OECD warns that pensions reforms have slowed in OECD countries but need to continue
Pensions at a Glance 2017, a new report issued in December 2017 by the OECD, warns that further reforms are needed across OECD countries to mitigate the impact of population aging, increasing inequality among the elderly and changing the nature of work. The OECD also says that public spending on pensions for the OECD as a whole has risen by about 1.5% of GDP since 2000; however, the pace of spending growth is projected to slow substantially.
At the same time, recent reforms will lower the incomes of many future pensioners. People will live longer and would have to postpone the age of retirement to ensure a decent pension.
OECD Secretary-General Angel Gurría says, “bold action from governments is still needed,” to withstand the challenges of financial sustainability and pension adequacy. He underscored the rapidly-changing workplace and cautioned that “policy makers must ensure that decisions made today take this into account and our pension and social protection systems do not leave anyone behind in retirement.”
The net replacement rate from mandatory pension schemes for full-career average-wage earners entering the labour market today is equal to 63% on average in OECD countries, while average, replacement rates for low-income earners are 10 points higher and range from under 40% in Mexico and Poland, to more than 100% in Denmark, Israel and the Netherlands.
Over the past two years, one-third of OECD countries changed contribution levels, another third have modified benefit levels for all or some retirees, and three countries have legislated new measures to increase the statutory retirement age.
Under current legislation, normal retirement age will increase in roughly half of the OECD countries by 2060. The projected increase in retirement ages will be exceeded, however, by expected advances in longevity, meaning that the time people spend in retirement will increase relative to people’s working lives.
Employment at older ages will need to increase further to ensure adequate pensions for many people, according to the report.