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

Pension systems are facing crucial and far-reaching challenges. The economic crisis led to a reduction in governments’ revenues to finance retirement promises and to a loss of public confidence in private pensions in many countries. At the same time, pension systems also have to deal with the problems posed by population ageing and the current economic environment.

This edition of the OECD Pensions Outlook explores how pension systems are responding to the challenges they are facing. Population ageing and the challenging economic environment characterised by low returns, low growth and low interest rates, create serious problems for pension systems, affecting both pay-as-you-go (PAYG) financed public pensions and funded pensions.

This chapter discusses the impact of population ageing and stresses how future improvements in mortality and life expectancy may affect pension systems. The chapter focuses thereafter on how to address the challenges faced by funded pension systems coming from the uncertainty around future improvements in mortality and life expectancy (i.e., longevity risk). It first describes the mortality tables commonly used by pension funds and annuity providers to value their liabilities, then assesses the amount of longevity risk that those mortality tables may implicitly have, and finally discusses policy options to address longevity risk.

The 2012 edition of Pensions Outlook examined pension reforms from September 2007 to February 2012. During that period, in the aftermath of a major economic crisis, the main policy initiatives included increasing both the financial sustainability of public pensions and the security of private pensions. This chapter sets out the main pension reforms in the 34 OECD countries between February 2012 and September 2014. More than five years after the onset of the crisis, the world economy is still weak. Countries are accelerating the pace of pension reforms in order to stabilise both unsustainable government debt and public pension expenditure while addressing adequacy concerns in ageing societies.

This chapter examines the potential role of private pensions in the retirement readiness of working-age individuals in selected OECD countries. A description of the methodology used is followed by a look at the potential importance of private pensions in total pension income at retirement. The chapter then addresses several policy questions on whether working-age individuals would have sufficient pension income at retirement to reach certain poverty thresholds; to be at least as well-off as the cohort already retired; and to maintain a certain level of their standard of living at retirement.The analysis herein also identifies population subgroups that may rely less on private pension provision at retirement and those subgoups that are at greatest risk of having a low pension income. The chapter finally looks at the potential impact of housing wealth, different economic conditions and labour market exit ages on the potential role of private pension provision in the retirement readiness of working-age individuals.

This chapter describes automatic enrolment schemes in six OECD countries and assesses their success in raising private pension coverage. The chapter first identifies elements of the design of automatic enrolment schemes that may influence coverage outcomes: target population, opting-out window and re-enrolment process, contribution rates, financial and non-financial incentives and other plan characteristics. The chapter then discusses the importance of communication and education campaigns that accompany the launch and implementation of automatic enrolment; it stresses the importance of considering the interaction of automatic enrolment with other existing incentives; and it evaluates the costs of automatic enrolment for employers and the state.

This chapter looks at annual pension statements and national pension communication campaigns. It first examines pension statements themselves, setting out what they are and exploring their content, before turning to the challenge of communicating projections on pension benefits. It assesses how pension plan providers can best communicate projections of future benefits to members of defined contribution plans, looking in particular at how to convey the uncertainty underlying these projections. The second part of the chapter provides lessons learnt from examining national pension communication campaigns in various countries. Policy guidance is offered at the end of this chapter.