Inequality among the retired could increase in future years, fuelled by the retrenchment of public pensions, trends towards working longer and more reliance on private pensions, according to the latest edition of Pensions at a Glance from the Organisation for Economic Co-operation and Development (OECD).
The report warned: “Population ageing means that, in many OECD countries, pension expenditures will tend to increase. Recent reforms have aimed at maintaining or restoring financial sustainability of pension systems by reducing future pension spending.
“The social sustainability of pension systems and the adequacy of retirement incomes may thus become a major challenge for policymakers.”
The annual report, a comprehensive examination of pension systems in OECD and selected non-OECD countries, looks at recent trends in retirement and working at older ages, evolving life expectancy, design of pension systems, pension entitlements, and private pensions, before providing a series of country profiles.
Other key findings include:
- Future entitlements will generally be lower, and not all countries have built in special protection for low earners. People who do not have full contribution careers will struggle to achieve adequate retirement incomes in public schemes, and even more so in private pension schemes, which commonly do not redistribute income to poorer retirees.
- It is essential people continue paying in contributions to build future pension entitlements and ensure coverage. However, increasing pension age alone will not suffice to ensure people stay effectively on the labour market. A holistic approach to ageing is needed.
- Because of stigma, lack of information on entitlement and other factors, not all elderly people who need last-resort benefits claim them. There is thus a certain degree of hidden old-age poverty.
- Public services are retirement-income enhancers. This is especially true of healthcare and long-term care services. Services benefit the poorest retirees much more than they do richer elderly households. Public support is set to play an increasingly important role in preventing old-age poverty among people requiring health and long-term care services.