Pension crisis due in 2050

With its unfavorable demographics and generous retirement benefits, Greece could face a major crisis mid-century as pension and healthcare spending gobble up a major part of its gross domestic product, the head of Citigroup Asset Management in Greece warned yesterday. Managing Director Giorgos Papadopoulos said a study conducted by the Center for Strategic International Studies and published in conjunction with the bank showed that a global retirement crisis is looming ahead. He said the study suggested that government spending on pensions and healthcare in developed countries could outgrow official projections. Greece could see a serious problem in middle of the century, with public spending on pensions projected to rise by an additional 19 percent of GDP. By 2050, total public spending on pensions and healthcare could reach a staggering 44 percent of GDP, Papadopoulos said. He said the problem partly stems from the low dependency ratio (pensioners to workers) in Greece, which is expected to fall to 1:1 by 2020. Generous retirement benefits, a high replacement ratio, and a high incidence of early retirees, coupled with the complicated and fragmented system also aggravate the situation. Greece last week passed legislation laying out reforms for the social security system. Critics said the changes represent a piecemeal approach and do not address the problem of an aging population, nor will they help reduce the actuarial deficit. Papadopoulos said Citigroup Asset Management has a diverse range of products for individuals seeking private insurance for their old age. These range from equity mutual funds to others focusing on fixed income, money market and asset allocation. The price of Yapi Kredi shares, heavily weighted on the main Istanbul index, has fallen some 40 percent since the watchdog’s decision.