This can also be demonstrated in a stringent model of a closed economy. But as soon as supply-side and external factors are included the results are different. A new report by Allianz Group and Dresdner Bank economists illuminates this. Among other things, they also expose the assumption that people dissave in old age (the life-cycle hypothesis) as unrealistic. It turns out that people do not unwind their savings in old age but actually build up further assets (inheritance motive, "rainy day savings").

The openness of economies further erodes the link between demographics and financial market trends. International diversification of retirement portfolios can offset the lower domestic yields going forward assumed in the asset meltdown hypothesis. Shrinking societies benefit for example from the population growth and dynamic economic development in, say, Asia.

These conclusions are backed up by a string of empirical studies. "The impact of demographic change on the financial markets will be on the moderate side, if there is any at all." Private retirement provision will therefore continue to fulfil its purpose as we are not heading for a broad slide in yields.