Whereas in 1990 there were 500 million people over 60 in the world, by 2030, as a consequence of lower fertility and the diffusion of medical advances, there will be 1.4 billion. A quarter will be very old and two-thirds women. The issue of population ageing at such a rate poses economic problems of considerable magnitude, on a global scale. When life expectancy was relatively low, there was no need to save or otherwise provide for old age. Instead, the world will be increasingly characterized by a large segment of the population having claims to a share of output, without providing labour on a sufficient scale to maintain their incomes. How to organize a system of such claims in a manner that maintains economic efficiency and growth is a major issue for advanced countries, and a challenge to the Third World. All such systems, given the time horizon of a lifetime and the likely changes and shocks that will occur, involve risk, whether financial or political. And the resulting choice, and its consequences for the development of pension funds and other institutional investors, will undoubtedly be the major determinant of the resulting structure of the financial system.
In this context, this book offers an overview of the economic issues relating to one possible approach to population ageing--namely, the development of funded pension schemes to complement social security, as they have arisen in the industrial countries. The raw material for the analysis is a combination of the economic theory of pension funds and experience regarding social security, as well as the structure, regulation, and performance of pension funds in twelve OECD countries and two developing countries, using information available up to the time of writing--mid-1994. The countries studied are the USA, the UK, the Netherlands, Switzerland, Sweden, Denmark, Japan, Canada, Germany, Australia, France, and Italy, together with Chile and Singapore. The definition of pension funds employed is of financial intermediaries, usually sponsored by non-financial companies, which collect and invest funds on a pooled basis for eventual repayment to members in pensions. The principal focus is on the implications of the development of pension funds for financial markets, but labour-market, fiscal, and distributional issues also enter the picture. The material is relevant to students, economists, and specialists in pension funds, financial markets, and institutions; pension-fund managers and trus-