Pension regimes struggle to gain trust of workers, says OECD
People remain slow to trust pension promises, a new OECD report has found.
Low investment returns on pension savings, less stable employment structures, low economic growth and the fact that people are living longer have all eroded belief that pensions “will deliver on their promises once workers reach retirement age”, the OECD Pensions Outlook 2018 reports.
Poor pension coverage among some workers has also contributed to this scepticism.
“People are also concerned about whether the institutions managing their retirement savings in funded pensions arrangements have their best interests at heart,” the report accepts, despite a string of pension reforms across different countries in recent years.
The report says people need to increase retirement savings – both in the amount they contribute and starting those contributions earlier in their working lives.
“This is even more necessary as improvements in mortality and life expectancy lead to ever-longer periods in retirement,” the report warns.
It adds that pension reforms must be better communicated so that their rationale and effects are clearer.
And it acknowledges that people in defined-contribution schemes – where the pension pot is determined by how much you put in and the investment return on those funds – bear the greatest risks in pension saving to ensure that their pension is sufficient to last their full lifetime. This contrasts with the security of defined-benefit pension schemes where a proportion of final salary is promised as income in retirement.
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Read the full report here