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20 January, 2017

OECD Pensions Outlook 2016 – OECD – December 2016

Last December 5, 2016, the OECD published the third edition of the report “OECD Pensions Outlook 2016.” The report analyzes the major policy issues facing the public and private pension systems in the 35 OECD member countries.

The report shows that DC systems have expanded worldwide; in fact, the number of countries in which DC pension funds assets represent more than 100% of GDP increased from 4 (Canada, Netherlands, Switzerland, USA) to 7 (Australia, Canada, Denmark, Iceland, the Netherlands, Switzerland and the United States) between 2000 and 2015.

The report shows the increasing role of the defined contribution (DC) pension systems in financing pensions, and the new challenges they impose on pension policies worldwide. It states that in order to mitigate investment and longevity risks, and maximize the benefits of the DC systems, adjustments like the following must be made:

  1. Governments should make DC plans more financially favorable to low income workers, through subsidies and matching contributions policies.
  2. Governments should adopt policies that strengthen life annuity markets, simplifying these modalities for workers. Incentives are also required for improving innovation and the proper administration/management of those risks.
  3. Policymakers should introduce rules to ensure that financial advisors are qualified and do not have conflicts of interest.
  4. Financial education should be widely available, and information for workers should be highly standardized.
  5. Governments should standardize the pension systems for public and private sector workers, so as to encourage labor mobility and equity between these two sectors.

To read the full report, please visit the following link.

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