Macro must play greater role in pensions debate - Bailey

Added 16th September 2016

The macroeconomic aspect of the pensions debate requires more attention said Andrew Bailey, CEO of the Financial Conduct Authority.

Macro must play greater role in pensions debate - Bailey

Speaking on Friday at the 24th Pensions and Savings Symposium at Gleneagles, Bailey said that given record low interest rates and rates of GDP growth in many parts of the world, and the expectation that global growth will likely continue to be low for some years still, the macroeconomic dimension to the pensions debate “is growing in significance”.

He said the keys to long-term planning for retirement income are: the long-run course of real interest rates, the assumed duration of retirement, and the target for income in retirement.

Acknowledging that all three of these assumptions are very big judgements, he said currently all three are surrounded by “substantial uncertainty”.

Debt burden

Complicating matters further is the level of debt with which the world is now burdened.

“We now live in a world where we can expect debt ratios to remain high over the medium term, which is more manageable at current real interest rates but would be much more problematic in a world whenever nominal and real rates rise,” he said, adding that in countries like the UK, this is much more of an issue for households than companies based on current debt ratios, which has a bearing particularly on home ownership.

Bailey pointed to these as just two of a number of issues that need to be considered when trying to gauge how best to solve the problem of ensuring people’s lifestyle in retirement.

Other issues, he said, included the balance of who, among the state, employers and individuals should carry the risk of failure, especially as the balance is currently shifting toward individuals; the potential for large intergenerational shifts in both income and wealth; and the impact of heightened macroeconomic uncertainty on the ability to write long-term financial contracts.

All of these are big issues, he said and ones that require a great deal more work if they are to be successfully resolved.

Kames Income Hub

home_research_centre

Vincent McEntegart, manager of the Kames Diversified Monthly Income Fund, explains how he aims to deliver a stable and sustainable income of 5% p.a.*, paid monthly, by investing in a range of asset classes

Square Mile Research

Jupiter UK Special Situations
Jupiter UK Special Situations...

Talking Factsheets is a video service for users...

Visitor's Comments Add your comment

Add Your Comment

We won't publish your address

About Author

Geoff Candy

Group digital editor

Geoff Candy joined Portfolio Adviser as News Editor in May 2014. He has been a financial journalist and broadcaster since 2005 and, in that time has worked in both South Africa and the Netherlands, covering everything from high street retailers and construction companies to mining and insurance.

Profiles

Viewpoint

Investment Strategy

Feature

Tweets

Events

PA Emerging Markets 2017
PA Emerging Markets 2017

Tuesday 7 February
Bloomsbury Street Hotel, London

PA SRI 2017
PA SRI 2017

Tuesday 21st February
Bloomsbury Street Hotel, London

PA Japan 2017
PA Japan 2017

Wednesday 8th March
Furniture Makers' Hall, London

PA Dublin 2017
PA Dublin 2017

Tuesday 14th March
Westbury Hotel, Dublin

Sponsored Content

Investment Strategy

OTHER STORIES FROM LAST WORD...