According to Allianz, the baby boomer tsunami will first reach the USA where it is expected to peak in 2020 (see graph). Switzerland will follow in 2025 when a good 7% of the population will be in the 60 to 65 age bracket. By comparison, that number was 4% in 1950.

Pension systems overwhelmed

Rising longevity compounds the problem: in Switzerland life expectancy will climb from 69.2 years to nearly 84 in 2025. According to Allianz, with the shift from defined benefit to defined contribution savings schemes, longevity is increasingly placed onto individuals' shoulders. Until recently, most social security systems in Europe featured generous Pay-As-You-Go approaches. This is now changing and the importance of non-public pillars is increasing.

With rising life expectancy, the time spent in retirement and the required funding will therefore grow unless the retirement age is increased proportionally. To mitigate the effects of this development, Germany and the Netherlands raised their retirement age to at least 67, while France increased the earliest retirement age to 62. Meanwhile, the UK has decided to revoke the legal retirement age altogether effective September 2011.

According to Allianz, another challenge savers face is the investment risk. The shift from defined benefit to defined contribution plans transfers the responsibility for investment decisions onto the saver. During market downturns, participants in defined contribution plans can suffer heavy losses.

Growing trend towards more individual responsibility

The sheer magnitude of baby boomers entering retirement will significantly increase the number of people dependent on contributions from the working population compounding the above-mentioned issues.
The shift from defined benefit to defined contribution plans has led to an individualization of retirement savings.  This trend toward increased savings and more responsibility for those savings indicates that people are beginning to take control of their retirement planning.