Reactive policies in response to resource constraints could lead to the collapse of pension savings, according to forward-looking research examining resource constraints and the risks they pose to the financial services and global economy.

Conducted by the Institute and Faculty of Actuaries and Anglia Ruskin University, the research looked at empirical data for resource constraints including metals and fresh water and applied actuarial modelling techniques to pensions in order to project the landscape 25 years down the line.

The researchers found that reactive policies and responses to resource constraints led to negative outcomes including a possible collapse of pension savings; but that positive outcomes are a result of proactive decision making by key actors in the global economy and business leaders.

They concluded that in the current climate, there is a reactive approach to resource constraints, which “can have significant economic impact and this can result in social and political shockwaves, as seen recently with the Arab Spring and food shortages”.

Institute and Faculty of Actuaries council member Peter Tompkins said: “Despite strong evidence that there is a risk that resource constraints could have significant economic impacts, these risks are not being factored in by many actors in the global economy.

“Our research is focused, in particular, on the impact to the financial services industry and to businesses. Modelling work suggests that factoring resource constraints into risk management measures now could significantly limit future damage. Our research finds that many current savings structures, such as pension schemes, may have to be re-designed if we are entering a low-growth economic paradigm.

“Actuaries have a key role to play in advising decision makers on risk. With this research we aim to help actuaries to lead the way in modelling these risk factors and providing a voice for these risks within their sectors.”

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