It’s crazy for retirement age to be 65, warns world’s largest fund manager

The world is facing a looming retirement crisis as people live longer, the head of the world’s largest fund manager warned.

Larry Fink, chairman and chief executive of BlackRock, said longer lives meant workers may have to retire later in life to ensure their savings pots tide them over until their death.

In his closely-watched annual letter, which is distributed to investors, Mr Fink said: “No one should have to work longer than they want to. But I do think it’s a bit crazy that our anchor idea for the right retirement age — 65 years old — originates from the time of the Ottoman Empire.

“When people are regularly living past 90, what should the average retirement age be?”

The billionaire investor, who founded BlackRock in 1988, is considered one of most influential voices on the global stage, with his pronouncements often setting the tone for policy making discussions around the world.

Mr Fink, 71, said he feared not enough was being done to ensure people have enough money to safeguard their retirement and “urgent” action was needed to help people build more substantial retirement pots for when they get old.

The Wall Street boss said he wanted to “start having the conversation” about the issue as changing demographics around the world lead to rapidly ageing populations, with countries needing to develop US-style capital markets to help pay for retirees.

Obesity drugs such as Wegovy were also contributing to longer lives, and sometimes adding an extra 10 years to a person’s lifespan, he said, but there was too little focus on having enough money set aside to live these extra years comfortably.

“As a society, we focus a tremendous amount of energy on helping people live longer lives. But not even a fraction of that effort is spent helping people afford those extra years,” said Mr Fink.

According to UN projections, one in six people globally will be over 65 years old by 2050, up from one in 11 in 2019.

In the UK, the retirement age has slowly nudged up from 65 and the Government introduced auto enrolment into pensions a decade ago to stave off the crisis.

People can currently start claiming the state pension at 66, although this is set to rise to 67 by 2028.

Chancellor Jeremy Hunt last year was forced to shelve a planned rise in the state pension age to 68 because of declining life expectancy.

Spending on the UK state pension is also expected to rise from 5.1pc of GDP to 8.6pc of GDP by 2072-73, according to the Office for Budget Responsibility (OBR).

The Tories and Labour have both pledged to keep the pensions triple lock, which guarantees payments rise in line with the highest of price increases, earnings or 2.5pc every year, would remain in the next parliament.

Prime Minister Rishi Sunak insisted on Tuesday that maintaining the policy would be affordable.

However the Institute for Fiscal Studies (IFS) has warned that the triple lock could increase spending by anywhere between a further £5bn and £45bn per year by 2050.

Over recent decades, changes in the pensions industry have transferred all the risk of retirement from employers onto workers.

Defined benefit (DB) schemes, which guarantee pensioners a fixed income level when they retire, are being phased out in favour of defined contribution schemes, which pay out based on the total level of savings and investment gains accrued.

The BlackRock chief said baby boomers who benefitted from DB schemes had an “obligation” to help Gen Zs and millennials save more for retirement.

He said: “Young people have lost trust in older generations. The burden is on us to get it back. And maybe investing for their long-term goals, including retirement, isn’t such a bad place to begin.”

BlackRock is the world’s largest asset manager, overseeing around $10 trillion (£8 trillion) in assets under management.

More than half of those assets are allocated to retirement products.