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New indicators of 30 OECD countries' pension systems

Published online by Cambridge University Press:  23 August 2006

EDWARD WHITEHOUSE
Affiliation:
Social Policy Division, Organization for Economic Co-operation and Development, Paris (e-mail: edward.whitehouse@oecd.org)

Abstract

Pension systems are complex and diverse, so comparing them is consequently difficult. Yet there are valuable lessons to be learned from the pension experiences of other nations. International comparisons of pension systems have focused almost wholly on the fiscal aspects of ageing populations. This paper provides consistent data on pension entitlements for the 30 member countries of the OECD, allowing cross-country analysis of the adequacy and distribution of pension promises.

The following section provides a brief description of the 30 retirement-income regimes and compares key parameters, such as pension eligibility ages, ceilings on pensionable earnings, contribution rates to defined-contribution schemes and accrual rates for defined-benefit plans. Section 2 sets out the methodology for and assumptions used in modelling pension entitlements. Section 3 presents replacement rates, the most commonly used indicator in pension analysis. Section 4 calculates pension wealth, the present value of the flow of pension entitlements, which captures the effects of cross-country differences in life expectancy, pension eligibility ages, and indexation of pensions in payment. The concept of weighted averages is introduced in Section 5: a way of summarizing the main indicators across the range of individual earnings. The structure of the pension package, that is the role that different components of the retirement-income system play, is explored in Section 6. Section 7 presents a measure of the progressivity of the pension benefit formula, while Section 8 concludes.

Type
Research Article
Copyright
2006 Cambridge University Press

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Footnotes

Much of the work underlying the paper was a collaboration with Monika Queisser of the OECD and was published as OECD (2005). Mark Pearson and Martine Durand, also of OECD, Robert Palacios of the World Bank and two anonymous referees gave helpful comments and advice. The paper represents a personal view and does not commit either the OECD Secretariat nor any of its member governments.

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