One of the biggest challenges many countries face is the ageing population. Low fertility rates accompanied by an increase in longevity make the ageing population one of the most important issues the humanity should deal with it. This book tackles one of the important matters regarding the ageing population which is providing enough retirement income for retirees. Yet, this is not a trivial matter. As a result of a decrease in fertility rate and an increase in longevity, Pay As You Go type publicly run retirement schemes are not enough to fund individuals’ retirement alone. As a result, the supplementary retirement schemes are needed. In theory, rational individuals should have enough private savings to smooth out consumptions over time. Yet, this does not work in practice and hence, in addition to the public pension, forced savings mechanisms make sure that individuals have enough retirement income. These schemes can be either defined benefit (DB) or defined contribution (DC). In the DB schemes, pension funds are responsible to provide certain guaranteed benefits, i.e., the retirees do not bear risks. In the DC schemes, the investment return risk falls on the retirees. Over time, in the US, and many other places, pension funds move from DB types to DC types at increasing rates. In a reasonably high capital market return environment, forced saving mechanisms provide reasonably well insurance against the longevity risk whether they are DB of DC types. Yet, for a long period of time, the global economy faces low capital market returns. As a result, DB pension funds face a hard time to meet their obligations while DC pension plan holders face inadequate income support in their retirements. Under these circumstances, professional fund managers, current working generation, and current retirees need to come up with strategies to cope with this relatively new phenomenon. We also need more research on financing retirement in the era of low return and high longevity. Possible remedies are increasing savings, consuming less in retirement, working more, retiring late, and investing better. Yet, all these suggestions are not trivial to handle.

Although there are a lot of discussions on financing retirement in the low return era, I was not aware of a comprehensive work until I read ‘How Persistent Low Returns Will Shape Saving and Retirement edited by Olivia S. Mitchell, Robert Clark, and Raimond Maurer’. This book provides an excellent survey of the problems and possible solutions regarding saving and retirement when the persistent low returns are the reality.

The book contains 12 independent chapters categorised under three parts except the first chapter. The first chapter provided a brief overview of the book. The first part consists of five chapters from chapters two to six. The second chapter provides an explanation of why the interest rates are low. It is mainly focused on the political economy explanation of the independence of the US Federal Reserve System. Although the chapter provides an explanation regarding the low interest rates we face, I would prefer to see another chapter explains the issue from the more theoretical point. The low interest rate is a global phenomenon and there is vast research on it. I felt that the current book would be more informative if it extended the origins of the low returns a little bit more. The remaining four chapters in the first part analyse the consequences of the low interest rates. The third chapter concludes that saving rates would need to rise by roughly two-thirds for most Americans given persistent low returns. The fourth chapter analyses the consequences of the low returns from the DB pension plan sponsors’ perspective. The low returns jeopardise the defined pension plan sponsors meeting their liabilities. The chapter comes up with various strategies that can help defined pension plan sponsors to meet their liabilities concluding a decision to increase the portfolio's equity allocation is likely to be the most effective one. The fifth chapter focuses on the investment strategies for retirement saving in the low return environment. The authors estimate that if individuals save systematically throughout their careers and extend their working lives to age 70, a 10% contribution rate should be sufficient for most wage earners to achieve a reasonable replacement rate in retirement. Chapter 6 focuses on risk-taking strategies in the low return environment to make sure the retirement income is sufficient. In sum, I found Part I is quite comprehensive and informative in terms of handling the consequences of the low returns on savings and retirement income. As I stated earlier, this part could have been improved if there is at least one more chapter regarding the origins of the low return.

Part II of the book is dedicated to the retirement strategies and contains three chapters. Chapter 7 discusses changes in the retirement environment, how older workers have been responding to these changes and the future challenges. Chapter 8 calibrates a model economy to the US economy to find the optimal amount of saving with the low persistent returns. The authors find that people are predicted to save less during periods of low returns. Finally, Chapter 9 takes a positive approach instead of a normative approach in contrast to the earlier chapters and document what households have done in the low return environment. I found Part II quite interesting. All three chapters complement each other well. Readers are exposed to both theoretical and empirical studies regarding retirement strategies.

Part III consists of three chapters. As a result of the persistent low return and increasing longevity, old age labour participation has been increasing recently. In order to accommodate the relatively old labour force, employers need to prepare themselves. Chapter 10 states that becoming more age-ready requires firms to optimize physical and mental wellness for workers of all ages, including providing training and skill upgrades. Chapter 12 evaluates models and features used in state-sponsored retirement saving plans as a supplement to social security benefits. I think it could have been better to present this chapter in Part I which covered private DB and DC type of pension plans which supplement social security benefits. The last chapter studies the global developments in retirement benefits acknowledging DB plans around the world increasingly replaced by DC arrangements as an evidence that employers are moving away from providing retirement guarantees. Employment of older individuals is not a trivial matter. Although Chapter 10 touched some issues regarding this, Part II is silent regarding the structural transformation we face due to developments in the Artificial Intelligence, Automation, and Big Data. These developments will affect workers of all ages. It could be very helpful to have another chapter in Part III to discuss the possible future structural changes in the workforce and its implications for the older workforce.

In sum, this is a very interesting, well-written and well-edited, and timely book. In a nutshell, I learned the followings from reading the book: the increase in longevity and the persistent low returns require individuals to save more, work more, and retire late. The rapid replacement of DB plans with DC plans amplifies the risk of the inadequate financing of retirement from the individuals’ perspective. Hence, individuals need to take certain risks to develop meaningful investment strategies associated with their private savings and DC plans. Because of the increasing number of people retiring late, employers need to prepare themselves to accommodate the relatively old workforce.

I found the book touched most of the important issues regarding the ageing population and the persistent low returns. I highly recommend it to pension professionals, academics who work on pension issues, and anybody who wants to be prepared better for his/her retirement.