People will need to save as reforms cut pension promises, says OECD
OECD - Paris, 7 June 2007
People in OECD countries will have to save more for their retirement as a result of the major pensions reforms carried out in recent years, according to a new OECD report. The average pension promise in 16 OECD countries studied was cut by 22%. For women, the reduction was 25%.
Pensions at a Glance 2007 notes that in only two countries, Hungary and the United Kingdom, did pension promises increase on average. In France, Germany, Italy, Japan and Sweden, future benefits will be cut by between 15 and 25% and in Mexico and Portugal by over 30% from what people would have been entitled to before the reforms.
The impact on workers varies widely across the OECD. Several countries moved towards greater targeting of benefits on poorer pensioners, notably Mexico, Portugal and the United Kingdom. Austria, France, Germany and Sweden also protected low earners.
Reforms have worked in the opposite direction in other countries. Poland and the Slovak Republic, for example, have tightened the link between pension entitlements and earnings when working, without putting in place any new social safety nets for low earners. This may increase the poverty risk for retirees who have not been covered by the system over their full career, the report finds.
The most common feature of the reform packages is a change in pension age. When reforms are complete, most OECD countries will have a standard retirement age of 65 years, although in Denmark, Germany, Iceland, Norway, the United Kingdom and the United States, the pension age is or will be 67. Only France, Hungary and the Czech and Slovak Republic plan to have pension ages below 65.
But although pensions reforms in the OECD as a whole were substantial and necessary to ensure the financial sustainability of pensions systems for current and future retirees, more remains to be done.
Some countries, for example, are phasing in pension reforms too slowly, notably Austria, Italy, Mexico and Turkey. In Turkey, for example, the new retirement age of 65 will only be reached in 2043 for men and even later for women. This will mean spending on pensions will remain high for many decades and these financial pressures might require short-term adjustments that may cause more hardship than faster reforms would have done.
Early retirement is also still a problem in many countries, adding extra pressure to public finances. Between 1999 and 2004, for example, the average retirement age for men was below 60 in eight OECD countries, including Belgium, France, Hungary and Italy.
Pensions at a Glance 2007 provides indicators for comparing pension policies across OECD countries and includes a chapter on the role of private pensions in providing future retirement incomes.
To obtain a copy of the report, journalists are invited to contact the OECD Media Division (tel. 33 1 45 24 97 00). For further information, please contact Monika Queisser (tel. 33 1 45 24 96 34 or mailto:[email protected]) or Edward Whitehouse (tel. 33 1 45 24 80 79 or mailto:[email protected]), OECD's Social Policy Division.
For further information :
www.oecd.org/els/social/ageing/PAG
Pensions at a Glance 2007 can be purchased in paper or electronic form through the OECD’s Online Bookshop(Linkki toiselle web-sivustolle.). Subscribers and readers at subscribing institutions can access the online version via SourceOECD(Linkki toiselle web-sivustolle.)