Pensions at a Glance 2015 - Politico

1 Pensions at a Glance 2015 . OECD AND G20 INDICATORS. This work is published under the responsibility of the Secretary-General of the OECD. The opinions expressed and arguments employed herein do not necessarily reflect the official views of OECD member countries. This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. Please cite this publication as: OECD ( 2015 ), Pensions at a Glance 2015 : OECD and G20 indicators, OECD Publishing, Paris. ISBN 978-92-64-24063-6 (print). ISBN 978-92-64-24444-3 (PDF). Series: OECD Pensions at a Glance ISSN 1995-4026 (print). ISSN 1999-1363 (online). The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities.

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3 At FOREWORD. Foreword T his sixth edition of Pensions at a Glance provides a range of indicators for comparing pension policies and their outcomes between OECD countries. The indicators are also, where possible, provided for the other major economies that are members of the G20. Four special chapters (Chapters 1 to 4) provide deeper analysis of recent pension reforms, the role of first-tier Pensions , the impact of short and interrupted careers and the sensitivity of future replacement rates to parametric changes. This report was prepared by the Pensions team in the Social Policy Division of the OECD Directorate for Employment, Labour and Social Affairs. The team comprises Herv Boulhol, Anna Cristina D'Addio, Kristoffer Lundberg and Andrew Reilly. National officials particularly delegates to the OECD Working Party on Social Policy and members of the OECD pension expert group provided active and invaluable input to the report.

4 For OECD countries, the results of the OECD pension models have been confirmed and validated by national authorities. Chapter 1 on Recent pension reforms was written by Kristoffer Lundberg. Chapters 2 and 4 entitled The role of first-tier Pensions and Sensitivity of replacement rates to the model parameters , respectively, were written by Andrew Reilly. Anna Cristina D'Addio wrote Chapter 3 on How incomplete careers affect pension entitlements . Herv Boulhol was responsible for the enhancement and the revision of these chapters. Chapters 2 and 3 were edited by Ken Kincaid. Marl ne Mohier prepared the manuscript for publication. The indicators related to private Pensions were mainly provided by the OECD's private- Pensions unit in the Directorate for Financial and Enterprise Affairs: Pablo Antol n, St phanie Payet and Romain Despalins.

5 The report has benefited from the commentary of many national officials and colleagues in the OECD. Secretariat, notably Mark Pearson, Monika Queisser and Stefano Scarpetta. It is a joint project co-financed by the European Commission and the OECD. Pensions AT A Glance 2015 : OECD AND G20 INDICATORS OECD 2015 3. TABLE OF CONTENTS. Table of contents Editorial The next frontier for pension policy: Focusing more on social sustainability.. 9. Executive summary .. 13. Chapter 1. Recent pension reforms .. 15. Introduction .. 16. Overview of reforms .. 19. Improving financial sustainability .. 20. Increasing retirement-income adequacy .. 27. Remaining challenges .. 31. Notes .. 33. References.. 33. Annex pension reforms from September 2013 to September 2015 .. 34. Chapter 2. The role of first-tier Pensions .

6 45. Introduction .. 46. Eligibility criteria for basic and minimum old-age Pensions .. 47. Benefit levels.. 50. What happens in the event of ineligibility for contribution-based basic and minimum Pensions ? .. 53. How will benefits evolve? .. 59. Conclusion and policy implications .. 66. References.. 68. Annex Supplementary figures on the effect of different indexation approaches .. 69. Chapter 3. How incomplete careers affect pension entitlements .. 73. Introduction .. 74. Setting the scene for an understanding of contribution gaps.. 76. How scattered careers affect Pensions : Theory and practice .. 86. pension systems components that can mitigate the adverse effects of interrupted careers .. 86. pension credits to plug the contribution gap.. 87. Simulating pension entitlements for shorter and interrupted careers.

7 91. Putting the results in a policy perspective: pension credits and other measures towards less fragmented careers .. 98. Policy implications and challenges ahead .. 99. Notes .. 101. References.. 102. Annex Main rules of pension credits related to childcare and unemployment.. 106. Pensions AT A Glance 2015 : OECD AND G20 INDICATORS OECD 2015 5. TABLE OF CONTENTS. Chapter 4. Sensitivity of replacement rates to the model parameters .. 111. Introduction .. 112. Impact of parameter changes since Pensions at a Glance 2013 .. 113. How changes in inflation affect replacement rate results .. 114. How changes in real wage affect replacement rate results .. 114. How changes in the rate of return affect future replacement rates .. 116. How changes in the discount rate affect replacement rates .. 118. Impact of mortality rates.

8 119. Country-specific economic assumptions .. 119. References.. 122. Chapter 5. Design of pension systems .. 123. Architecture of national pension systems .. 124. Basic, targeted and minimum Pensions .. 126. Earnings-related Pensions .. 128. Current retirement ages .. 130. Future retirement ages .. 132. Chapter 6. pension entitlements .. 135. Methodology and assumptions .. 136. Gross pension replacement rates .. 138. Gross pension replacement rates: Mandatory and voluntary schemes.. 140. Tax treatment of Pensions and pensioners .. 142. Net pension replacement rates .. 144. Net pension replacement rates: Mandatory and voluntary schemes .. 146. Gross pension wealth .. 148. Net pension wealth .. 150. Chapter 7. Demographic and economic context .. 153. Fertility .. 154. Life expectancy.. 156. Old-age dependency ratio.

9 158. Employment rates of older workers .. 160. Effective age of labour market exit .. 162. Expected years in retirement .. 164. Chapter 8. Incomes and poverty of older people .. 167. Incomes of older people .. 168. Old-age income poverty .. 170. Average worker earnings .. 172. Chapter 9. Finances of retirement-income systems .. 175. Mandatory pension contributions.. 176. Public expenditure on Pensions .. 178. pension -benefit expenditures: Public and private .. 180. Long-term projections of public pension expenditure .. 182. Chapter 10. Private Pensions and public pension reserve funds.. 185. Coverage of private Pensions .. 186. Institutional structure of private pension plans .. 188. Assets in pension funds and public pension reserve funds .. 190. Asset allocation of pension funds and public pension reserve funds.

10 192. 6 Pensions AT A Glance 2015 : OECD AND G20 INDICATORS OECD 2015 . TABLE OF CONTENTS. Investment performance of pension funds and public pension reserve funds .. 194. pension fund operating costs and fees .. 196. DB funding ratios .. 198. Chapter 11. Pensions at a Glance 2015 : Country profiles .. 201. Guide to the country profiles .. 202. Argentina .. 204. Australia .. 207. Austria .. 212. Belgium .. 216. Brazil .. 222. Canada.. 225. Chile.. 229. China .. 233. Czech Republic .. 235. Denmark .. 240. Estonia .. 247. Finland.. 251. France .. 256. Germany .. 261. Greece .. 265. Hungary.. 269. Iceland .. 273. India .. 277. Indonesia.. 280. Ireland .. 283. Israel .. 286. Italy .. 290. Japan .. 295. Korea .. 299. Luxembourg .. 302. Mexico .. 306. Netherlands .. 310. New Zealand.. 313. Norway .. 316. Poland.