Private pensions

OECD Private Pensions Outlook 2008

 

Date of publication
12 February 2009

 

Facts and figures 

Pension Country Profiles 

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Executive summary - the Executive Summary provides a comprehensive overview of the content of the publication, including main findings and key statistics. Available in ChineseExecutive Summary, French, GermanJapaneseRussian and Spanish.

 

Table of contents

  • Private pensions and the 2008 turmoil in financial markets
  • Role and types of private pension systems
  • Key pension fund indicators
  • Public pension reserve funds
  • Performance indicators of private pension systems

Overview of the publication

As the role of private pension systems grows in importance, there is a need to monitor their development and review their performance in an international context, especially following the crisis in the financial markets in 2008. This is the first edition of Private Pensions Outlook, a new OECD publication that guides readers through the changing landscape of retirement income provision.

 

This edition presents a special feature on the implications of the financial crisis for private pensions, as well as in-depth, international analyses of private pension arrangements across OECD and selected non-OECD countries. The publication focuses on the role of pension funds, and also provides evidence on public pension reserve funds which complement the financing of social security systems.

 

In addition to essential data on assets, investments, membership, and industry structure based on the latest official statistics, this volume presents a framework for evaluating the trends shaping the pensions industry, based on the role of the private pensions in relation to the public pension system.

 

The Outlook provides comprehensive country profiles, describing private pension arrangements in individual OECD countries. The Outlook can also be used in cross-country comparisons of key facets of retirement systems across OECD and non-OECD countries, using data acquired as part of the OECD Global Pension Statistics project.

 

The performance of private pension systems can be evaluated according to key policy criteria using readily accessible information on the coverage of private pension systems, the adequacy of benefits, solvency, investment performance and administrative efficiency.

 

Facts and figures

Did you know that …

… The OECD accounts for more than 90% of the world’s private pension assets and the United States for nearly one half of the total.

 

The growing role of funding and private pensions in retirement income arrangements

The OECD-weighted average ratio of private pension assets to the area’s GDP reached 111.0% in 2007.By October 2008, total OECD private pension assets were down to about US 23 trillion, or about 90% of the OECD’s GDP.

Non-OECD pension markets are generally small in comparison to the OECD area. Pension fund assets in the BRIC countries were all relatively low in relation to GDP (17% in Brazil, 2% in the Russian federation, 5% in India, and 1% in China). By contrast, the Chilean pension market had assets equivalent to more than 64% in 2007. 

 

A shift to lower risk exposures in pension fund portfolios is expected throughout much of the OECD

In some countries, for example Ireland and the United States, pension funds raised their equity allocations substantially between 2001 and 2007, to over 60% of total assets, exposing them to large losses in 2008. On the other hand, pension funds in countries such as Denmark, the Netherlands and Switzerland engaged in a substantial shift in their portfolio from equities to bonds between 2001 and 2007. In the case of Denmark and the Netherlands this portfolio reallocation appears to be partly driven by the introduction of stricter, risk-based funding requirements.

Major declines in equity allocations and increases in bonds and cash took place in 2008 across the OECD as equities crashed while government bonds yielded strong, positive returns.

(Download the figure in Excel

Did you know that …

… Irish and US pension funds increased their equity exposure before the crisis while Danish and Dutch pension funds reduced it.

 

Figure 2.14. Variations in equities allocations between 2001 and 2007 in selected OECD countries (in percentage points)

 

 Did you know that …

… Delaying joining a pension plan for five years, from age 25 to 30, raises the required contribution rate to achieve a replacement rate of 65 percent of previous earnings, by almost 3 percentage points a year.

Coverage of voluntary private pension plans is insufficient in countries where public pensions are low

Although overall coverage of voluntary private pension plans is well above half of the employed population in the eight OECD countries analysed, it is unevenly distributed. Younger workers and people with low incomes are much less likely to be members of a voluntary pension.

The results suggest that some OECD countries, such as Australia, France, Germany, the United Kingdom and the United States, where even low earners have low replacement rates from the PAYG-financed system, need to focus efforts to expand coverage among low earners.

Related documentation: "Coverage of funded pension plans", Working Paper on Insurance and Private Pensions No 19 

 

Benefit adequacy

The analysis of benefit adequacy and security indicates that individuals in many OECD countries may run the risk of not having enough income in retirement to maintain the same standard of living as they enjoyed while in active employment. In some countries like Australia, Canada, France, Germany, Japan and Mexico, even workers with a full contribution record of 40 years or more in both the public and private pension system, and earning average wages will be unlikely to reach a replacement rate greater than 60%.

(Download the figure in Excel)

Did you know that …

… In some OECD countries, workers earning average wages are unlikely to have a combined public and private pension greater than 60% of their final salary.

 

Figure 4.3. Potential replacement ratio at normal retirement age: public pension, mandatory private pensions and typical occupational plans (as a % of final earnings)

 

Did you know that ...

... Pension funds across several countries have added value in the long-term with respect to benchmarks.

Investment performance

The availability of adequate data to undertake in-depth analyses of the risk-adjusted performance of pension funds is still limited. For countries where good quality data is available, the evaluation of pension fund performance against market benchmarks is generally positive, at least after taking regulatory constraints into account. 

