Everyone knows life expectancy globally is not only rising but rising at a rate unprecedented in human history. It is one of humanity’s great success stories, albeit one that seems to be curiously under-appreciated by the population at large. We should, of course, be celebrating the dramatic rises in longevity already seen. The UN forecasts global average life expectancy, just 48 years as recently as 1950, to rise to 77.1 years by the middle of this century.
A report from Bank of America Merrill Lynch “The Silver Economy — Global Ageing Primer”, came up with the startling suggestion that “life expectancies of 300-400 years or even an infinite extension of life expectancy may be within reach in our lifetimes”. Even if there is just a grain of truth to them, the consequences could be profound.
in North America, at least, a one-year increase in longevity “could more than double the amount of aggregate pension underfunding”. Given that the deficit in US public pension funds alone has been estimated at $3.4bn by the Hoover Institution, a think-tank at Stanford University, that could get a little messy. BofA estimates that, worldwide, annuity and pension-related longevity risk exposure is already a “worrying” $15tn-$25tn, about three months’ worth of global gross domestic product.
BofA presents a picture of workers readying for their extended retirements by squirrelling away ever-larger sums of money. It quotes figures from PwC, the professional services firm, suggesting that global pension assets will rise from $33.9tn in 2012 to $56.5bn by 2020. However, against a backdrop of static real median wages in the developed world; decent wage growth, but from a very low base, in most emerging countries; and the likelihood of extremely low interest rates for some time to come, it seems implausible that the average worker (or their government on their behalf) will be able to save enough to generate adequate income for a lengthy retirement. Higher retirement ages — thereby keeping the ratio of years in work to years in retirement constant — are the obvious answer, particularly considering that the rise in life expectancy is being pretty much mirrored by a rise in the years of healthy life the typical person can expect.
SOYMB is reminded of a short story written by the late Richard Montague, “The General Immunity Serum” and how capitalism could not cope with the end of death.