The Holistic View: Why All Four Pillars Need to Work in Concert

In the chapter “The financial crisis: impact on the four pillars of old age protection” of The Geneva Report No. 6: Addressing the Challenge of Global Ageing—Funding Issues and Insurance Solutions we discussed the theoretical foundations of the Four Pillars Framework and pointed out that the recent
credit crisis and the subsequent sovereign debt crisis have affected all four pillars in a negative fashion. We have also suggested possible ways to improve the current situation. In this chapter, we suggest that an institutional design in which the four pillars work in concert is likely to deliver better real economic results, while designs that pit these four entities against each other are likely to cause imbalance and weakness in the real economy.

We should not assume that retirement systems are immune to producing negative impacts on the real economy and cannot play a similarly devastating role to that of the housing market in the U.S. We must therefore create a four pillars system whose design and financial structure has a positive impact on the real economy.