OECD: Lower pension payouts
PARIS (Reuters) – Some countries need to undertake major pension reforms urgently and will have to accept lower payouts for retirees in exchange for preventing their pension systems collapsing, the OECD said yesterday in a report on pensions systems in 16 of its 30 member countries. «There is a clear underlying trend toward a reduced pension promise for today’s workers when compared with past generations,» it said. «This is necessary to ensure the financial sustainability of pension systems for both current and future retirees.» The OECD singled out Greece and Spain as examples of countries where workers could still expect large pension benefits if they retire at the standard pension age as well as offering incentives for early retirement. «Population aging will increase the financial pressure on these schemes and reforms are needed urgently,» the OECD said. It also said some countries which have already made reforms, are phasing them in too slowly, for example Austria, Italy, Mexico and Turkey. In Turkey the new retirement age of 65 will not be reached until 2043 for men and later for women. In Austria and Mexico, people who were already covered by the public pension system are guaranteed that benefits will be no lower or only a little lower than under the old system. In Italy a 1995 reform will only affect people who retire around 2017 or later. «Even though the long-run financial position of the pension systems of these countries is much improved, the slow pace of change will result in many decades of relatively high expenditures,» the OECD said. Generous Luxembourg The report said Luxembourg had the most expensive pensions promise, with a male pensioner expected to receive $920,000 and a female retiree over $1 million. The Netherlands and Greece ranked second and third. The most modest pension systems were in Belgium, Ireland, Japan, the United Kingdom and the United States where pensions wealth is around two-thirds of the average for OECD countries. Pension reform means that workers will be required to rely more on their own savings to fund retirement even if they have been paying into a system throughout their career. Reforms may also result in greater poverty in old age for low-income workers, for example in Italy, Poland and Slovakia. «Countries will have to monitor closely the income situation of retirees and establish safety nets to prevent a resurgence of old-age poverty,» it said. Young workers who miss payments in the first 10 to 15 years of their career because of other demands on their budget will find it even more difficult to reach a sufficient pension level, the OECD said.
