This means that
everyone, including young people, should now be worried about having enough money
in old age. Furthermore, life expectancy has also increased by 5.5 years on average within just the past decade. But what this means for
retirement is that what was previously considered enough money is now insufficient
to cover the additional years a person will live.
blockchain-powered solutions are hoping to address this changing landscape and
improve the way that we save for our retirement.
Examining the Issues
Pension funds and the people
running them are partly to blame for creating this crisis. There have been
plenty of cases where fund managers have pilfered and mismanaged funds. In the
U.K., the collapse of construction firm Carillion has left thousands of workers with
uncertain futures as company executives let the workers’ pensions become grossly underfunded. Just recently, a former State Street executive was convicted of defrauding customers of the company’s financial services, which
included several European pension funds.
Current systems lack
transparency and accountability, and often members and retirees only find out that
their pensions are in jeopardy after the news is brought to the public's
Workforces are also
shifting. Fewer people are opting for traditional forms of employment where
they could get access to such employer-provided benefits that typically include
pensions. Freelancers and entrepreneurs have to create such benefits on their
own, which means they might not manage or deposit funds in conventional ways.
For these and many other reasons, funds are actually paying out more to support retirees than the money they take in.
Looking at these
issues, it is possible to see how a technology such as blockchain can be of
use. The transparent and immutable record keeping provided by blockchains makes
fraud and misappropriation of funds traceable. As a decentralized technology,
blockchain platforms also promote democratized access to products and services.
Blockchains for Pensions
startup Akropolis is among the few initiatives
actively working on addressing the pensions crisis. The project seeks to
leverage blockchain technology’s strengths to provide solutions to the issues
Akropolis provides a
marketplace where users can shop around for pension products that best suit
their needs. The platform also allows users to manage their own retirement
funds. Through blockchain technology, everything becomes readily auditable —
unlike with conventional funds where members are rarely updated about fund
performance if at all. This way, users will know how their money is doing at
any given moment, allowing them to make financial moves to boost their ability
to meet their respective retirement goals.
The platform also
serves as a gateway connecting pension funds and fund managers. All
institutional participants have to go through a vetting process to ensure that
only valid entities participate. They are also subject to ranking and
reputation mechanisms to determine which ones are performing well and meeting
their commitments to users. With the blockchain as the recording ledger, it
would be difficult for malicious actors to game or defraud the system. As such,
all actors on the platform are encouraged to act in everyone’s best interest.
The pensions problem
can be a tough issue to solve. Fortunately, blockchain technology is also
creating new ways for people to manage money and invest. Aside from the crypto
market, blockchains have entered various finance verticals that can be used to
can leverage blockchain technology’s ability to allow for fractional ownership
of various assets. Slice Market, for instance,
provides investors access to prime U.S. real estate investments, recording
fractional ownership on a blockchain. By pooling together smaller investments,
investors are able to participate even without significant capital and can earn
through dividends. They are also provided with increased liquidity as users
will be able to readily sell their stakes.
Others with a more
adventurous streak can also explore other unconventional investment vehicles. Assets
such as exotic cars and fine art can be acquired through projects like BitCar and Maecenas, respectively.
Retirement Planning Is a Must
Obviously, plenty of
due diligence is required when diversifying into other investment vehicles. But
most importantly, people need to ramp up their savings and investment efforts
to ensure that they live comfortable lives upon retirement.
Workers should take
time crafting retirement plans and strategies. If fixed, pension funds could
regain their seat as the go-to means for saving for retirement. But it would
also serve workers well to explore other verticals, and blockchain technology
seems like it could be a solution here.