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China
Beijing, 11 September 2009

The World Economic Forum has just published Transforming Pensions and Healthcare in a Rapidly Ageing World: Opportunities and Collaboration Strategies with the support of Mercer and the Organisation for Economic Cooperation and Development (OECD).

The ratio of elderly persons to the working-age population will dramatically increase in coming years in many parts of the world. Emerging economies in Asia like China, India, Thailand and Korea will see the biggest increase in elderly population by 2030.

“With the fast changing economic landscape in Asia, policy makers, industries and the employers have a distinct window of opportunity to transform the future challenge of ageing societies into an immediate opportunity, and shape the retirement and health care policies to promote the economic growth, capital market development and the well being of its citizens,” according to Vanessa Wang, Asia leader of Mercer’s retirement, risk and finance business.

“This report inspires employers and policymakers to expand and shift their strategic thinking,” said M. Michele Burns, Chairman and Chief Executive Officer of Mercer. “The report makes a compelling case for immediate and collaborative action by the private and public sectors. Even more impressive, the analysis sets out a pragmatic blueprint for transformation, by identifying the most promising strategies and providing key scenarios of the future against which to consider the effectiveness of each. The key strategies range from the now existing, but underappreciated, to new and highly innovative options that merit serious consideration.”

Preparing for retirement: The importance of education

With pension reforms in Asia, there continues to be movement by both governments and the private sector to shift retirement responsibility to the individuals. Despite this, the Asian population remains largely ill-prepared for retirement, with individuals generally lacking the awareness, economic literacy and planning skills to adequately assess their needs for financial and choose the appropriate insurance and retirement services and products.

Ms. Wang said, “People throughout Asia underestimate how much money they need to retire, and don’t know where to access the basic tools, services and product to achieve their financial goals. Even in those markets with mandatory provident funds such as Singapore and Hong Kong, individuals tend to feel they are already covered and don’t save further for retirement. This will lead to significant challenges further down the road. As such, it is essential that the governments and employers throughout Asia raise awareness and help provide basic financial education to help people better understand their retirement needs.”

Health care strategies for an ageing world – opportunities for the employer

It becomes important for employers to help employees use health care services more effectively. Mercer notes that efforts to give more responsibility to the individual employee to save money will be more successful if coupled with initiatives such as coaching. Providing practical incentives to enable employees to adopt more healthful diets and increase their exercise, for example, can be a base on which more innovative wellness initiatives can be built.

Among other trends identified by Mercer is a return by some employers to onsite or online health facilities to control health care costs and improve workforce productivity. Such facilities may offer the opportunity to better manage chronic illnesses, to expand health and productivity programs and to manage workplace injuries.

Employers are also in a potentially strong position to improve health care supplier incentives. In practice, says Mercer, employers may find this area to be the most important and also one of the fastest to change in the coming years. Pay-for-performance programs, coupled with developing preferred provider networks and empowering employees to be smart shoppers for health care, adds up to a powerful force for constructive change.

Opportunities and collaborative strategies arise from addressing the issue

“At a time when recovery from the recent economic turmoil places pressure on already-stretched resources,” Ms. Wang observed. “This research provides Asian leaders with a powerful decision-making framework for evaluating and prioritizing alternative pension and health care financing strategies. Employers, providers and governments will need to collaborate in new ways to meet the challenge identified by this research. In particular, the massive challenge we face of financing pensions and health care requires collaborative intervention at earlier stages in life and not only near or at retirement age.

“This research is a clear call for strategic thinking by leaders reviewing their pension and health care agendas. Mercer intends to continue to work in partnership with many major government, providers and employers to seek out effective innovation and practical solutions in these areas,” said Ms. Wang.

Reports available from the World Economic Forum and from Mercer

The World Economic Forum report can be downloaded at http://www.weforum.org/pensionshealthcare
 
In conjunction with the World Economic Forum report, and influenced by Forum insights and analysis, Mercer has published a special Mercer’s Perspective, which addresses the implications of an ageing global population on pension plan design, defined benefit plans, health care planning and workforce planning that anticipates an ageing workforce, can be downloaded at www.mercer.com/WEF.

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