This third edition of the OECD Pensions Outlook provides an analysis of different pension policy issues in OECD countries covering both public and private pension systems.

Population ageing, the financial and economic crisis as well as the current environment of low growth and low interest rates pose fundamental and far-reaching challenges to pension systems. They increase financial pressure on defined benefit (DB) pension arrangements, which translates into fiscal difficulties for pay-as-you-go (PAYG) financed public pension arrangements, and strains on solvency for funded DB pension arrangements. Defined contribution (DC) pension arrangements in which individuals bear many of the risks of saving for retirement will see reductions in the retirement income they are able to deliver.

Pension systems across OECD countries are still addressing the challenges posed by population ageing, the financial and economic crisis and the economic environment of low growth and low interest rates. This Outlook continues the OECD exploration of how pension systems are responding to these challenges.

The pensions landscape has changed in recent decades. All OECD countries have to varying degrees a combination of different pension arrangements to provide retirement income. This chapter first suggests a means for understanding and differentiating between the characteristics of different pension arrangements. Then, focusing on those pension arrangements in which assets back pension benefits, the chapter documents their growing importance over the last 15 years. The growth of pension arrangements in which pension benefits are linked to the amount of assets accumulated is also highlighted. Given these trends, the chapter discusses the advantages and disadvantages of defined benefit and defined contribution pension arrangements and ends with the main OECD policy messages.

This chapter assesses whether the tax treatment of retirement savings vehicles in different OECD countries provides an advantage when people save for retirement. It then calculates the tax advantage that individuals saving into private pension plans may enjoy over their lifetime. This overall tax advantage is the amount that an individual would save in taxes paid by contributing to a private pension plan instead of putting the same amount into an alternative, benchmark savings vehicle. It also includes the effect of state financial incentives, such as flat-rate subsidies and matching contributions, and it is calculated for different types of private pension plans across all OECD countries.

This chapter looks at policy measures which can be taken to help ensure that consumers receive appropriate financial advice for retirement. The measures include duty of care standards, disclosure requirements, and remuneration limits in order to mitigate conflicts of interest, qualification standards to ensure that advisors are competent to provide advice, and ensuring that mechanisms are in place to facilitate dispute resolution for consumers. The chapter discusses the objectives and potential effectiveness of each of these measures, along with their potential impact on the affordability and availability of advice. Finally, it proposes approaches to improve the effectiveness of these measures and reduce the impact on the accessibility of advice.

This chapter discusses the issues that policy makers should consider to support life annuity products as a key instrument to finance retirement and protect individuals from the risk of outliving their assets. First, there is a need for consistency in the scope, definition and terminology used to refer to annuity products. There is also a need for coherence in the design of the framework of the pension system in order to further the role of annuity products to protect individuals from longevity risk. Continued innovation in product design highlights the need for regulatory requirements to adapt, but also for consumers and their financial advisors to be able to understand the complicated product features which may result. Finally, the appropriate incentives for annuity providers to mitigate the risks they face where necessary should be in place in order to ensure the sustainability of these products.

Ageing populations and fiscal pressures have led many governments to reform their pension systems in ways that are making individuals increasingly responsible for managing their retirement wealth, as well as investment and longevity risks. This chapter starts by providing an overview of the main challenges people face when they take decisions for retirement. The chapter then looks at the role of financial education in addressing people’s lack of financial literacy for retirement, analysing how financial education needs for retirement vary across different features of pensions systems and discussing the main existing initiatives. It concludes with practical tools to support policy makers.

This chapter examines the pension systems for civil servants in OECD countries, concentrating on those countries that have different rules, or even systems, for civil servants and private sector workers. The chapter starts with a discussion of the history and recent reforms of civil service pension systems including interactions with the private sector. The key parameter values of the civil servant schemes are compared with those for private sector workers, followed by analysis of the future pension promises for workers starting their career today. A discussion of the implications for the ongoing financial commitment for the state for current and future retirees in the public sector follows. The final section summarises key findings and draws policy implications, highlighting the benefits of an integrated framework for all workers.