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Retirement Planning > Saving for Retirement

Small World, Isn't It?

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There I was lucky me! strolling down Piccadilly on a lovely London afternoon. It was only after a couple of minutes that I became aware I had started to whistle the song “Small World” from the musical “Gypsy.”

And it was only later that I realized how appropriate that song was at that particular time.

I had just left the Global Financial Leadership Foruma meeting sponsored by the American Council of Life Insurers, A.T. Kearney and EDS where, in one sense, the message that came through loud and clear was precisely that: It’s a small world and countries in every part of the globe are experiencing exactly the same pressures when it comes to their rapidly aging populations.

It’s true that no one at the meeting actually sang the words, “We have so much in common, it’s a phenomenon,” but speaker after speaker did talk about the forces pressing on government pension systems and the nearly universal push to make people more responsible for their retirement.

This was true in countries such as Germany and Great Britain, where a government pension system has long been in place. But it was also true, speakers said, in developing countries such as Brazil and India.

If one was unfamiliar with the so-called Three Pillar model for retirement security before this meeting, that certainly was not the case after it. The three pillars consist of first, a government pension program; second, employer-sponsored programs; and third, individual savings.

The problem in many Western countries is that what has been promised to pensioners in Pillar I has and will become more and more difficult for governments to deliver. The main culprits here are an aging population that is living longer combined with a generally decreasing pool of workers to support the system. In addition, the cost of living in retirement has risen greatly over the years.

This sounds familiar to anyone who has thought about the Social Security system here in the U.S.

Fred Hubbell, chairman, executive committee, ING Americas, in Amsterdam, gave as good a summary of the situation as any during a luncheon address. The three pillars need to be brought into more balance around the world, he said, adding that many consumers all around the globe still have a lot of confidence in Pillar I.

“This means we have not been doing a good job of educating,” he said. “We need to develop consumer confidence in all three pillars.”

The advantages of the Three Pillar system are many, according to Hubbell. It boosts economic growth, accelerates development of local capital markets, promotes investment diversification and shares responsibility for retirement among the government, employers and individuals.

Another point that Hubbell mentioned is that the Three Pillar system is not a one-size-fits-all system and that indeed weightings among the three pillars vary by country.

For insurers, he said, there is “a great opportunity to take an active part in offering solutions on a macro and customer level.”

For ING’s part, Hubbell said, it has two intentions. It wants to increase the size of the global pension/retirement security pie at the same time that it is increasing its own share of that pie. Some of what it is doing to grow the pie is fostering public/private partnerships, advising governments on reforms, helping to build Pillar II and III systems and creating awareness among the public.

And as for increasing its share of the larger pie, ING is, according to Hubbell, building on existing business, developing new initiatives, exporting best practices and exploring partnerships.

Other insurers may choose to sing somewhat different tunes than ING’s, but its a good bet that many of them, too, will succeed in making sweet music abroad.

Small world, indeed.

Steve Piontek


Reproduced from National Underwriter Edition, April 30, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.


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