OECD Private Pensions Outlook 2008

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12 Feb 2009
9789264044395 (PDF) ;9789264044388(print)

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As the role of private pension systems grows in importance, there is a need to monitor their development and review their performance in an international context, especially following the crisis in the financial markets in 2008. This first edition of the OECD Private Pensions Outlook provides essential data on assets, investments, membership, and industry structure based on the latest official statistics, as well as a framework for evaluating the trends shaping the pensions industry, based on the role of the private pensions in relation to the public pension system. It also provides comprehensive country profiles, describing private pension arrangements in individual OECD countries. This edition's special feature covers the implications for pensions and private pensions policy of the financial crisis. This publication includes StatLinks, URLs linking graphs and tables via the internet to Excel® table containing the underlying data.
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  • Special Feature
    The financial turmoil which started with the subprime crisis in the United States in mid-2007 has affected many aspects of the economy, including private pension arrangements.
  • Introduction
    Over the past two decades, there has been a marked shift towards funding and private sector management in pension systems, driven largely by the introduction of mandatory private pensions. Funding has also become increasingly important within publicly managed pension systems. Many countries have established public pension reserve funds (PPRFs) to provide financing support to otherwise pay-as-you-go systems. 
  • Reader's Guide
    The OECD Working Party on Private Pensions and its Task Force on Pension Statistics launched the Global Pension Statistics project (GPS) in 2002. The GPS intends to provide a valuable device for measuring and monitoring the pension industry, and permit intercountry comparisons of current statistics and indicators on key aspects of retirement systems across OECD and non-OECD countries. Data are collected on an ongoing basis so that trends can be readily identified and analysed. The statistics cover an extensive range of indicators and relate to a wide definition of private pension plans (see below OECD classification), themselves subdivided into detailed categories using coherent statistical concepts, definitions and methodologies. 
  • Role and Types of Private Pension Systems
    In 2007, nearly USD 28 trillion in assets were accumulated in private pension systems in the OECD area, of which more than 60% was held by the US private pension system (USD 17 trillion). The OECD-weighted average ratio of private pension assets to the area’s GDP reached 111.0% in 2007. Between 2006 and 2007, institutional investors’ total assets increased by 11.3%. However, pension funds’ assets rose only by 7.5%, while those of insurance companies and investment funds both grew 12.9%. The financial assets held by investors are heavily pension-oriented. As much as 60% of the total volume of assets held by institutional investors worldwide has as its main purpose the financing of retirement benefits. Chapter 1 describes the main types of private pension systems and focuses on the growing role of funding, private pensions, and institutional investors in retirement income arrangements. Data shown in this chaper include all kinds of private pension arrangements (i.e. including pension funds, book reserves, pension insurance contracts and bank/investment company managed funds). 
  • Key Pension Fund Indicators
    This chapter provides indicators on the trends in pension fund assets, investments, membership, and revenues and expenditure up to December 2007. The performance of private pension systems over the coming years will be strongly influenced by the evolution of the financial crisis and the depth of the economic recession. Some indicators, like pension fund net income flows will show a marked deterioration in 2008. The shift from defined benefit to defined contribution is likely to be accentuated in the years to come. Investment policies are also experiencing change, leading to lower equity allocations even after markets recover. Funds in emerging economies will grow in importance over the coming decades, so selected non-OECD countries are included too. While Chapter 1 looked at all types of private pension arrangements, this Chapter focuses exclusively on pension funds, for which detailed indicators are available. The Chapter therefore excludes data pertaining to: ? book reserve systems (as they exist in countries like Austria, Canada, Finland, France, Germany, Italy, Luxembourg, Mexico, Spain, and Sweden); ? pension insurance contracts (such arrangements exist in all OECD countries, the main exceptions being the Czech Republic, Hungary, Japan, Mexico, New Zealand, and the Slovak Republic) and; ? funds managed as part of financial institutions (often banks or investment companies), such as the Individual Retirement Accounts (IRAs) in the United States and other countries. The full description of data coverage can be found in Chapter 5 in the table entitled "Overview of private pension system by type of plan and financing vehicle", provided for each individual OECD country. This table describes existing pension plans in the country and gives the correspondence with the OECD classification in terms of pension plan type and financing vehicle. Pension plans included in the data are also flagged in this table.
  • Public Pension Reserve Funds
    In some countries public pension systems are accumulating large reserve funds to complement pay-as-you-go financing. This chapter presents the main trends in assets and investments of these funds up to December 2007. The 2008 financial crisis has had a major impact on the value of some of these funds as their equity allocations had been rapidly increasing in recent years. However, some of these funds have an even longer investment horizon than pension funds, especially in those countries where by law they are not expected to make any disbursements for the next ten to twenty years. Hence, these funds can take larger risks than most pension funds in the expectation that over the long term the investment strategy will pay off. This chapter contains data and analysis on public pension reserve funds (PPRFs) which are defined as funds set up by governments or social security institutions with the sole objective of complementing the financing of pay-as-you-go (PAYG), public pension plans.
  • Performance Indicators of Private Pension Systems
    The 2008 financial crisis focused attention on the reliability of private pensions systems, with some workers suddenly confronted by the prospect of losing a significant part of their benefits. Some schemes will recover less quickly from the crisis than others, and there are even fears that some may not recover at all, at least not without help from the taxpayer. However, the performance of the private pension system as a whole should not be judged by focusing on investment returns in a single year alone. In particular, in order to gauge the private pension system’s ability to deliver benefit adequacy and security in old age, one needs to make projections about the level of benefits that these plans may pay in the future. The following chapter provides a set of performance indicators of private pension systems. In addition to benefit projections for a representative private pension plan in each country, the chapter analyses indicators on coverage, investment performance, solvency and administrative efficiency (operating costs and fees charged to participants) of private pension systems. 
  • Country Profiles: Australia
  • Country Profiles: Austria
  • Country Profiles: Belgium
  • Country Profiles: Canada
  • Country Profiles: Czech Republic
  • Country Profiles: Denmark
  • Country Profiles: Finland
  • Country Profiles: France
  • Country Profiles: Germany
  • Country Profiles: Greece
  • Country Profiles: Hungary
  • Country Profiles: Iceland
  • Country Profiles: Ireland
  • Country Profiles: Italy
  • Country Profiles: Japan
  • Country Profiles: Korea
  • Country Profiles: Luxembourg
  • Country Profiles: Mexico
  • Country Profiles: Netherlands
  • Country Profiles: New Zealand
  • Country Profiles: Norway
  • Country Profiles: Poland
  • Country Profiles: Portugal
  • Country Profiles: Slovak Republic
  • Country Profiles: Spain
  • Country Profiles: Sweden
  • Country Profiles: Switzerland
  • Country Profiles: Turkey
  • Country Profiles: United Kingdom
  • Country Profiles: United States
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