Adequacy (2) : Pension entitlements of recent retirees
By Edward Whitehouse & Asta Zviniene
This note discusses how expected benefit levels can be assessed. The note points out the measurement of current benefit levels that are observable: they do not depend on any assumptions about the future. However, they do depend on past contribution patterns, macroeconomic developments and parameters and rules of the pension system rules that, in many cases, no longer apply today. This briefing discusses the measurement of empirical average pension levels, minimum pensions and the evaluation of the extent of redistribution present within the pension system. Most of these measures, by their construction, take the form of a replacement rate: that is, they compare benefit levels (in the numerator) with some measure of earnings or incomes in the denominator. The note sets out how these ratios are constructed, what they measure and the pitfalls to be avoided to allow meaningful comparisons between countries.
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