Ageing and saving

The issue of ageing and saving has two distinct facets. On the one hand, there is the individual issue. Each of us is getting older and wants to make sure that our savings plans are appropriate. I term this the ‘microeconomic’ aspect of saving and ageing. At the same time, OECD economies are themselves ageing: people are living longer, the baby-boom generation, born after 1945, is passing through to middle age and, in some countries, fertility rates are below replacement levels. I term this the ‘macroeconomic’ aspect of ageing, and it will affect these economies in almost all dimensions: in savings and investment rates, in the growth rates of productivity, output and public spending, in wage structure, educational attainment and labour supply (Disney, 1996). And, of course, there are links between the microeconomic and macroeconomic facets of ageing: for example, as a country ages, with more elderly dependants relative to workers, it becomes harder to sustain the social security pension without higher taxes. In turn, a prospective decline in the social security pension may cause people to revise their individual or household saving and retirement strategies.