THE CENTRAL BANK of Ireland has published a technical paper today which notes that young people will face significantly more challenges building a retirement fund than previous generations.
The paper, Wealth Accumulation and Inter-generational Inequality with Inverted Population Pyramids, notes that demographic changes mean many developed economies are transitioning to an inverted population pyramid – a greater number of older people than younger people.
It adds that demographic changes have led to a build-up in wealth among older generations, and a decline in rates of return.
Younger generations therefore face significant challenges in building up sufficient wealth to fund their retirement.
As a result, future retirees are likely to face progressively lower standards of living at retirement than previous generations.
This in turn may be exacerbated by the need to fund a longer retirement due to increased life expectancies.
Yesterday the government was warned that Budget 2023 should be a “delicate balancing act” between protecting people who are most vulnerable to rising living costs and fuelling further inflation.
Sebastian Barnes, chairperson of the Irish Fiscal Advisory Council, said long standing gaps in policy need to be addressed.
“A long-term policy to make the pension system sustainable is required, but keeping the pension age at 66 will add to the costs. Using the Rainy Day Fund or creating a new National Pension Reserve Fund would help to save excess corporation tax receipts and prepare for the future,” Barnes concluded.
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