OECD criticises insufficient pension reforms
GLOBAL - Widespread pension reform and the lifting of retirement ages across Europe will not be sufficient to cover future pension costs, according a newly published report from the Organisation of Economic Cooperation and Development (OECD).
Although the 43-country report, Pensions At A Glance 2011, reckons most of the countries studied will have raised the pensionable age to 65 for both sexes by 2050, additional life expectancy will outstrip the increase by about two years for men and 1.5 years for women.
The OECD additionally forecast that the working-age population will decline by 10% in 2050, after peaking in 2015.
Although the report described recent pension reforms as "a step in the right direction" towards addressing improving longevity, it also claims governments should assess the impact of pension cuts on the most vulnerable, pointing out that in OECD countries pension reforms since the early 1990s had reduced future benefits by an average of 20%.
In some markets - notably, the UK, the US, Germany and Japan - pensioners receive on average half of their previous earnings.
The report suggested that private pensions and continued employment will be forced to plug the income gap left by the first pillar, which currently accounts for around 60% of old-age income.
It singles out Germany and New Zealand for having successfully broadened private pension provision. Some systems, such as that in the Netherlands, include quasi-mandatory private pension provision. More than 90% of Dutch employees are covered by 656 occupational schemes.
However, in other markets the OECD claimed governments needed to replace built-in incentives to retire with incentives to continue working.
"The success of the reform crucially rests on the ability to increase the duration of the working life," the report said. Italy, which at 30% has the highest proportion of total public expenditure dedicated to pensions payments in Europe, is singled-out in the report as having particular "room for improvement" in this area.