1887

OECD Working Papers on Finance, Insurance and Private Pensions

Selected studies on finance, insurance and private pensions policy prepared for dissemination in order to stimulate wider discussion and further analysis and obtain feedback from interested audiences. The studies provide timely analysis and background on industry developments, structural issues, and public policy in the financial sector. Topics include risk management, governance, investments, benefit protection, and financial education. Previous papers addressing these policy issues are available via http://dx.doi.org/10.1787/19936397.

English

Coverage of Private Pension Systems

Evidence and Policy Options

To adapt pension systems to demographic trends, many countries are reducing pay-as-you-go public pension levels and lifting retirement ages. In this context, funded pensions could play a major role to avoid adequacy gaps. Yet, as this paper shows, the coverage of funded private pensions, as measured by enrolment rates, is highly uneven across countries and between individuals, especially in voluntary systems. Some countries have made funded pensions compulsory (e.g. Australia, Chile) or quasimandatory (e.g. Denmark, the Netherlands) to ensure that most workers are covered and therefore have access to a sufficiently high complementary pension. However, in other countries with relatively low pay-as-you-go public pension benefits, funded private provision remains voluntary. The low level of funded pensions’ coverage in such countries should be a major policy concern. Recent policy initiatives in Germany and New Zealand, involving the introduction of financial incentives (and auto enrolment in New Zealand) have been effective in raising coverage to the highest levels among voluntary pension arrangements, but coverage gaps remain that need to be addressed.

English

Keywords: financial incentives, benefit adequacy, coverage, auto-enrolment, compulsion, funded pensions
JEL: J26: Labor and Demographic Economics / Demand and Supply of Labor / Retirement; Retirement Policies; G23: Financial Economics / Financial Institutions and Services / Pension Funds; Non-bank Financial Institutions; Financial Instruments; Institutional Investors; J32: Labor and Demographic Economics / Wages, Compensation, and Labor Costs / Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
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