Ageing in OECD countries and the need
for private pensions
Stéphanie Payet and Clara Severinson
The Working Party on Private Pensions
24 October 2011
People are living longer, and…
• One of the great achievements of the last
century was the mitigation of old-age
poverty in OECD countries.
• As society ages, pension promises are
getting more costly.
• A balance must be found between fiscal
sustainability and adequacy of benefits.
Spending more time in retirement
Average ages for OECD countries
90
85
80
75
70
2050
M 20.3 /
W 24.6
2010
M 18.5 /
W 23.3
1971
M 13.5 /
W 18.2
65
60
1960
1970
1980
1990
2000
Average pensionable age
2010
2020
2030
Life expectancy
2040
2050
Estonia
Canada
Ireland
Poland
Denmark
United Kingdom
Sweden
Slovak Republic
Netherlands
Czech Republic
Germany
EU27
Finland
Portugal
Norway
Austria
Italy
Hungary
France
Belgium
Spain
Slovenia
Luxembourg
Greece
percent of GDP
2060 Projected Pension Expenditure
Projected expenditure, 2060
25
20
15
10
5
0
International Trends
• State pensions are being cut back in response
to ageing populations
• Globally, there is a shift towards risk-sharing
in both state and occupational pensions:
– Defined contribution and hybrid plans
– Fewer traditional DB plans
• Individuals are more exposed to risks
Estimated Replacement Rates (public
pension and mandatory pensions savings)
The Financial Crisis has put pressure
on private pension savings
• Confidence has been shaken as investment returns
have been extremely volatile
• Some governments are being pressured to retreat
from private pension …
• … but public PAYG systems face sustainability
problems given ageing populations and are also
affected by recent increases in unemployment
– Public provisioning should provide adequate
retirement income for low income workers – a
safety net
– Incentives to keep working and to increase
contributions should be considered to help
build pension assets
Main Policy Goals
• Balancing the objectives of benefit adequacy
and financial sustainability remains the key
challenge
• Long-term strategy should remain
diversification and balanced old-age
provision including both private and public
pensions
• Main policy goals:
– Live longer, work longer, contribute longer
– Strengthen private pension systems
– Improve financial literacy
An overview of WPPP projects
• Global Pension Statistics’ project
• Joint EU-OECD project on coverage,
contributions and benefits in private
pensions
• Retirement Savings Adequacy Project
• Design of DC pension plans
The Global Pension Statistics’ Project
• Since 2002, the GPS provides a valuable means
for measuring and monitoring the funded
pension industry, and permits inter-country
comparisons of funded pension statistics and
indicators across countries
• Data are collected yearly from administrative
sources and published with a 7-months lag
• Large geographical coverage: 34 OECD countries
and 32 non-OECD countries, thanks to the
cooperation with the International Organisation
of Pension Supervisors
Scope of the GPS
• Variables collected cover: total assets, asset
allocation, liabilities, contributions, benefits,
costs, membership and number of funds/plans
• Mandatory and voluntary funded pension plans
are included, covering public and private sector
workers, and are broken down by:
– Types of plans: occupational/personal, DB/DC
– Financial vehicles: autonomous pension funds,
pension insurance contracts, book reserve or other
• Data on Public Pension Reserve Funds are also
collected
Data Dissemination and Publications
• Newsletter “Pension Markets in Focus”
(published around July each year)
• Key pension funds’ indicators disseminated
freely through OECD.Stat and updated on an
ongoing basis
• Data sharing with the EU DG Employment
• Flagship publications: “OECD Private Pensions
Outlook 2008” and forthcoming “OECD
Pensions Outlook 2012” with ELS
• Contributions to: “OECD Pensions at a Glance”,
“OECD Factbook” and “OECD in Figures”
Joint EU-OECD Project: Goals
• Assess publicly available data sources which
could be used to estimate levels of private
pension coverage, contributions and
benefits
• Examine ways and means to make better use
of available administrative data and micro
datasets at national and international levels
• Estimate a selected list of indicators for 8
countries
13
Retirement Savings Adequacy Project:
Main objectives
• Assess the amount of financial resources people
may have to finance retirement
• Construct indicators of retirement savings
adequacy and highlight the role of private
pensions in financing future retirement
• Identify groups of the population in each country
at risk of not being prepared for retirement
• Draw policy recommendations on how to improve
the adequacy of retirement savings
14
Design of DC pension plans
• Retirement income adequacy depends
more and more on the pension benefits
stemming from DC pension plans
• The WPPP has been working during the
past 3 years on ways of improving the
design of DC plans in order to ensure this
adequacy
• Proposed policy measures concern both
the accumulation phase and the payout
phase
Further details and contact
Stéphanie Payet
stephanie.payet@oecd.org
Clara Severinson
clara.severinson@oecd.org
www.oecd.org/daf/pensions