbate vulnerabilities. However, there is a path forward. Resilient systems can be achieved through innovative reforms that expand coverage, ensure equitable contributions and align benefits with long-term demographic realities. By integrating public policy with private-sector innovations, countries can create sustainable systems that meet the needs of everyone. These reforms require bold action, cross-sector collaboration and a commitment to equity and sustainability.19 Demographic shifts and fiscal strain are creating unprecedented challenges for public retirement systems. As populations age, the number of retirees relying on public pension systems is increasing dramatically, while the working-age population, whose contributions fund these systems, is shrinking. This demographic shift places immense pressure on pay-as-you-go systems in which current workers’ contributions fund retirees’ benefits. Combined with longer lifespans, this demographic shift means individuals will rely on pensions for more years than ever before, straining public finances. Without reforms, many systems face the risk of insolvency, jeopardizing the financial security of millions.Transitioning from traditional pension models to more sustainable systems is complex and requires careful management. Transitions from pay-as-you-go systems to funded schemes, or from defined benefit to (collective) defined contribution plans can take years, if not decades, and necessitate compromises on intergenerational redistribution, clear communication and long-term political commitments. Gradual changes rather than abrupt shifts are necessary to help mitigate disruptions and allow individuals and organizations to adjust to new rules over time. Successful examples, such as the current transition in the Dutch occupational sector (see Section 1.3), demonstrate that with the right strategies these challenges can be effectively managed.1.1 The case for action 1.2 Understanding the challenges Resilient systems can be achieved through innovative reforms that expand coverage, ensure equitable contributions and align benefits with long-term demographic realities. Future-Proofing the Longevity Economy: Innovations and Key Trends 99