More pension reforms are needed to tackle the financial problems of rising numbers of retired people, says a think-tank report.
Governments need to look at policies to relieve financial inequality among the elderly and to find ways of managing the changing nature of work, according to the Organisation of Economic Co-operation and Development, a collective that comes up with ideas for the world’s top 35 developed nations.
The OECD says many countries are ill-equipped to give decent pensions to people who are living longer, even though the cost of pensions has increased to 1.5% of GDP for member countries.
“The challenges of financial sustainability and pension adequacy mean that bold action from governments is still needed,” said OECD Secretary-General Angel Gurría.
UK has lowest state pension replacement rate
“The world of work is changing fast and policy makers must ensure that decisions made today take this into account and our pension and social protection systems do not leave anyone behind in retirement.”
OECD research shows the average state pension replacement rate is 63%. The rate is the difference between earnings when working and benefits paid in retirement.
In the UK, the rate is 29% – the lowest of all OECD countries – while the highest is 102% in Turkey.
The OECD report Pensions At A Glance 2017 found only one in 10 Europeans aged between 60 and 69 years old combine work with pensions.
After 65, half work part time, which is a level that has stayed the same since the 1990s.
Barriers to working in retirement
Retirement ages across the OECD range from 60 years in Luxembourg, Slovenia and Turkey to 74 in Denmark
“Barriers to continuing to work beyond the retirement age also exist outside the pension system, especially through age discrimination from employers or in cultural acceptance of part-time work,” says the OECD.
“Policy makers need to ensure that postponing retirement should be sufficiently rewarding while not overly penalising people who retire a few years before the normal retirement age. Flexibility should be conditional on ensuring the financial balance of the pension system, with pension benefits actuarially adjusted in line with the flexible age of retirement.”