Governments must convince people to work longer – OECD

Reforming pension systems around the world has helped limit the rise in costs resulting from ageing populations and increased longevity, but governments still need to do more, according to a report by the Organisation for Economic Co-operation and Development (OECD).

The OECD said policymakers had to go further in encouraging people to work longer and save more for their retirement.

Angel Gurría, OECD secretary-general, said: “Raising retirement ages and promoting private pensions are all steps in the right direction, but, alone, they are insufficient.”

He said governments needed to think about the long-term impact on social cohesion, inequality and poverty.

“Ensuring everyone has a decent standard of living after a life of work should be at the heart of policies,” Gurría said.

In a new report called ‘Pensions at a Glance 2013’, the organisation said policy action was also needed to avoid rises in inequality among retirees and pensioner poverty.

The report includes data on the 34 OECD member states – countries in North America, Europe, Australasia, Japan and South Korea – as well as countries outside the organisation such as Argentina, Brazil, China, India, Indonesia, the Russian Federation, Saudi Arabia and South Africa.

By 2050, most OECD countries will have a retirement age of at least 67 years for both men and women – an increase of about 3.5 years from current levels for men and 4.5 years for women, according to the report.

It said recent pensions reforms meant that not only would most young people starting work now have to save more for retirement, but that they would also get lower pensions than generations before them.

Although working longer may compensate for some of these reductions, overall, each year of contribution will pay out less than it does today, the report found.

Keeping down the costs of running personal and occupational pension schemes is critical, the OECD said.

It said governments needed to tackle this issue urgently as part of their efforts to promote private pension systems.