PENSIONS
SitemapKey findings
Are pension systems designed to achieve
fiscal sustainability? Do pension policies
target inter-generational equity?
fiscal sustainability? Do pension policies
target inter-generational equity?
Pensions scores are weighted composites. One qualitative assessment contributes half of the weighting, with four quantitative measures contributing the other half.
Pensions scores
Pensions scores
PensionsKey findings: Pensions
Criterion ranking are split into four groups. In the score distribution graphs, click on the bars to see individual countries’ scores.
Top group
In this top group, pension systems are comparatively sustainable in the long term, successfully keeping retirees out of poverty.
Canada, New Zealand and Finland rely almost wholly on public pension systems, with recent reforms improving sustainability. Canadian pensioners without additional employer-based coverage receive comparatively low benefits, however. Private and occupational pension plans are relatively more important in Sweden and Switzerland.
Reforms in Finland and Norway have discouraged early retirement. Norway’s state system, funded by petroleum and gas revenues, is exceptionally generous and stable.
Switzerland’s first-pillar public pension system will face long-term demographic threat if the retirement age is not raised or benefits reduced. All but New Zealand show comparatively high dependency ratios.
Canada, New Zealand and Finland rely almost wholly on public pension systems, with recent reforms improving sustainability. Canadian pensioners without additional employer-based coverage receive comparatively low benefits, however. Private and occupational pension plans are relatively more important in Sweden and Switzerland.
Reforms in Finland and Norway have discouraged early retirement. Norway’s state system, funded by petroleum and gas revenues, is exceptionally generous and stable.
Switzerland’s first-pillar public pension system will face long-term demographic threat if the retirement age is not raised or benefits reduced. All but New Zealand show comparatively high dependency ratios.
Upper middle group
7
7.5
7.5
9
7.4
10
7.3
11
7.2
7.2
13
7.0
7.0
15
6.8
6.8
This group contains a variety of pension-system models, generally showing good results in preventing poverty. However, most are in the midst of reforms aimed at responding to long-term pressures.
Reforms in Denmark, Australia, the Czech Republic and Germany will gradually increase the retirement age over time. Lacking similar changes, Luxembourg’s very generous benefits face long-term sustainability problems, while Iceland’s crisis-related pension fund losses have forced a reduction in benefits.
Chile broadened its tax-financed public pillar, offering a guaranteed – though still low – minimum income to older citizens. The Czechsystem was found to be unconstitutional, requiring revision that may include a lower degree of redistribution.
The USA and UK offer low benefits by OECD standards, with relatively high reliance on private and occupational supplements. Australia and the USA lag substantially behind others in this group in preventing old-age poverty.
Reforms in Denmark, Australia, the Czech Republic and Germany will gradually increase the retirement age over time. Lacking similar changes, Luxembourg’s very generous benefits face long-term sustainability problems, while Iceland’s crisis-related pension fund losses have forced a reduction in benefits.
Chile broadened its tax-financed public pillar, offering a guaranteed – though still low – minimum income to older citizens. The Czechsystem was found to be unconstitutional, requiring revision that may include a lower degree of redistribution.
The USA and UK offer low benefits by OECD standards, with relatively high reliance on private and occupational supplements. Australia and the USA lag substantially behind others in this group in preventing old-age poverty.
Lower middle group
17
6.4
18
6.3
19
6.2
6.2
6.2
6.2
23
6.0
24
5.9
25
5.6
5.6
Pension systems in this group often face serious sustainability threats, with rising general-budget subsides or deficits already evident as populations grow older.
Demographic shifts are a particular concern in Ireland, Austria, Hungary, South Korea, Belgium, Spain and France. Retirement age increases were approved in Hungary and prepared in France and Spain, while Poland reduced access to early retirement. Austria and Belgium retain unsustainably low retirement ages.
Slovakia, Ireland and Poland rely comparatively heavily on occupational or privately managed funds. The financial crash damaged Irish occupational pension stocks badly, with many funds falling into deficit.
South Korea’s system provides very minimal benefits, leaving comparatively many retirees in poverty. While fiscally stable today, the program faces long-term threats associated with a fast-aging population. Turkey’s system is still undergoing transformation, with coverage incomplete and deficits despite the population’s relative youth.
Demographic shifts are a particular concern in Ireland, Austria, Hungary, South Korea, Belgium, Spain and France. Retirement age increases were approved in Hungary and prepared in France and Spain, while Poland reduced access to early retirement. Austria and Belgium retain unsustainably low retirement ages.
Slovakia, Ireland and Poland rely comparatively heavily on occupational or privately managed funds. The financial crash damaged Irish occupational pension stocks badly, with many funds falling into deficit.
South Korea’s system provides very minimal benefits, leaving comparatively many retirees in poverty. While fiscally stable today, the program faces long-term threats associated with a fast-aging population. Turkey’s system is still undergoing transformation, with coverage incomplete and deficits despite the population’s relative youth.
Bottom group
In this group, deep sustainability problems with public pension system are common, and most fail to prevent old-age poverty.
Pension systems are facing problems with sustainability even in the relatively short term in Italy, Portugal, Japan and Greece. Japan and Italy have raised retirement ages and changed benefit structures, but more reforms are necessary.
Mexico implemented major reforms a decade ago, moving from a pay-as-you-go to a defined-benefit system aimed at broadening and stabilizing coverage. While this was successful, old age poverty remains a serious problem.
Each of these countries aside from Mexico has a very low working population as a share of the total population, a problem both for contribution-based and tax-funded models.
Pension systems are facing problems with sustainability even in the relatively short term in Italy, Portugal, Japan and Greece. Japan and Italy have raised retirement ages and changed benefit structures, but more reforms are necessary.
Mexico implemented major reforms a decade ago, moving from a pay-as-you-go to a defined-benefit system aimed at broadening and stabilizing coverage. While this was successful, old age poverty remains a serious problem.
Each of these countries aside from Mexico has a very low working population as a share of the total population, a problem both for contribution-based and tax-funded models.