Shifting Responsibility
The ways the world has changed since the first public pay-as-you-go pension was introduced in Germany in 1889 are too numerous to name. But the demographic changes that are currently taking place threaten to topple existing social support structures.
The population is aging. Employees are retiring earlier. Life expectancy is increasing. Fertility rates are down. Under the public pay-as-you-go pension systems in place throughout the world, payroll taxes are withheld from workers and used to pay current retirees-transferring funds from one generation to another. These systems are facing tremendous pressure as the number of workers paying taxes to support each retiree declines.
With the weakening of public systems, policy-makers worldwide are forcing a shift to private and individual retirement solutions. This strategy is flowing an unprecedented stream of assets into investment vehicles in an attempt to meet retirement demands. Consequently, mutual funds, investment firms and insurance companies now have access to one of the largest pools of investment money ever.
At the same time, many corporations are being asked to take more responsibility for their employees' retirement plans, and individuals are being asked to take more responsibility for their own well-being in retirement. In response, both corporations and individuals are exploring alternatives to public as well as other traditionally defined benefit pension plans.
For more than two decades, State Street has played a critical role in private investment of pension assets. Because of our
specialised focus on the full investment cycle, we understand the issues that are increasing pressure on institutional investors of all types. That's why we provide a rich variety of essential services and products designed to help our customers meet their investment objectives.
