China will see the second largest retirement savings gap of a forecast US$119 trillion by 2050, according to the World Economic Forum (WEF) in a report released last week.
The country with the biggest retirement funding gap is forecast to be the US, with a predicted gap of $137 trillion by 2050. India is third with a forecast gap of $85 trillion.
The savings gap will grow fastest in China and India at growth rates of 7% and 10% respectively. In 2015, the retirement funding gap stood at $11 trillion in China and $3 trillion in India.
The report says that there are three key drivers of this growth:
- Rapidly ageing populations – there will be over 600 million retirees in China and India by 2050
- High percentage of informal sector workers – 9 in 10 Indian workers are in the unorganised sector with limited access to retirement savings accounts
- Growing middle class – as wages and quality of life increase, expectations for retirement income also grow.
Globally, the report says that longer life spans, disappointing investment returns will help create a retirement savings shortfall of $400 trillion, five times the size of the global economy, in three decades. The $400 trillion shortfall includes a $224 trillion gap among six large pension-savings systems: the US, the UK, Japan, the Netherlands, Canada and Australia. India and China will account for the rest.
WEF said its calculations are based on publicly available data on government programmes such as social security in the US; employer-based contributions and individual savings. It assumed that workers would retire between the ages of 60 and 70.