Pressure persists to maintain adequate and financially sustainable levels of pensions as population ageing is accelerating in most OECD countries. In 1980, there were 2 people older than 65 years for every 10 people of working age in the OECD. That number will have increased to slightly over 3 in 2020, and is projected to reach almost 6 by 2060. The working-age population, measured using fixed age thresholds, is projected to decrease by more than one-third by 2060 in several countries.
Several measures legislated since September 2017 have rolled back previous reforms. Recent reforms have loosened age requirements to receive a pension, increased benefits and expanded coverage. Contribution rates were changed in Hungary, Iceland and Lithuania; old-age safety nets and minimum pensions increased in Austria, France, Italy, Mexico and Slovenia as well as benefits for low earners in Germany, while Spain suspended measures (sustainability factor and revalorisation index) to deal with financial pressures due to ageing. Only Estonia has raised the retirement age. By contrast, Italy, the Netherlands and the Slovak Republic expanded early-retirement options or limited previously announced increases in the retirement age.
With improving economic conditions, financial pressure to reform pension systems has eased and it is understandable that some countries want to soften unpopular measures introduced in a crisis context. However, while financial pressures on pension systems were exacerbated by the crisis, they often also reflected structural weaknesses. Backtracking on reforms that address long-term needs may leave pension systems less resilient to economic shocks in the future and unprepared to face population ageing.
Based on currently legislated measures, slightly more than half of OECD countries are increasing the retirement age, from 63.8 years currently to 65.9 years on average by about 2060. This represents half of expected gains in life expectancy at age 65 over the same period, implying that by themselves, these changes will be insufficient to stabilise the balance between working life and retirement.
Taking into account recent reforms, future net replacement rates from mandatory schemes for full-career average-wage workers equal 59% on average, ranging from close to 30% in Lithuania, Mexico and the United Kingdom to 90% or more in Austria, Italy, Luxembourg, Portugal and Turkey. Replacement rates based on full careers are projected to fall over the next decades in most OECD countries.