In an article dismissing the proclaimed, and in some case much-awaited, demise of capitalism, the Economist makes light of the argument that the ‘sharing economy’ is poised to replace the market economy. Not so says Buttonwood. In perfect capitalist style, new business models are merely replacing old ones whilst finding innovative ways to monetize their services on offer.
These new trends are also leading to changes in the employment market and workplace with more people following the economy and changing employers and sectors many times in a lifetime. These changes require individuals to be more aware of economic realities and the ins and outs of the market economy, according to the finance columnist.
Whereas capitalism may be alive and kicking these new ‘forces’ have an undeniable impact on many facets of society. Applying the same logic to the pension system as we know it, the article leads to some interesting insights and a difficult question.
The paternalistic system that guaranteed an income for life thanks to a retirement income linked to the final salary of employees is on the way out. With global changes in finance and as part of an ever-evolving capitalist system, future retirees “must now guess at their likely longevity, calculate their spending over two decades or more while allowing for the effect of inflation, decide on the asset allocation for their funds, assess the merits of rival providers and adjust for the impact of their fees”.
Considering that even the best asset managers would struggle to take all these factors into account and turn a decent profit, people investing for a rainy day may be well advised to get to grips with the workings of markets.
This ultimately leads to the question whether governments should be doing more to protect long-term individual investors from inevitable and unpredictable economic cycles?
Read the BETTER FINANCE 2014 Pensions Report for a comprehensive view on the state of European pensions. Watch this space for the 2015 edition, to be published at the end of September 2015 / beginning October!
Date: 5th October 2016
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Type: In the news