OECD Pensions Outlook 2016 (eBook)

Oecd (Autor)

eBook Download: EPUB

2016 | 1. Auflage
184 Seiten
OECD Publishing (Verlag)
978-92-64-26602-5 (ISBN)

Infos

The OECD Pensions Outlook 2016 assesses policy issues regarding strengthening pension systems and, in particular, funded pension plans.  It covers defined benefits and defined contribution pension plans; fiscal incentives to save for retirement; policy measures to improve the financial advice for retirement; annuity products and their guarantees; pension design and financial education; and the pension arrangements for public-sector workers, including a comparison with those for private sector workers.

Inhalt

Foreword 5
Table of contents 7
Editorial: Pensions systems continue to adapt to the challenges they face 11
Executive summary 13
Chapter 1.The changing pensions landscape: The growing importance of pension arrangements in which assets back pension benefits 17
1.1. Pension arrangements across OECD countries 18
Characteristics to distinguish different types of pension arrangements 18
Pension arrangements across OECD countries 20
Trends in funded pension arrangements 21
Figure 1.1. The growing importance of funded pension arrangements 21
Figure 1.2. Average composition of potential pension income at retirement 22
1.2. Defined benefit and defined contribution pension arrangements 22
Evolution of DB and DC pension arrangements 23
Table 1.1. Private pension assets and members by type of pension plan in the OECD, in 2015 24
Figure 1.3. Evolution of DB and DC pension arrangements in OECD countries according to assets (millions national currency) and members (thousands) 26
Potential reasons behind the different evolution of DB pension arrangements in OECD countries 25
Advantages and disadvantages of DB and DC pension arrangements 32
1.3. Main OECD policy messages 34
Diversify the sources to finance retirement 34
Funded private pensions are complementary to public pensions 35
Improve the design of DC pension plans 35
Notes 36
References 37
Annex 1.A1.Research papers on the evolution of DB and DC plans 38
Table 1.A1.1. Selection of studies analysing the shift from DB to DC plans 39
Annex 1.A2.Data appendix 41
Definitions 41
Data 41
Chapter 2.Does the tax treatment of retirement savings provide an advantage when people save for retirement? 45
2.1. How different tax regimes may provide a tax advantage when individuals save for retirement 47
How to assess the tax advantage 47
Table 2.1. Tax paid for different tax regimes: illustrative example 48
Comparing different tax regimes 50
Table 2.2. Selected stylised tax regimes 51
Figure 2.1. Overall tax advantage provided through stylised tax regimes by component, average earner 52
Impact of the level of income 52
Figure 2.2. Overall tax advantage provided though stylised tax regimes, by income level and component 53
Impact of the length of the contribution period 56
Table 2.3. Overall tax advantage provided through stylised tax regimes, according to the length of the contribution period, average earner 56
Impact of the contribution rate 57
Figure 2.3. Overall tax advantage provided through stylised tax regimes, according to the contribution rate, by income level 58
Impact of the type of pay-out option 59
Figure 2.4. Overall tax advantage provided through stylised tax regimes, by type of pay-out option and component, average earner 60
Impact of financial and economic parameters 61
Table 2.4. Overall tax advantage provided through stylised tax regimes, according to different economic parameters, average earner 61
Main findings 62
2.2. Does the tax treatment of retirement savings in different OECD countries provide an advantage when people save for retirement? 63
Table 2.5. Overall tax advantage in OECD countries by component and type of plan, average earner 64
Table 2.6. Variation of the overall tax advantage with income in OECD countries, by type of plan 68
Figure 2.5. Overall tax advantage in selected OECD countries by type of benchmark savings vehicle, average earner 69
2.3. Conclusions 70
Notes 71
References 72
Annex 2.A1.Framework and assumptions 73
2.A1.1. Definition of the indicator 73
Table 2.A1.1. Baseline values of parameters 74
2.A1.2. Benchmark savings vehicles 74
2.A1.3. Personal income tax system 74
2.A1.4. The calculation of contributions and their taxation 74
Funded private pension plans based on accumulated rights (occupational DB plans) 75
Funded private pension plans based on assets accumulated (DC, hybrid and personal plans) 75
Taxation of contributions 75
