- Toshendra Kumar Sharma
- January 10, 2020
Retirement represents a wonderful stage of life as it brings in feelings of excitement and adventure that are associated with leaving the working world, as it now means that you can live life on your own terms and your time is solely your time, and you are the main decision-maker when it comes to deciding what to do with your time.
For more adults, the retirement phase of life represents a milestone. But the fact is that, in today’s modern world, a lot is changing in terms of people’s mindsets. So, even after retirement, though the ability to generate income is limited, no individual wants to be a burden to anyone. This is where pension plans, social security programs, and savings vehicles come to the rescue as they help people prepare for their retirement years. But there are certain issues associated with pension schemes and other savings plans.
To know more about this, we will be discussing this in detail in this article.
Issue With Pensions
Gone are the days where people used to work for one company and be rewarded with a guaranteed lifelong pension. Though the concept of pensions still exists, trends like the onset of automation and rising costs of modern medicine are putting high pressure on the bottom line while extending the employer’s obligations to former employees.
The situation of people who still rely on pensions is becoming precarious as there is a global threat faced by pension funds. Funds that are supposed to pay out monthly stipends are struggling to keep up their projected return promises as they are suffering from a lack of funding. There is a huge gap that prevails between the money available in pension funds and the outstanding liabilities to pensioners. This could soon lead to a financial crisis.
The main reason for this situation is the lack of transparency at all stages of the pension-managing process. This is exactly where blockchain comes to the rescue. Let us now understand how blockchain can be used to avoid or solve the financial crisis.
Ana Andria, the founder of the blockchain-based pension infrastructure, Akropolis, is of the opinion that the pension scheme is falling apart due to the following reasons.
- The system’s low mobility as most pension plans are attached to specific careers, employers, and places of residence.
- Changing world demographics as they are fewer young workers supporting more pensioners.
- Lack of control and transparency for beneficiaries of pension plans.
Blockchain For Solving Global Retirement Crisis
Blockchain, as we know, is a decentralized, digital ledger that helps store transactions in a secure manner in the form of blocks. It would be wise even to say that blockchain technology has come into existence at a crucial time when the pension industry was looking for a savior. It can very well be represented as the savior of pension schemes across the globe owing to the unique and innovative ways in which it is being applied by ambitious projects across numerous industry verticals.
Blockchain addresses the challenges of the pension system with the help of a shared decentralized ledger. This helps align stakeholders in any single system. Blockchain provides access to crucial information that is relevant to all. Blockchain will be very helpful as its simple, ledger-based system will allow individuals to audit the funds they are considering. There is greater accountability with a blockchain system as it is equipped with reporting mechanisms that can permanently punish funds that do not follow through by adding records of the results on the shared ledger.
Transparency is the foundation for any successful pension system. While all efforts by working individuals to save money for retirement has been waning due to rising inflation, debt levels, and stagnant wages, blockchain brings more optimism to the picture. Blockchain can help solve pension issues by enhancing transparency and minimizing costs and providing several convenient ways to address fund management. Thanks to the blockchain, Stakeholders of the pension system can now move closer and align their interests.
Apart from helping to solve pension issues, blockchain is also creating novel ways for people to manage and invest money. Apart from the crypto market, blockchain has also entered many finance verticals that can be used to complement pensions.
Conclusion
The one important fact that we must keep in mind is that plenty of due diligence will be needed while diversifying into other investment vehicles. But, bottom line, people need to ramp up their investment efforts and savings to make sure that they lead comfortable lives post-retirement.
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