As people live longer, delaying retirement helps to maintain pensions at a financially sustainable level. Declining fertility also puts pressure on pension systems by reducing the number of workers contributing to support a growing population of retired people. These challenges can be tackled in a number of ways, including by increasing pension contribution rates, reducing pension benefits or delaying retirement. The OECD provides data and analysis on a wide range of pension policies to inform policy makers and other stakeholders on solutions to today’s challenges for asset-backed pension systems and to ensure their soundness and stability.
Pensions and insurance
Well-functioning pensions and insurance systems are vital for stable economies and individual financial security. In the face of challenges like population ageing and climate disasters, reforms are necessary to maintain the robustness and soundness of pensions and insurance systems. The OECD offers guidance on system design, regulation, supervision, risk management, and retirement planning.
Key messages
Pension and insurance systems are facing major changes and risks, including demographic shifts, climate disasters, cybersecurity threats, pandemics, technological advancements including artificial intelligence, and changing consumer expectations and lifestyles. Pensions and insurance systems need to adapt to these trends.
The OECD monitors developments in the pension and insurance systems and provides comparable statistics and international best practices to help policy makers, regulators and other stakeholders monitor and evaluate the design and operation of insurance and pension markets.
The effective financial management of disaster risks is a key public policy challenge for governments around the world, particularly for households and businesses faced with significant exposures to such risks and/or limited capacity to manage the financial impacts of natural and/or man-made hazards, such as floods, earthquakes, cyclones, terrorist attacks, industrial and technological accidents, and pandemics. Finding solutions to address climate-related risks and risks linked to cyber-attacks are high on the policy agenda.
The OECD undertakes analysis of the role of insurance – and financial markets more generally – in providing disaster risk financing tools and provides guidance on building financial resilience to disaster risks within the economy.
Context
Pension entitlements
For average earners with a full career starting from age 22 in 2024, net income after retirement at the normal retirement age is 63% of pre-retirement income on average across the OECD. These net replacement rates vary from under 35% in Ireland and Lithuania, to 90% or more in the Netherlands, Portugal and Türkiye.
Whilst the gross replacement rate gives a clear indication of the design of the pension system, the net replacement matters more to individuals, as it refers to the percentage of a worker’s disposable income in retirement in comparison to when working.
Pension assets grew by 7% in the OECD in 2024
Pension assets reached USD 70 trillion at the end of 2024, with pension providers - such as pension funds - managing USD 63 trillion and public pension reserve funds USD 7 trillion. Asset growth primarily reflects positive returns in equity markets. Positive cash flows from contributions over benefit payments also contributed.
Insurance plays a critical role in economic activity
The amount of premiums individuals and businesses pay to acquire insurance coverage has grown over the years, in line with GDP growth, highlighting the critical role that insurance plays in underwriting economic activity. This premium growth is the likely result of an increased need for insurance coverage to support growing economic activity, while accounting for increases in the value of assets, higher risk for some types of coverage, as well as inflation in recent years. The penetration of the insurance sector in the economy is uneven around the world and still low in many jurisdictions, which reflects the significant financial protection gaps for many types of risks.
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As pension systems are under increasing pressure due to population ageing, reforms are needed to ensure both pension adequacy and the financial sustainability of pension systems. How this can be achieved differs by country and depends on both the design of the pension system and investment decisions of pension funds and individuals.Learn more
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Increasing life expectancy and declining fertility rates have resulted in rapid population ageing across many OECD countries. This trend is expected to intensify over the coming decades, with major consequences nationally and globally. Policy action is needed now to ensure that people can comfortably enjoy their later years without inequalities becoming wider both within and across generations.Learn more
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Pension arrangements that are backed by assets (such as equity, bonds and real estate) play an essential role in delivering adequate retirement income. The OECD collects standardised data on asset-backed pension systems, provides guidelines and standards to assess and improve pension systems, and undertakes analytical work to help decision makers in the public and private sectors understand the challenges facing pension systems and the different approaches to address them.Learn more
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Insurance plays a critical role in supporting economic activity by protecting individuals, households and business against risk. The OECD supports governments to leverage the role of insurance in achieving economic, social and environmental objectives by monitoring insurance markets and developing guidelines and best practices.Learn more
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Well-functioning financial markets are fundamental to long-term sustainable economic growth and financial stability. They provide a platform to raise and allocate capital efficiently, manage risks, determine asset prices and inform investor decisions. Well regulated financial markets foster investor confidence through transparency, fairness, and clearly defined rules of engagement. The OECD’s work on financial markets aims to promote efficient market-orientated financial systems through sound policies for capital markets, sustainable finance, digital finance, public debt management, financial literacy and consumer protection, pensions, and insurance.Learn more
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Capital markets are crucial for the economy as they allow businesses to access capital and help households to manage their savings. They also support financial stability by providing market-based financing to complement the use of bank credit by the corporate sector. Capital markets' ability to provide long-term financing, particularly equity capital, is also key to enable and support the digital and green transitions.Learn more
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