Future generations are on course to become enveloped in the biggest pension crisis in history, according to the World Economic Forum (WEF), unless policymakers from the world's leading economies take urgent action.
The Geneva-based organization predicted the challenges of an ageing population could result in the world's largest economies being forced to tackle a pension time-bomb.
Analysis from WEF showed six countries with the biggest pensions, including the U.S., Canada, U.K., Netherlands, Japan and Australia, as well as the two most densely populated countries in the world – China and India – would face a retirement savings gap in excess of $400 trillion in 2050, up from around $70 trillion in 2015.
'Financial equivalent of climate change'
"The anticipated increase in longevity and resulting ageing populations is the financial equivalent of climate change," Michael Drexler, head of financial and infrastructure systems at WEF, said in the report published on Friday.
The body that organizes the annual gathering of the global elite in Davos said with babies being born today having a life expectancy of more than 100, the costs of providing financial security to people in retirement could skyrocket to unprecedented levels.
According to the WEF's forward looking estimates, the retirement savings gap from all eight countries is set to inflate by 5 percent every year over the next four decades. This translates to an extra $28 billion of deficit every 24 hours.
"We must address it now or accept that its adverse consequences will haunt future generations, putting an impossible strain on our children and grandchildren," Drexler added.
The report based its pensions saving gap projections on the amount of money required in order to allow people to retire with a relatively unaffected standard of living. The Organization of Economic Co-operation and Development (OECD) recommend a target of 70 percent of one's pre-retirement income. The OECD argues this should give people enough financial security post-retirement as people generally save less and pay less tax when they stop working.
Five-point plan to prevent pension time bomb
The WEF proposed a five-point checklist that policymakers should adopt to help curtail the impact of a pension crisis for future generations.
The high priority actions included reviewing the national retirement age, embracing technology assistance where needed, supporting financial literacy efforts for vulnerable people, providing clear communication to all and standardizing pension data to give citizens a full picture on their respective financial positions as they get older.
"While the challenge can seem overwhelming it is important to continuously evolve the systems in place to start to put positive changes in motion," the report said, before adding, "If we continuously review, assess and take small steps over time we will more likely be able to meet the needs of today's retirees and afford the promises we are making to today's workers."