The world demographics are fast changing, which will have an impact on the social and economic systems of world nations. The inevitable consequence of demographic shift is visible in the rising share of elderly population that is causing an imbalance, which needs a rethinking on sustainability front. Such an imbalance will feature in terms of the 65+ population exceeding those below eight by 2080 and by the year 2060, the Asian subcontinent would have 60 per cent of global elderly aged 65 and above.
By the middle of this century, the global strength of 65+ is projected to exceed 1.6 billion, with certain regions accounting for one in four and certain other regions one in three beyond the age of 65 years. This global transition informs that with passing of a quarter of this century, 63 countries have already peaked in population size from where there can only be a decline. However, the only solace is that these countries account for less than a third of the global population. However, decline in population has already begun in China in 2022 which is one of the population giants but sub-Saharan Africa is adding a magnitude of 740 million working age population. These trends suggest that a traditional balance between the years spent in productive employment and retirement is somewhat shaken.
Longevity challenges
The period of demographic dividend typically represented by the large and increasing working age population compared to retirees has helped sustain economic growth. But when the table turns with lowering of birth rates and increases in longevity, it poses a challenge to maintaining the resilience of the economic system. Such a demographic turnaround needs a re-evaluation of the systems of provisioning of pensions, health care, and social protection, and above all, the sustainability of economy with a growing imbalance between the consumers and the producers. This also threatens the individual pathways of life preparations where the state is in a flux to address the complex web of interdependencies of the multistage life cycle.
There is a visible lack of preparedness to face the evolving demographic shift either due to inadequate savings, lack of career flexibility, and outdated pension system with a mandated retirement age. Hence there is a need for a fresh assessment of demographic dividend devoid of the notion that ageing society poses a burden with depletion of resources and tax social services. It needs reimagining a system in which individuals contribute at various stages of life, without being constrained by fixed working years, and where social security can be recalibrated to support healthy ageing and an older workforce. This may otherwise call for a longevity economy where the young and the old contribute in equal terms that needs to be premised on a resilient pension system.
The immediate response need reforming the public retirement system in light of demographic changes that ensures financially sustainability and inclusivity to address diverse requirements. With people living longer there needs to be reassessment of retirement savings.
Creating a future-proof corpus
The employers can play a crucial role towards enhancing financial wellbeing of employees through their life cycle in keeping with prospective years of retired life. With longer life span there emerges a potential role of care giving that can be a potential choice for many beyond the active working years. Systems need to evolve to support caring roles and address savings and income. Given that there is a gradual shift from traditional defined benefit pension to that of individualised contribution plans, every individual is responsible to ensure a desired level of income in retirement.
This has led to emphasis on savings and investment to secure own futures. Here the challenge lies in conversion of the savings into a reliable consistent source of income that can see through the later years of life. Such a process is termed as accumulation to decumulation. This alternative is on the presumption that individual has retirement savings outside the public pension system.
The reality is that an insignificant share has retirement savings and a global survey indicates that 44 per cent individual fear outliving their savings. In fact, a substantial share of workers in Asia remains worried about becoming poor or be in need of money on retirement which ranges between 50 per cent in China and 90 per cent in Vietnam. Despite these concerns, many retirees continue to maintain their pre-retirement saving habits and tend to be quite conservative in their spending. This is largely owing to the uncertainty regarding the duration of life in retirement and there should be measures adopted to ensure a financial flow for a life time based on the savings and assets owned by retirees.
Policy options
To mitigate the adverse fiscal impact of rising longevity on State finances, increasing retirement ages remains a common strategy. The current average retirement age in OECD countries is 64.7 years, which is projected to rise to 66.4 years in the future, and to 70 years or more in countries such as Denmark, Estonia, Italy, the Netherlands, and Sweden. Moreover, according to the Pensions at a Glance 2025 report of the OECD, normal retirement ages are expected to increase in 19 of the 38 OECD member countries.
In this context, India, and ageing States such as Kerala, may need to consider raising the retirement age. As fertility rates continue to decline in advanced States, such a measure could also help sustain productivity levels. However, these reforms are likely to face strong public resistance in the context of high unemployment and the expected labour market disruptions arising from the increasing adoption of artificial intelligence across industries.
Alternatively, financial sustainability can be pursued by increasing contribution rates or reducing benefit levels. The recently implemented Unified Pension Scheme (UPS) represents a step in the right direction, blending features of defined contribution systems (NPS) and the older guaranteed-benefit framework (OPS). As the RBI study cautioned, policymakers should resist political pressures to revert to unfunded guaranteed promises (OPS), which create large fiscal risks, and undermine long-term financial sustainability.
Finally, drawing from international reforms where Ireland and Korea increased contribution rates and Japan raised the contribution ceiling to mobilise more resources for their pension systems, India should similarly pursue policies to bolster its funded schemes. Specifically, India should incentivise voluntary contribution rate increases by employees and raise the contribution ceiling under schemes like the UPS and NPS. These reforms would strengthen the fiscal sustainability of the overall pension architecture.
Final thoughts
The need for rethinking on longevity economy is the need of the moment. The demographic transition presents both risks and opportunities. With well-designed reforms — combining public policy, employer engagement and financial innovation — societies can support healthy ageing, protect living standards in retirement, and harness the contributions of older adults. The challenge is to build a resilient pension and social protection architecture in which people of all ages can thrive. While change is inevitable, empowering decision makers to reimagine financial resilience remains the key.
Mishra is a Professor at the International Institute for Population Sciences (IIPS), and Dash is Assistant Professor at IRMA, Tribhuvan Sahkari University
Published on May 5, 2026