2.A1.5. The taxation of returns on investment 76
2.A1.6. The calculation of withdrawals and their taxation 76
2.A1.7. The taxation of funds accumulated 77
2.A1.8. Stylised tax regimes 77
Coverage of the analysis 77
Personal income tax system 77
Table 2.A1.2. Income tax brackets and marginal tax rates for the stylised tax regimes 77
Construction of the stylised tax regimes 77
Table 2.A1.3. Options for the tax treatment of contributions, returns on investment and withdrawals to build stylised tax regimes 78
Notes 79
Chapter 3.Policy measures to improve the quality of financial advice for retirement 81
3.1. Scope and application of the regulation of financial advice 83
Defining the scope of regulation 83
The importance of comprehensive and clear definitions of the different types of advice 84
Potential implications of differences in the application of regulation 85
3.2. Regulatory developments in financial advice 86
3.3. Policy measures to improve consumer outcomes from financial advice 88
Policy measures to mitigate conflicts of interest in financial advice 88
Qualification standards 99
Dispute resolution 100
3.4. Minimising advice gaps 101
3.5. Regulation of technology-based advice 103
3.6. Conclusions 104
Notes 106
References 106
Chapter 4.Policy considerations for life annuity products 109
4.1. The need to define a common language: what is a life annuity product? 111
Clarifying the scope 111
Defining an annuity product 112
Features of annuity products 112
A common terminology 113
Table 4.1. Classification of annuity products 114
4.2. Designing a coherent framework for retirement 115
4.3. Keeping up with innovation: Ensuring sustainable and suitable annuity products 119
4.4. Encouraging appropriate risk management 121
4.5. Policy considerations 122
Notes 124
References 124
Chapter 5.The role of financial education in supporting decision-making for retirement 125
5.1. Decision-making challenges for retirement 127
5.2. Financial education needs for retirement 129
Financial education needs for retirement according to pension system characteristics 130
Figure 5.1. Financial education needs for retirement 131
5.3. Policy responses and the role of financial education 135
Policy responses to support decision-making for retirement 136
Financial education initiatives for retirement 137
Box 5.1. Compulsory provision of financial education for retirement 137
Figure 5.2. Financial education tools for retirement 138
Table 5.1. Summary of financial education initiatives for retirement by country 140
Table 5.2. Selected financial education resources for retirement planning 141
5.4. Policy guidance and practical tools for financial education for retirement 148
Policy guidance 148
Practical tools 149
Notes 149
References 151
Chapter 6.Civil service pensions: Toward a unified system with the private sector 157
6.1. Institutional arrangements 159
Civil service versus private sector pension arrangement 159
Table 6.1. Institutional arrangements for pensions covering civil servants vs. private sector workers 159
Vesting periods 160
Figure 6.1. Vesting periods for civil service pensions 160
Portability 161
Table 6.2. Portability and preservation of pension rights 161
6.2. Recent reforms 162
Table 6.3. Reforms to civil service pension schemes over the last 25 years 162
6.3. Differences between civil service and private sector rules 163
Table 6.4. Comparison of accrual rates at average earnings between civil servants and private sector workers 164
Table 6.5. Contribution rates to first and second tier pensions by civil servants and private sector workers at average wage 165
Table 6.6. Indexation of current pensions in payment 166
6.4. Future theoretical pension entitlements 166
Table 6.7. Comparison of pension rules of civil servants relative to private sector workers 167
Figure 6.2. Long-term gross replacement rates for civil service and private sector average earners, entering at age 20 in 2014, % 168
Figure 6.3. Long-term replacement rates for civil servants and private sector average earners, before the civil service reform 169
Discussion 169
6.5. Financial commitment 171
Figure 6.4. Public sector employment as a percentage of total employment, 2013 171
Figure 6.5. Expenditure on pension schemes specific to civil servants as a % of GDP, 2013 172
Figure 6.6. Share of employees 50 years or older in central government and total labour force (2009) 173
6.6. Key findings and policy implications 174
Key findings 174
Policy implications 175
References 177
Annex 6.A1.Civil service pension rules 178

