TURKEY - As benefits in pension systems have been cut substantially since the 1990s, voluntary pension savings will have to fill the gap, says the Organisation for Economic Cooperation and Development.

The comments came from OECD principal administrator Monika Queisser at a conference in Istanbul this week organised in conjunction with the International Organisation of Pension Supervisors.

In her presentation of figures culled from the forthcoming  "Pensions at a Glance" report for 2007, she also mentioned an increased risk of pensioner poverty which needs to be addressed.

In the biennial report, which first appeared in 2005, the OECD looks at mandatory pensions full-career workers to provide a comparison of pension schemes throughout member states.

Average earners can expect their post-tax pension to be worth 69% of their earnings, a slight drop from 2005. The European country with the lowest net replacement rate is still Ireland with just under 40%, followed closely by the UK. In Greece and Turkey the net replacement rate exceeds 100%. Luxembourg, the Netherlands and Hungary are just below that mark.

Taking into account the gross replacement rate the UK shows the widest gap between benefits provided under mandatory schemes and a target overall replacement rate of 60%, followed closely by Ireland with Germany coming third.

Queisser pointed out that while pensions in Germany and France are considered to be very generous latest reforms will mean that average earners cannot expect their pensions to be very high.

For the 2007 report the OECD has also looked at the impact pension reforms had on replacement rates. The biggest cut was made in Italy and Sweden with the gross replacement rate dropping from over 85% to just under 65%.

Only Turkey showed a slight increase in the ratio for average earners post-reform due to the retirement age having been raised. In the UK there was a significant rise in the ratio for low earners after the reform: from just over 40% to 50%.

The government's intention was to address the risk of pension poverty among people with just half the average income. In general, Queisser sees the danger of pension safety nets like "basic pension" or "Mindestrente" being used more often over the next years if not enough is saved through either mandatory or voluntary private pensions.

OECD calculations also show the role of mandatory private pensions in various countries revealing that only in eight out of 23 European countries (including Turkey) this sector plays a significant role in contributing to the replacement rate.
While in Iceland and Denmark mandatory private pensions account for almost two thirds of the ratio, it accounts for around 50% of the gross replacement rate in Slovakia, Netherlands and Poland.

In Hungary, Sweden and Switzerland the share is still sizeable, ranging from approximately one fourth to one third.

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