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Reforming Retirement-Income Systems: Lessons from the Recent Experiences of OECD Countries

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  • John P. Martin
  • Edward R. Whitehouse

Abstract

1. Reforming pensions looms large over the policy agenda of OECD countries. This is hardly surprising since public spending on pensions accounted on average for 7 per cent of OECD GDP in 2005; and this pension spending effort is set to increase significantly over the coming decades in response to population ageing. Pension policy is indeed challenging and controversial because it involves long-term decisions in the face of numerous short-term political pressures. 2. However, the status quo does not always win out so far as pension reform in concerned: public finance crises and the looming threat of ageing populations have proved effective spurs for reform. As a result, much has been done since the early 1990s to make pension systems fit for the future. Nearly all the 30 OECD countries have made at least some changes to their pension systems in that period. In 16 of them, there have been major reforms that will significantly affect future benefits. 3. The purpose of this paper is to summarise these reforms and highlight the main lessons. Section 1 looks at which countries reformed their pensions systems and which did not. It also examines the fiscal challenges posed by public pensions. Section 2 describes the measures in the reforms themselves. These include, among other things, increases in pension age, changes in the way benefits are calculated and smaller pension increases in retirement than in the past. Section 3 explores the impact of these reforms on future pension entitlements of today’s retirees, showing a clear trend to a lower pension promise for today’s workers than for past generations. This means that people will need to save more for their own retirement via private pension schemes, an issue examined in Section 4. This is followed in Section 5 by a review of the main outstanding challenges facing pension systems in OECD countries. The final section presents some concluding remarks. 4. La réforme des retraites occupe une place d’importance dans tous les programmes politiques des pays de l’OCDE. Ceci n’est guère surprenant dans la mesure où les dépenses publiques pour les retraites ont constitué en moyenne 7% du PIB des pays de l’OCDE en 2005 ; et cet effort de dépenses publiques risque d’augmenter de manière significative pendant les prochaines décennies en réponse au vieillissement démographique. Les politiques en matière de retraite font donc face à des défis de taille et sont controversées parce qu’elles impliquent des décisions à prendre à long terme face à de nombreuses pressions politiques de court terme. 5. Pour l’instant, nous n’assistons pas pour autant à un status quo en matière de réforme des retraites. En effet, les crises financières publiques et la crainte grandissante causée par l’apparition d’une population vieillissante ne font qu’encourager les réformes. C’est ainsi que beaucoup a été fait depuis les années 90 pour faire en sorte que les régimes de pensions se réactualisent en tenant compte de l’avenir. C’est presque tous les 30 pays de l’OCDE qui ont ainsi fait quelques changements pendant cette période. Seize d’entre eux ont d’ailleurs opté pour des réformes significatives devant affecter considérablement les prestations futures. 6. Ce document vise à résumer ces réformes et à mettre en exergue les principales leçons à tirer. La Section 1 se penche sur les pays qui ont réformé leurs régimes de pensions et ceux qui n’ont pris aucune mesure. Elle s’intéresse aussi au défi fiscal posé par les pensions publiques. La Section 2, quant à elle, décrit ces réformes, entre autres, l’augmentation de l’âge de la retraite, le changement du mode de calcul des prestations et des augmentations moindres des retraites par rapport aux années précédentes. La section 3 s’arrête sur l’impact de ces réformes sur les prestations futures des actuels retraités. Elle montre une claire tendance à promettre des retraites plus basses aux travailleurs d’aujourd’hui par rapport aux générations antérieures, le constat étant que les travailleurs devront dorénavant économiser davantage en vue de leur propre retraite via des régimes de pensions privés, sujet examiné dans la Section 4. La Section 5 examine les principaux défis auxquels doivent faire face les régimes de pensions des pays de l’OCDE. Le document se termine par des remarques de conclusion.

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Paper provided by OECD Publishing in its series OECD Social, Employment and Migration Working Papers with number 66.

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Date of creation: 30 Jun 2008
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Handle: RePEc:oec:elsaab:66-en

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  1. Choi, James J. & Laibson, David & Madrian, Brigitte C., 2004. "Plan Design and 401(k) Savings Outcomes," National Tax Journal, National Tax Association, vol. 57(2), pages 275-98, June.
  2. Whitehouse, Edward, 2000. "Administrative charges for funded pensions : an international comparison and assessment," Social Protection Discussion Papers 23140, The World Bank.
  3. John Beshears & James J. Choi & David Laibson & Brigitte C. Madrian, 2006. "The Importance of Default Options for Retirement Savings Outcomes: Evidence from the United States," NBER Working Papers 12009, National Bureau of Economic Research, Inc.
  4. Whitehouse, Edward & Queisser, Monika, 2007. "Pensions at a glance: public policies across OECD countries," MPRA Paper 16349, University Library of Munich, Germany.
  5. Pablo Antolín & Edward R. Whitehouse, 2009. "Filling the Pension Gap: Coverage and Value of Voluntary Retirement Savings," OECD Social, Employment and Migration Working Papers 69, OECD Publishing.
  6. Peter Whiteford & Edward Whitehouse, 2006. "Pension Challenges and Pension Reforms in Oecd Countries," Oxford Review of Economic Policy, Oxford University Press, vol. 22(1), pages 78-94, Spring.
  7. Edward R. Whitehouse, 2007. "Life-Expectancy Risk and Pensions: Who Bears the Burden?," OECD Social, Employment and Migration Working Papers 60, OECD Publishing.
  8. Kwang-Yeol Yoo & Alain de Serres, 2004. "Tax Treatment of Private Pension Savings in OECD Countries and the Net Tax Cost Per Unit of Contribution to Tax-Favoured Schemes," OECD Economics Department Working Papers 406, OECD Publishing.
  9. Monika Queisser & Edward R. Whitehouse, 2006. "Neutral or Fair?: Actuarial Concepts and Pension-System Design," OECD Social, Employment and Migration Working Papers 40, OECD Publishing.
  10. Thai-Thanh Dang & Pablo Antolín & Howard Oxley, 2001. "Fiscal Implications of Ageing: Projections of Age-Related Spending," OECD Economics Department Working Papers 305, OECD Publishing.
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Cited by:
  1. Grech, Aaron George, 2010. "Assessing the sustainability of pension reforms in Europe," MPRA Paper 27407, University Library of Munich, Germany.
  2. Javier Vázquez Grenno, 2009. "Spanish Pension System: Population Aging and Immigration Policy," Working Papers wpdea0902, Department of Applied Economics at Universitat Autonoma of Barcelona.
  3. Aaron George Grech, 2012. "Evaluating the possible impact of pension reforms on future living standards in Europe," LSE Research Online Documents on Economics 51296, London School of Economics and Political Science, LSE Library.
  4. Gretchen Van Riesen, 2009. "The Pension Tangle: Achieving Greater Uniformity of Pension Legislation and Regulation in Canada," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 294, August.

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