Textauszug

Chapter 1. The changing pensions landscape: The growing importance of pension arrangements in which assets back pension benefits1

The pensions landscape has changed in recent decades. All OECD countries have to varying degrees a combination of different pension arrangements to provide retirement income. This chapter first suggests a means for understanding and differentiating between the characteristics of different pension arrangements. Then, focusing on those pension arrangements in which assets back pension benefits, the chapter documents their growing importance over the last 15 years. The growth of pension arrangements in which pension benefits are linked to the amount of assets accumulated is also highlighted. Given these trends, the chapter discusses the advantages and disadvantages of defined benefit and defined contribution pension arrangements and ends with the main OECD policy messages.

The landscape of pension arrangements across OECD countries has changed substantially in recent decades. On the one hand, fiscal sustainability problems in public pension arrangements have led to a series of reforms that have reduced the benefits they provide.2 On the other hand, pension arrangements in which contributions are used to build assets to finance future pension benefits have grown in importance. Simultaneously, there has been an increase in the importance of pension arrangements in which individuals bear most of the risks linked to saving for retirement (e.g. longevity, investment) as opposed to pension arrangements in which the employer or the State bear the risks associated with pension promises.

The purpose of this chapter is to assess this changing landscape and present the OECD’s main pension policy messages. This first requires understanding the different types of pension arrangements and their distinguishing characteristics. Secondly, given the increased importance of pension arrangements in which assets back pension benefits, the chapter then focuses on those arrangements and documents its evolution over time.

The chapter first discusses several characteristics of the different types of pension arrangements that can be used to distinguish among them and understand them. It highlights that all countries have to varying degrees a combination of different arrangements to provide retirement income. The chapter then presents empirical evidence of the growing importance of pension arrangements in which assets back pension benefits over the last 15 years for OECD countries, including the split between defined benefit and defined contribution pension arrangements. It then discusses the advantages and disadvantages of DB and DC pension arrangements. The chapter ends with the main OECD pension policy messages.

1.1. Pension arrangements across OECD countries

This section discusses the characteristics that distinguish the different types of pension arrangements and that can be used to understand them. It also provides evidence on the growing importance of pension arrangements in which assets back pension benefits across OECD countries.

Characteristics to distinguish different types of pension arrangements

Different types of pension arrangements have different characteristics.3 These characteristics allow one to understand and distinguish among them. Pension arrangements differ according to:

1. Whether they are mandatory or voluntary

2. How pension benefits are financed

3. Who manages the pension arrangement

4. The role of the employer in those pension arrangements

5. The link between pension contributions and pension benefits.

6. Who bears the risks

Whether the pension arrangement is mandatory or voluntary

Pension arrangements can be mandatory or voluntary for different parties: the provider, the employer and/or for members. They can be mandatory or voluntary with respect to participation, contributions, and setting up the plan. Pension arrangements provided by the State (e.g. public pensions, social security) are generally mandatory for workers. Pension plans in which employers automatically enrol their employees are generally mandatory for the employer but voluntary for employees (e.g. New Zealand, the United Kingdom). Arrangements based on individual accounts can also be mandatory for individuals (e.g. Chile, Sweden) or voluntary (e.g. Riester in Germany, KiwiSaver in New Zealand). Contributions can be voluntary for the individual but mandatory for the employer (e.g. Australia). Pension arrangements that people can contract out with insurance companies or banks are generally voluntary.

How pension benefits are financed

Pension arrangements also differ on whether pension benefits are financed using current contributions or assets accumulated. The former are referred to as pay-as-you-go (PAYG) pension arrangements, and the later as funded pension arrangements.

