The Daily Update - Putin a Dampener on Pension Reform

The Daily Update - Putin a Dampener on Pension Reform

“None of them” was Russian President Vladimir Putin’s response to questions regarding his preferred pension reform option, “Why? Because [raising the retirement age] cannot be pleasing to the overwhelming majority of our citizens”. Indeed, they have proven to be very unpopular. Public outcry against proposed pension reforms – that include raising pension ages from 60/55 to 65/63 for men and women respectively – has been pronounced with tens-of-thousands at various protests since their announcement in mid-June; Putin opinion polls are at their lowest in years. Some indicators put his approval ratings at the lowest in almost four years following the recent sharp drop from above 80% to now ‘just’ 67%.

The Daily Update - Pensions on life support

The pension industry wasn’t particularly well established in the 14th century (during the time of the Black Death) as such they’ve not really ever had first-hand experience with shrinking national populations and their painful effects on growth expectations and pension liabilities. The next 50 years will see a prolonged stalling of population growth and labour force shrinkage across almost all developed and many emerging countries to an extent not seen for over 650 years. Global population should continue to rise (to rough estimates of 9.7bn by 2050 and 11.2bn by 2100). But over half of this growth will be from Africa meaning that its population of 1bn now could triple by 2100. Meanwhile the number of countries with shrinking populations is expected to reach 100 including almost all developed countries. Currently around 25 countries have notable long term declining population trends but importantly this includes the likes of the US and Japan and would include Germany but for the wave of migration in the last decade. Such migration is clearly becoming less popular within wealthy nations; the forthcoming boom in African population could thus have significantly less impact in places such as the US and EU compared to the economic boosts we have seen from past Eastern European and Asian migration. For example over 80% of immigration into the US over the past three decades has been working age (16-64).

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