The OECD Pensions Outlook provides an analysis of different pension policy issues in OECD countries covering both public and private pension systems. This fourth edition discusses policy options to help governments ensure that people will get the most out of the pension system.

People’s trust in pension systems is low. Population ageing, low returns on retirement savings, low growth, less stable employment careers and insufficient pension coverage among some groups of workers have been eroding the belief that all types of pension systems, pay-as-you-go or funded, will deliver on their promises once workers reach retirement age. This is supported by evidence in the recent OECD Risks that Matter survey. People are also concerned about whether the institutions managing their retirement savings in funded pension arrangements have their best interests at heart.

Policymakers designing pension systems should reflect on their objectives (poverty relief, redistribution, sustainability, and consumption-smoothing) and risks (demographic, social, labour, macroeconomic, and financial).

This chapter considers the growing role of supplementary pensions in supporting retirement outcomes across the OECD. It sets out the principal objectives that pension systems may aim to meet and the various risks that individuals face in saving for retirement. The chapter then examines how different design features of supplementary pensions can be deployed to achieve different objectives and offset individual and collective risks, in light of the features of the national pay-as-you-go (PAYG) public pension system. It outlines the trade-offs faced by policy makers as the role of supplementary pensions increases, and discusses the advantages and disadvantages of different features of PAYG and funded, defined benefit and defined contribution, and public and private pension provision.

This chapter examines whether countries can improve the design of financial incentives to promote savings for retirement. After describing how countries currently design financial incentives, it assesses the overall tax advantage that these incentives provide to individuals, how these incentives affect the way individuals save for retirement, and the fiscal cost these incentives represent to governments. The chapter also compares different approaches to designing financial incentives, based on their inherent characteristics within a common framework, to assess the various implications for individuals and governments. It concludes with policy guidelines to help countries improve the design of their financial incentives to promote savings for retirement.

This chapter examines policy measures implemented in different jurisdictions to help align the charges levied by pension providers on scheme members, sponsors and employers with the cost of the services provided, as well as ways to improve outcomes for members and sponsors. These policy measures have been introduced because market mechanisms alone have often been insufficient to achieve this goal. Aligning charges and costs is important as both visible charges – the fees paid to providers by different parties – and unreported charges – deductions from pension portfolios to pay suppliers such as asset managers – reduce the overall value of the pension pot. The most common policy response, improving transparency of charges and costs, works best when accompanied by additional measures such as pricing regulation or structural solutions. The chapter also considers how disclosure initiatives and pricing regulation can include benchmarking and performance-related fee structures to improve outcomes for members and sponsors.

This chapter considers how the governance frameworks and investment policies of several nationally significant investment institutions contribute to realising the missions of these institutions. It maps the set-up and practices of the different institutions against the recommendations of the OECD Core Principles of Private Pension Regulation, especially Core Principle 3: Governance and Core Principle 4: Investment and Risk Management. The chapter builds on this analysis to determine how the application of the recommendations might be strengthened to help improve outcomes for members of private pension schemes. The institutions examined include pension funds, reserve funds and sovereign wealth funds.

This chapter identifies policies to improve retirement incomes through a better design of funded pension arrangements in the context of behavioural biases and low levels of financial knowledge. It discusses five key decisions that people need to make when planning and saving for retirement: participation, contribution, plan provider, investment strategy, and post-retirement withdrawal option. The chapter concludes with a set of policy guidelines that could help policy makers improve the design of funded pension arrangements.

This chapter assesses the potential differences in pension outcomes across socioeconomic groups due to differences in mortality and given the rules of the pension system that are in place. The analysis uses four indicators to conclude that low socioeconomic groups may indeed face a disadvantage for their pension and retirement, but this disadvantage may be partially offset when considering public pension benefits and progressive taxation.

This chapter describes survivor pension schemes in OECD countries. It first documents expenditures on survivor pensions the number of recipients and the average level of benefits. It then provides details about eligibility rules and benefit determination across countries. The chapter includes a discussion of how survivor pensions have developed in the recent decades and whether these trends are related to the more general evolution of pension systems and the deep changes in socio‑economic environments. Simulations based on the OECD pension model estimate the impact of the survivor pensions on the financial situation of survivors, including how pension splitting can affect survivor pensions in OECD countries. Main results and key policy insights follow.

Annex 7.A. is available ONLINE ONLY at the following DOI: http://dx.doi.org/10.1787/pens_outlook-2018-11-en