Who manages the pension arrangement

The public sector or the private sector can manage different types of pension arrangements. Those managed by the public sector (public pensions or social security) are generally PAYG and mandatory. Pension arrangements managed by the private sector are generally funded, and they may be either mandatory or voluntary. Pension arrangements for public sector employees sometimes have assets backing pension payments (e.g. the United Kingdom and the United States) or they are PAYG (e.g. most European countries).4

It is also important to consider the institutional framework. Private pension arrangements can be structured to leave more choice and decision-making to individuals or can be structured around large scale multi-employer platforms or schemes that may allow them to take advantage of economies of scale. Institutional frameworks structured around more individual choice can also rely on collective platforms.

The role of the employer

The role of the employer in setting up pension arrangements is a distinguishing feature, especially for pension arrangements managed by the private sector. Traditionally, pension arrangements are split between occupational and personal. Occupational pension arrangements are those in which the access point is through the employer, who sets up the pension plan and has an influence on its design. Occupational pension arrangements include employer-sponsored plans and plans where employers are responsible for making up any shortfall in the plan’s ability to pay benefits. Personal plans are all other types of pension arrangements.5

Personal plans include pension arrangements which are linked to an employment or professional activity but the employer only plays an administrative role (e.g. record keeping, collection of contributions). Such arrangements can be the main source individuals have to finance retirement, and can be either mandatory (e.g. in Chile and Mexico) or voluntary (e.g. KiwiSaver in New Zealand). Personal pension arrangements also include all those arrangements in which the employer plays no role.

The link between pension contributions and pension benefits

Pension arrangements can also differ on how pension benefits are determined. Pension benefits can be determined according to a formula such as defined benefit (DB) pension arrangements in which benefits are calculated with respect to the number of contributing years and salary. Alternatively, there are pension arrangements in which there is a close link between pension contributions and pension benefits such as in defined contribution (DC) pension arrangements in which benefits depend on the level of assets accumulated.

The “hard” pension benefit guarantees involved in traditional final-salary DB pension arrangements have been changing into soft guarantees (e.g. defined ambition) in which risks (e.g. longevity, investment, benefit shortfalls) are shared between different stakeholders – members, employers, providers.

Who bears the risks

Finally, pension arrangements also differ on who bears the risks involved in saving for retirement – e.g. longevity, investment – and who has to make up for any pension benefit shortfall. The employer (the State when it is the employer) bears the risks in employer-sponsored DB plans. Pension providers bear the risks in pension arrangements in which benefits depend on assets accumulated and include guarantees. Individuals bear the risks in pure DC pension arrangements. Finally, the tax-payer bears those risks that affect financing retirement in PAYG public pensions or Social Security.

Pension arrangements across OECD countries

All OECD countries exhibit a combination of the different types of pension arrangements. They all have voluntary and mandatory pension arrangements; PAYG and funded pensions; public and private management; occupational and personal plans; DB and DC promises. What changes is the weight of each component in overall total retirement income.

All countries have non-contributory public pension arrangements as part of the old-age safety net – social assistance or universal pensions. These can be means-tested, universal, or targeted to certain groups. Contributions to public pension arrangements are sometimes used to finance non-contributory pensions. The OECD recommendation since the 1990s has been to finance non-contributory pensions fully out of general taxation (OECD, 1998).

Most countries have a contributory component PAYG-financed public pension, in which current pensions are financed with the current workers’ contributions. In exchange people contributing today accumulate...

Produkt-Details

• Erscheint lt. Verlag: 5.12.2016
• Sprache: englisch
• Themenwelt: Recht / Steuern ► Wirtschaftsrecht
• Themenwelt: Wirtschaft ► Betriebswirtschaft / Management ► Finanzierung
• ISBN-10: 92-64-26602-X / 926426602X
• ISBN-13: 978-92-64-26602-5 / 9789264266025