Payments from private pension schemes were worth 1.3% of GDP on average for the latest available year, representing about one‑seventh of total – public and private – spending, and having increased from 0.5% of GDP in 1990 and 1.2% in 2010.
Pensions at a Glance 2025
OECD and G20 Indicators
Private pensions are mandatory or achieve near-universal coverage through industrial relations agreements (“quasi-mandatory”) in less than one‑third of the 38 OECD countries. In others, voluntary private pensions – either individual (“personal”) or employer-provided (“occupational”) – have broad coverage (Table 4.2), implying that in total around half of OECD countries have significant private pensions.
Biggest flows of private‑pension payments are in Iceland, Switzerland and the United States, between 5.2% and 5.7% of GDP (Table 8.3). The next four countries – Australia, Canada, the Netherlands and the United Kingdom – record private‑pension payments of between 3.0% and 4.5% of GDP. Japan (where private pensions are voluntary) also has high levels of expenditure on private pensions, at 2.7% of GDP.
Many countries introduced compulsory private pensions in the 1990s: Australia, Estonia, Mexico, Poland, the Slovak Republic and Sweden. In some cases – particularly in Central and Eastern Europe – these new schemes were mainly taken up by younger workers. Many of the schemes have yet to begin paying benefits and some countries have since removed the scheme entirely (for example Poland) or made them voluntary (for example Estonia).
Total expenditure from both public and private pensions is highest in Italy at 16.6% of GDP, followed by Greece at 16.3%, Austria at 14.6% and France at 13.7% for the latest years available. The average across countries is 9.4% of GDP with the lowest levels found in Ireland at 3.8% of GDP and Korea at 4.7%.
The importance of private pensions as a proportion of total pension spending varies considerably by country (Figure 8.1). The private‑pension share is highest in Iceland at 64% followed by Australia, Switzerland and the United States at around 50%. Overall, the average is 18% of total spending, for the 30 countries with recorded spending for private pensions, with 11 having a share below 5% and a further three under 10%.
Trends
The countries that have recorded an increase in private pension spending larger than one percentage point of GDP from 2000 are Australia, Iceland, Switzerland and the United States (Table 8.3). In Australia and Switzerland, the occupational pensions became compulsory in 1992 and 1985, respectively, which extended coverage significantly. This is now being reflected in the rapid growth in private pension entitlements as each successive generation of retirees contributed for longer, on average, to the private pension scheme.
The average proportion of private spending in total pension spending has increased slightly over the last two decades, from 16.6% for 2000 to 18.3% for the most recent year available, for the 30 countries that have both public and private spending in both years. However, there has been significant change in some countries. In Chile, for example the proportion virtually doubled from 18% to 32%. Increases of 19 and 12 percentage points are found in Australia and Iceland, respectively. Conversely, the proportion halved from 47% to 22% in Ireland and fell by 9‑10 percentage points in Japan and Korea. In Ireland, private pension coverage has been in decline in recent decades. In Korea, private spending was low and the introduction of the public pension has increased expenditure from this component.
Tax breaks
Many OECD countries offer favourable tax treatment to retirement savings made through private pension plans. Often, individual contributions are fully or partially deductible from income and investment returns are fully or partially relieved from tax. Some countries offer tax relief on pension payments (see “Tax treatment of pensions and pensioners” in Chapter 4).
The cost of these fiscal incentives is measured in many OECD countries using the concept of “tax expenditures”. This attempts to quantify the value of the preferential tax treatment relative to a benchmark tax treatment. The idea is that this is the amount of revenue forgone as a result of the tax incentives.
Data on tax expenditures for retirement savings are available for 2021 in 26 OECD countries. Half of these figures are 0.2% of GDP or less. Conversely in nine countries – Australia, Canada, Germany, Iceland, Israel, the Netherlands, Switzerland, the United Kingdom and the United States – reported tax expenditures are worth 1% of GDP or more.
Tax expenditure figures come with important caveats: they are not comparable between countries because of differences in the benchmark tax system chosen. Despite their name, they are not equivalent to direct expenditures and so should not be added to numbers for public pension spending.
Further reading
OECD (2018), Financial Incentives and Retirement Savings, OECD Publishing, Paris, https://doi.org/10.1787/9789264306929-en.
OECD (2010), Tax Expenditures in OECD Countries, OECD Publishing, Paris, https://doi.org/10.1787/9789264076907‑en.
Note: Latest data is for 2021, except for * = latest data is for 2022 and ** = latest data is for 2023, m = mandatory private scheme, q = quasi mandatory; and v = voluntary. Blank cells indicate missing values.
Source: OECD Social Expenditures Database (SOCX); OECD Main Economic Indicators Database.
Note: Data for 2000 is not available for Colombia and Costa Rica.
Source: OECD Social Expenditures Database (SOCX); OECD Main Economic Indicators Database.