Remarks by Ángel Gurría
7 May 2019 - Tokyo, Japan
(as prepared for delivery)
Deputy Prime Minister, Distinguished Guests, Ladies and Gentlemen,
It is my great pleasure to join you here today at the G20 High-Level Symposium on Aging and Financial inclusion. The OECD is delighted to have worked closely with the G20 Japanese Presidency and the Global Partnership for Financial Inclusion in the development of the G20 Fukuoka Policy Priorities on Ageing and Financial Inclusion.
Japan’s choice of the ageing population as the focus area for financial inclusion in 2019 is particularly timely and vitally important. The figures are staggering. By 2050, there will be over two billion people aged 60 and above worldwide, more than double the number in 2017. And, while Europe currently has the greatest percentage of older people, in developing countries, where the pace of ageing of the population structure is much faster, one in five people will be over the age of 60 by 2050.
Old-age dependency ratios are set to rise in all G20 members in the next decades, although at different paces. Japan has experienced the fastest ageing of its population, with 47 people older than 65 per 100 working-age adults in 2015, up from 19 in 1990. Prime Minister Abe himself noted in his New Year reflections for 2019 that the declining birth-rate and the ageing population represent “Japan’s greatest challenge”. Fast-ageing Italy, Germany and Korea will also face some of the most significant challenges. Among emerging economies, Brazil and China are facing rapid demographic change at a relatively early stage of development. Indian, South African and Indonesian populations will age more slowly, and the challenge will be to put in place the conditions for the current young generations to have adequate retirement income when they reach old age.
But despite differences in the pace of ageing, all countries will need to prepare themselves for the “longevity economy”, for which financial inclusion will be crucial. The more longevity people enjoy, the more financial needs they will have to plan and manage particularly, but not only, in later life. Assets held and managed by, or on behalf of, older consumers will become increasingly significant as a proportion of overall assets. At the same time, the risk of financial hardship and poverty due to insufficient income and savings but also due to additional expenditure will increase. Already today, the poverty risk is highest for people above 75 years than for any other age category and affects women even more than men. In high-income economies only 46% of adults save money for old age. In low- and middle-income economies, with limited financial infrastructure, this number is even lower, and stands at only 16%. As a result, societies risk a financing gap created by the misalignment of “life longevity” and “asset longevity”.
The G20 Fukuoka Policy Priorities aim at responding to this challenging context by identifying eight key dimensions that policymakers must consider to support the financial inclusion of the elderly. Let me dive into some of them.
Governments will need to take action to strengthen the digital and financial literacy skills of the elderly; but also of young people, women and working age adults to help them make financial plans for older age. Less than 50% of adults could answer 70% of financial knowledge questions correctly across G20 countries, ranging from 62% in Korea to 31% in South Africa. Employer-sponsored training, self-guided online learning, community classes, or nation-wide financial education networks of local committees are some of the approaches that G20 countries have taken to address this challenge.
Policymakers will also need to realise that, even though technology-driven innovation has the promise to overcome many barriers to financial inclusion for older people and increase the security of financial transactions, many older people either do not want to, or simply cannot, engage directly with at times complicated digital technologies. In those cases, solutions might need to consider a gradual approach away from paper-based solutions and face-to-face service. They might also need to favour simplified digital solutions such as sending registered participants simple text messages with important warnings on scams, or letting users set automatic calendar reminders to ensure they pay their bills on time.
Supporting lifetime financial planning is another key aspect. While 68% of the world’s older population receives a pension, only 26% in Central and Southern Asia and 23% in sub-Saharan Africa do so. A combination of financial guidance, advice and product design, with appropriate consumer protection, can support lifetime financial planning. Such measures may be particularly relevant for women given their lower pension coverage and their higher exposure to poverty risk in old age.
Ladies and Gentlemen,
I would like to close by congratulating the Japanese Presidency and the GPFI on this most important contribution to the international policy agenda and the solid foundation it provides for realising the opportunities and addressing the challenges of financial inclusion for the ageing population.
Increased longevity represents one of our greatest achievements. But to protect it, we need to act responsibly and plan ahead. I wish you all the best for a successful Forum. Thank you.