Pension reforms in rich countries mean that retirement benefits will be 15-25% less than would have been paid, and most people will have to work for longer and save more, the OECD said on Thursday.
But although pension reforms in 16 of the 30 OECD countries have been “substantial and necessary” to ensure that pension systems remain viable, “more remains to be done,” the Organization for Economic Cooperation and Development said. In a survey called “pensions at a Glance 2007,” the OECD said bluntly: “People in OECD countries will have to save more for their retirement as a result of the major pensions reforms carried out in recent years. “The average pension promise in 16 OECD countries studied was cut by 22.0%.
For women, the reduction was 25.0%.” Only two countries had increased the promised average rate of payouts to pensioners. These were Hungary and Britain. “In France, Germany, Italy, Japan and Sweden, future benefits will be cut by between 15.0 and 25.0% and in Mexico and Portugal by over 30.0% from what people would have been entitled to before reforms.” But the structure of reforms varied widely.
For example, Mexico, Portugal and Britain, Austria, France, Germany and Sweden emphasized benefits to poorer pensioners. But some countries had tightened up the linkage between earnings and pension payments. “Poland and the Slovak Republic, for example, have tightened the link between pension entitlements and earnings when working ... This may increase poverty risk for retirees who have not been covered by the system over their full career,” the report said.
A raising of the retirement age was a central feature of most reforms. When the reform process has been completed “most OECD countries will have a standard retirement age of 65 years, although in Denmark, Germany, Iceland, Norway, the United Kingdom and the United States, the pension age is or will be 67. Only France, Hungary and the Czech and Slovak Republics planned to have pension ages below 65. Reform is too slow in Austria, Italy, Mexico and Turkey, the OECD warned. “In Turkey, for example, the new retirement age of 65 will only be reached in 2043 for men and even later for women
“This will mean spending on pensions will remain high for many decades and these financial pressures might require short-term adjustments that may cause more hardship than faster reforms would have done.” And early retirement remained an extra burden on public finances in many countries. “Between 1999 and 2004, for example, the average retirement age for men was below 60 in eight OECD countries, including Belgium, France, Hungary and Italy.” (servihoo.com)