Amid the coronavirus pandemic recession, a quiet crisis is building in the world’s pension systems

Name: Cathay Pacific Airways announces its largest job cuts in history
Uploaded: 2020-10-23T22:45:11.000Z
Duration: 3 min 43 s
Description: Cathay Pacific Airways announces its largest job cuts in history

The pandemic-induced recession has led to reduced pension contributions and higher government debt in many economies. Billions around the world, including in Hong Kong, face working longer or having less income in retirement

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A man rests next to his bicycle at a cargo dock in Hong Kong on April 21. The pandemic has heightened retirement insecurity for billions around the world. Photo: AFP

David Dodwell

Published: 6:45am, 24 Oct 2020Updated: 7:01am, 24 Oct 2020

Among the many distressing consequences of the pandemic-induced recession now enveloping us, only a few of the most direct effects have begun to be explored – bankruptcies, unemployment, the collapse back into poverty of many millions in the world’s poorer economies, rising government indebtedness and the squeeze this will exert on most government-funded services.

But some catastrophic impacts have yet to even be recognised. One is the grim prospects facing our elderly and those in retirement. A report this week from global actuary Mercer, with Monash University in Australia, has shed some initial light. It makes for uncomfortable reading.

In the interest of full disclosure, I must confess that I have for years been forecasting the imminence of the global pensions crisis, while we continue to read dire descriptions of pension schemes in danger – from numerous US states and cities, to General Electric, where pension obligations outweigh the company’s market value and where the pensions of 20,000 staff have been frozen, to Japan where there are around seven retirees for every 10 people in the workforce.

I must also confess that I have (ageing) skin in the game. At 69, I am still hard at work not just because I enjoy what I do, but because if I live as long as I hope to, I want to leave my modest retirement pot untouched for as long as possible.

Anyone who has read the Lynda Gratton and Andrew Scott book, The 100-Year Life, will know what I mean. But Jim McCaughan, former chief executive of US fund manager Principal Global Investors, makes it clear: “Pension systems in the world were designed when people would work for 40 years, and then live in retirement typically for up to another 10. Pensions won’t work well economically or socially if a 30-year career then gets followed by a 30-year retirement.”

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Cathay Pacific Airways announces its largest job cuts in history

Mercer’s annual Global Pension Index study, which examines schemes across 39 economies (including Hong Kong) in terms of three metrics – adequacy, sustainability and integrity – paints a chilling picture of how the pandemic recession will make an already terrible set of challenges even worse.