GLOBAL - An OECD study has warned that pension reforms are absolutely imperative to ensure the sustainability of pay-as-you-go schemes.
The study found that nearly all OECD countries needed to reform their pension system. In addition, the challenge of ageing populations has countries seeking new ways to finance retirement plans.
The research suggests implementing a range of reforms, from changing workplace practices and labour policies to altering state pension plans and encouraging older workers to delay retirement.
OECD warns that if nothing was done quickly to extend working lives, living standards would fall in the course of the coming decades.
For the OECD as a whole, the dependence ratio of older people (i.e. those aged 65 and over as a proportion of those aged 20 to 64) will rise from the current figure of 22% to 46% in 2050.
“This is not an insurmountable challenge. Most countries have considerable manoeuvring room to increase the employment rate of persons between age 55 and 64,” the study stated.
The first step governments can take is to eliminate provisions that subsidise early withdrawal from active life, such as early retirement schemes.
The organisation said that though some countries had already taken steps towards this, it was not enough and in many cases the actual retirement age remained two to three years below the statutory retirement age because other provisions continued to encourage people to stop working.
OECD said that governments must adapt their employment policies and public employment services must meet the specific needs of older workers and measures that reduce benefit dependency and facilitate the integration of older workers in the labour market should also be taken to combat the looming pension crisis.
This week's edition of Professional Pensions is out now.
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