Related documentation: "Pension fund performance", Working Paper on Insurance and Private Pensions No.20

 

Did you know that …

… If pension funds’ members in Hungary paid fees as low as in Sweden, their pension benefits would be 30% higher.

Figure 4.15. Administrative charges in selected
OECD and non-OECD countries, 2007 (as a % of total assets)

(Download the figure in Excel)

Related document: Fees in individual account pension systems, Working Paper on Insurance and Private Pensions No.27

 

Further reading

Pensions Markets in Focus
Global Pensions Statistics project
Pensions at a Glance 2009: Retirement-Income Systems in OECD Countries

 

 

 

Countries list

  • Afghanistan
  • Albania
  • Algeria
  • Andorra
  • Angola
  • Anguilla
  • Antigua and Barbuda
  • Argentina
  • Armenia
  • Aruba
  • Australia
  • Austria
  • Azerbaijan
  • Bahamas
  • Bahrain
  • Bangladesh
  • Barbados
  • Belarus
  • Belgium
  • Belize
  • Benin
  • Bermuda
  • Bhutan
  • Bolivia
  • Bosnia and Herzegovina
  • Botswana
  • Brazil
  • Brunei Darussalam
  • Bulgaria
  • Burkina Faso
  • Burundi
  • Cambodia
  • Cameroon
  • Canada
  • Cape Verde
  • Cayman Islands
  • Central African Republic
  • Chad
  • Chile
  • China (People’s Republic of)
  • Chinese Taipei
  • Colombia
  • Comoros
  • Congo
  • Cook Islands
  • Costa Rica
  • Croatia
  • Cuba
  • Cyprus
  • Czech Republic
  • Côte d'Ivoire
  • Democratic People's Republic of Korea
  • Democratic Republic of the Congo
  • Denmark
  • Djibouti
  • Dominica
  • Dominican Republic
  • Ecuador
  • Egypt
  • El Salvador
  • Equatorial Guinea
  • Eritrea
  • Estonia
  • Ethiopia
  • European Union
  • Faeroe Islands
  • Fiji
  • Finland
  • Former Yugoslav Republic of Macedonia (FYROM)
  • France
  • French Guiana
  • Gabon
  • Gambia
  • Georgia
  • Germany
  • Ghana
  • Gibraltar
  • Greece
  • Greenland
  • Grenada
  • Guatemala
  • Guernsey
  • Guinea
  • Guinea-Bissau
  • Guyana
  • Haiti
  • Honduras
  • Hong Kong, China
  • Hungary
  • Iceland
  • India
  • Indonesia
  • Iraq
  • Ireland
  • Islamic Republic of Iran
  • Isle of Man
  • Israel
  • Italy
  • Jamaica
  • Japan
  • Jersey
  • Jordan
  • Kazakhstan
  • Kenya
  • Kiribati
  • Korea
  • Kuwait
  • Kyrgyzstan
  • Lao People's Democratic Republic
  • Latvia
  • Lebanon
  • Lesotho
  • Liberia
  • Libya
  • Liechtenstein
  • Lithuania
  • Luxembourg
  • Macao (China)
  • Madagascar
  • Malawi
  • Malaysia
  • Maldives
  • Mali
  • Malta
  • Marshall Islands
  • Mauritania
  • Mauritius
  • Mayotte
  • Mexico
  • Micronesia (Federated States of)
  • Moldova
  • Monaco
  • Mongolia
  • Montenegro
  • Montserrat
  • Morocco
  • Mozambique
  • Myanmar
  • Namibia
  • Nauru
  • Nepal
  • Netherlands
  • Netherlands Antilles
  • New Zealand
  • Nicaragua
  • Niger
  • Nigeria
  • Niue
  • Norway
  • Oman
  • Pakistan
  • Palau
  • Palestinian Administered Areas
  • Panama
  • Papua New Guinea
  • Paraguay
  • Peru
  • Philippines
  • Poland
  • Portugal
  • Puerto Rico
  • Qatar
  • Romania
  • Russian Federation
  • Rwanda
  • Saint Helena
  • Saint Kitts and Nevis
  • Saint Lucia
  • Saint Vincent and the Grenadines
  • Samoa
  • San Marino
  • Sao Tome and Principe
  • Saudi Arabia
  • Senegal
  • Serbia
  • Serbia and Montenegro (pre-June 2006)
  • Seychelles
  • Sierra Leone
  • Singapore
  • Slovak Republic
  • Slovenia
  • Solomon Islands
  • Somalia
  • South Africa
  • South Sudan
  • Spain
  • Sri Lanka
  • Sudan
  • Suriname
  • Swaziland
  • Sweden
  • Switzerland
  • Syrian Arab Republic
  • Tajikistan
  • Tanzania
  • Thailand
  • Timor-Leste
  • Togo
  • Tokelau
  • Tonga
  • Trinidad and Tobago
  • Tunisia
  • Turkey
  • Turkmenistan
  • Turks and Caicos Islands
  • Tuvalu
  • Uganda
  • Ukraine
  • United Arab Emirates
  • United Kingdom
  • United States
  • United States Virgin Islands
  • Uruguay
  • Uzbekistan
  • Vanuatu
  • Venezuela
  • Vietnam
  • Virgin Islands (UK)
  • Wallis and Futuna Islands
  • Western Sahara
  • Yemen
  • Zambia
  • Zimbabwe