The long-term effects of an ageing workforce are under debate, but the pension crisis is a certainty

Europe’s pensions crisis has been much in the news recently – and once again sovereign debt is coming in for some of the blame. The Pension Risk Transfer Index, published on 25 July by Pension Insurance Corporation London, warned that defined benefit pension funds could be hit hard if the European sovereign debt crisis creates a re-run of the credit crunch.

“Should gilt yield fall back 30 bps [basis points] and equity markets drop 20% following a sovereign default, deficits could grow by 45%, costing an estimated £190bn [€215bn], placing additional strain on corporate sponsors at a time when the economic outlook is uncertain,” says the report.

Investment risk is not the only uncertainty, said OECD economist, pension policy analysis, Anna D’Addio. Speaking at a European conference on the pension crisis, she cited the challenges of changing old-age dependency ratios, and increasing life expectancy at pensionable age. “The two priorities – financial sustainability and adequacy of pensions – are difficult to balance,” she said.

With some European countries trying to solve the crisis by reviewing their default retirement ages – the UK default retirement age will be abolished later this year – risk managers need to consider potential new challenges from an ageing workforce. For example, the physical demands of some jobs could produce increased risks of accidents and health impairment, although the UK Health & Safety Executive reported this year that overall there is no evidence that older workers are more at risk of workplace accidents or injury than their younger counterparts.

QBE’s Issues Forum predicts a rise in disease claims and conditions generally more prevalent in older workers, warning: “It is likely that reserves, particularly for larger value claims, will increase.”

To catch a cyber thief

Cyber crime also continues to hit the headlines on a weekly, if not daily, basis. One of the latest incidents is the alleged theft by researcher Aaron Swartz of more than four million documents from the Massachusetts Institute of Technology’s online archive of scientific journals. This follows on the heels of data theft reports from a raft of companies including Bank of America and Sony Corp, suggesting that even the largest organisations are not taking cyber crime seriously enough and even if they do, they don’t know how to protect themselves against it.

Perhaps the problem is the intangibility of cyber assets. Physical protections may be good enough for the boardroom Van Gogh but a knowledgeable criminal need not even step through the corporation’s door to be inside its IT system.

Few risk managers are tech experts so they have to take the word of their IT security teams that the company is adequately protected. But might it be worth their while employing the odd freelance hacker to stress test the system, in a case of ‘it takes a thief to catch a thief’? Conventional methods don’t seem to be paying off. SR