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OECD Pensions Outlook 2012

image of OECD Pensions Outlook 2012

This edition of the OECD Pensions Outlook examines the changing pensions landscape. It looks at pension reform during the crisis and beyond, the design of automatic adjustment mechanisms, reversals of systemic pension reforms in Central and Eastern Europe, coverage of private pension systems and guarantees indefined contribution pension systems. It closes with a policy roadmap for defined contribution pensions and a statistical annex.

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Putting Pensions on Auto-pilot: Automatic-adjustment Mechanisms and Financial Sustainability of Retirement-income Systems

This chapter analyses the automatic adjustment mechanisms introduced in public pension systems over the past 15 years. These mechanisms create automatic links between demographic or economic developments and the retirement-income system, particularly benefit levels. While these mechanisms generate greater sustainability of pension promises they normally worsen benefit adequacy. Old-age safety nets may need to be reinforced to address these concerns. Furthermore, automatic adjustment mechanisms are often complex, difficult to understand and create uncertainty over future benefits. In order for individuals to adjust to these new pension designs – by working longer or saving more in private pensions, there is a need for gradualism and transparency in the implementation. A fair and predictable burden-sharing across generations should help individuals to act pro-actively by adapting their saving and labour supply behaviour.

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