The projected increase in saving rate is the result of two main factors. First, the change in the population structure leaves larger shares of the population in age-groups that save relatively more. Second, because the share of poor falls with age, the share of the population that is non-poor will increase with time (solid line in Figure 4b) — and this will lead to a higher weight on the saving rates by the non-poor in the average weighted saving rate. If inequality then falls, there will be even fewer poor people — across all age groups but also for the population as a whole. This will lead to an even higher weight on the non-poor’s saving rates in the average weighted saving rate.

# **_Robustness and Sensitivity_**

The baseline scenario for the change in the saving rate, when the population ages, is, as discussed above, illustrated by the solid line in Figure 4b. Three robustness scenarios are then performed: One where public pensions are still included in the estimations of income but where inequality remains unchanged; and two scenarios without public pensions where the poverty headcount either follows the trend or remains constant. These robustness scenarios are also displayed in Figure 4b. If the poverty headcount remains unchanged, fewer people will be saving a higher rate, so the saving trajectory shifts down.

The second and third scenarios testify to whether public pensions should or should not be counted as income which potentially alters the main finding. As Figures 2a,b depict, the saving rates evolve in line with the life-cycle hypothesis if public pensions are no included. Such a saving pattern would generate a weighted average of the saving rate that would fall over time when the population ages. It is our view, however, that these scenarios are not particularly credible, so while we present the implications for illustrative and transparency purposes, we choose rely on the income measurement that includes public pensions — and, thus, rely on the saving profiles that slightly rise over time.

Further robustness tests include whether fertility might be higher or lower than the rate considered in the simulations; whether life expectancy (or age-specific mortality rates) might be higher or lower; and whether the share below the poverty line may increase or fall more than the simulation scenarios reveal. If fertility is higher (lower) than the projected by the UN Population Division’s medium fertility variant, there will be a larger (smaller) share of the population in younger agegroups who save relatively less (more), thus reducing (increasing) the weighted average of the saving rate. On the other hand, if the age-structure of mortality changes the share of low-savers to highsavers will also change. In that context, it is more likely that mortality falls relatively more for older age-groups than for younger age-groups — thus increasing the saving rate.

The same argument holds for the share of the population below the poverty line: If the share below the poverty line falls for older age-groups, there will probably be a larger effect on the saving rate than if poverty in youth falls. However, if poverty uniformly falls with the same rate over the entire age-spectrum there will be a relatively larger increase in the saving rate from young savers since a relatively larger share of young live in poverty.

One might also expect the age-specific saving rates to endogenously change in one or the other direction. It is found in the following section that the saving rate might increase if the most prudent policies are put in place for the financing of aging. If an increase in the overall saving occurs, that would translate into considering an overall increase in the age-specific saving rates employed in this section. This may already be occurring, as illustrated in Figure 3a where age-specific saving rates have increased to a non-negligibly extent from 2002 to 2006. Given that saving patterns are perfectly 14