Pension bomb

A pension bomb or pension time bomb is a phenomenon where demographic and other changes (typically longevity, population peaks and troughs, and long term adverse changes in the rate of return on investments, cost of living or taxation) mean that widespread difficulties will occur at some relatively predictable time in the future.

U.S. baby boomers

The pension bomb is an expected economic situation beginning in 2010. Baby boomers of post World War II are expected to hit the retirement age of 65, due to the fact they were born in 1945. This means a large number of people are expected to be claiming government benefits such as Social Security and Medicare during this time. It has been predicted that this will cause problems to the economy of the United States and other Western nations.

UK state pension and private pension

Due to the low savings ratio, increased longevity, the move towards an earlier retirement age, and new taxation of pension funds by the Labour GovernmentFact|date=January 2008, both private and public pension funds are in difficulties. Many private funds have either closed their doors to new members or moved from final salary to contribution based benefits. Many hundreds of private funds have been wound up. The government has appointed an enquiry to look at ways of ensuring that a major increase in poverty in the coming decades can be avoided. Suggestions have included compulsory pensions and extension of retirement age to seventy.

Australian Government strategy

The Australian Federal Government has acknowledged that the number of people receiving the pension will outnumber the number of people in the workforce funding the pension by the end of the next decade. This situation is unsustainable so a number of strategies have been employed to counter this problem. Superannuation contributions have been increased while retirees have been banned from receiving their superannuation lump sum. Immigration policies have been modified to encourage young people to come to Australia. Australian citizens have been encouraged to give birth to more children with the incentive of a baby bonus of $5000 payable for each newborn child. Those who are nearing the age of 65 have also been encouraged to not retire but keep working for as long as possible well into their 70s. This, however, is not a practical option for those who are least skilled, have no higher education qualifications or are in physically demanding occupations such as bricklaying.