## Executive Summary ## Source details **Canonical URL:** [Executive Summary](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2011/_122811.pdf) ## Other formats - [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2011/_122811.pdf.md) - [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2011/_122811.pdf.json) --- ### Overview and purpose - Public pension reform is a key policy challenge in both advanced and emerging economies over coming decades. - The paper provides: - (i) an assessment of the main drivers underlying spending trends over recent decades; - (ii) new projections for public pension spending in advanced and emerging economies over the next 20 to 40 years; - (iii) an assessment of the sensitivity of the country projections to demographic and macroeconomic factors, and risks of reform reversal; and - (iv) country-specific policy recommendations to respond to pension spending pressures. ### Recent spending trends and composition - After rising by 3½ percentage points of GDP over 1970–2010 in advanced economies and by 1½ percentage points of GDP over 1990–2010 in emerging economies, pension spending now accounts for about one-fifth of primary total spending in both advanced and emerging economies. - Composition of public pension spending (typical shares): - Old-age benefits: about three-fourths of total pension spending. - Survivor benefits: 10 percent. - Disability pensions: 15 percent. - Disability spending has varied substantially across countries; examples include increases of 10 percentage points or more in Australia, Ireland, New Zealand, and the United Kingdom, and declines of similar magnitude in Finland, Luxembourg, the Netherlands, and Portugal. ### Pension system design characteristics - More than three-fourths of public pension systems link benefits to earnings during working lives. - Means-tested elderly benefits: - Two-thirds of schemes in advanced countries have some sort of means-tested program targeting the elderly. - Less than half of schemes in the emerging countries have means-tested programs. - Only four countries have a flat-rate universal pension: Canada, Denmark, New Zealand, and Russia. - Mandatory private pensions: - Play a bigger role in emerging economies (many in Europe and Latin America use individual accounts). - Only two advanced countries have mandatory private pensions: Slovakia and Sweden. - Some emerging economies (India, Indonesia, and Malaysia) use provident funds that typically provide lump-sum benefits. ### Projections and aggregate outlook - Pension spending is projected to rise: - In advanced economies by an average of 1 percentage point of GDP over the next two decades. - In emerging economies by an average of 2½ percentage points of GDP over the next four decades. - During 2010–2030, increases in spending in excess of 2 percentage points of GDP are projected in nine advanced and six emerging economies. - Projected magnitude (2010–2030) — cross-country examples: - Advanced economies with increases in excess of 2 percentage points of GDP: Belgium, Finland, Korea, Luxembourg, the Netherlands, New Zealand, Norway, Slovenia, and Switzerland. - Advanced economies with projected decreases: Denmark, Italy, Japan, and Sweden. - Emerging economies with increases exceeding 3 percentage points of GDP: China, Egypt, Jordan, Russia, and Turkey. - Emerging economies with projected decreases: Bulgaria, Chile, Estonia, Hungary, and Poland. - Average increase reported: Advanced average = 1.2 (percent of GDP); Emerging average = 1.0 (percent of GDP). ### Role of past reforms and fiscal cost - Without reforms, demographic changes would increase public pension spending by 4 percentage points of GDP in the advanced economies and emerging Europe, and 2 percentage points in other emerging economies. - If enacted reforms are implemented as planned, they will lower average pension spending in 2030 by: - 2½ percentage points in the advanced economies. - 3½ percentage points in emerging Europe. - 1 percentage point in other emerging economies. - Fiscal cost (present discounted value): - Over the next 20 years, average PDV of pension spending increases is 9 percent of 2010 GDP in the advanced economies and 7 percent in the emerging economies. - Cumulative PDV of increases over 2010–2050: 36 percent of 2010 GDP in advanced economies and 48 percent for emerging economies. - Discounting assumption: discount rate of 1 percent (equivalent to assuming a differential between the interest rate and rate of growth of 1 percentage point). - Over an infinite horizon, PDV of pension spending increases: 190 percent of 2010 GDP in the advanced and 230 percent in the emerging economies. ### Risks to projections (quantified) - Life expectancy upside risk: - Under a scenario where life expectancy is higher than anticipated, pension spending would be over 1 percentage point of GDP higher than projected in 2030 in five economies. - Low labor productivity risk: - Under a low labor productivity scenario, pension spending would be over ½ percentage point of GDP higher in three economies. - Demographic assumption risks: - Past 20-year projections have overestimated fertility rates by an average of 0.3 children per woman across advanced and emerging economies. - Twenty-year projections have underestimated life expectancy at birth by an average of 3 years in Australia, Canada, Japan, New Zealand, and the United States, and by about 1 year elsewhere. - Scenario impacts: - Low-fertility scenario (fertility rates are 0.5 children per woman lower): spending would increase by an additional 0.1 percentage points of GDP to 2030 in both advanced and emerging economies; additional increases of about 0.2 percentage points of GDP in Austria, Greece, Italy, and Slovenia. - High longevity scenario (life expectancy at age 65 increased in all countries to the highest level observed separately for advanced and emerging economies in 2010): spending would increase by about 0.3 percentage points in the advanced and 0.6 in the emerging economies; additional increases of more than 1 percentage point of GDP in the Czech Republic, Russia, Slovakia, Turkey, and Ukraine. - Macroeconomic assumption risks: - Low productivity scenario (productivity growth lowered by 0.25 percent or set equal to the 2000–07 average if this is lower): pension spending in 2030 would increase by 0.2 percentage points in the advanced and by 0.1 percentage points in the emerging economies. - Country-specific impacts: under this scenario, pension spending would increase by 1 percentage point of GDP in Italy and by ½ percentage point in Portugal and Spain. - Labor force participation sensitivity: assuming unchanged labor force participation rates would increase 2030 spending by at least ½ percentage point of GDP in Brazil, Japan, Korea, Ukraine, the United Kingdom, and the United States. - Reform reversal risk: - Examples of reform impacts (reductions in 2030 spending relative to a no reform baseline): - At least 5 percentage points of GDP: Austria, France, Hungary, Italy, and Poland. - At least 3 percentage points of GDP: Brazil, Bulgaria, Chile, Denmark, Estonia, Finland, Germany, Greece, Japan, Portugal, Sweden, and Ukraine. - Implementation challenges include substitution into disability and historical instances of partial reversal or delay (examples: Sweden, Germany). ### Policy considerations guiding reform - Pension reforms are often a necessary part of fiscal consolidation and can: - Avoid deeper cuts in pro-growth spending (e.g., public investment). - Prevent worsening intergenerational equity associated with rising life expectancies and longer retirement periods. - Raise potential output when they increase retirement ages. - Reforms must preserve the role of public pensions in alleviating elderly poverty. ### Recommended reform options and country considerations - Increasing retirement ages: - Advantages: avoids further cuts in replacement rates beyond those already legislated; raises potential output over time. - Should be accompanied by measures to protect incomes of those who cannot continue to work. - Advanced economies: - There is room for more ambitious increases in statutory retirement ages in many advanced economies given continued gains in life expectancy; protect those unable to work. - Emerging Europe: - One possible strategy is equalizing retirement ages of men and women. - Other emerging economies: - Where pension coverage is low, consider expansion of non-contributory “social pensions” combined with reforms to place pension systems on sound financial footing, including raising statutory retirement ages. - Where average pensions are high relative to average wages: - Increasing statutory ages could be complemented by reductions in the generosity of pensions. - Where taxes on labor income are relatively low: - Consider increasing revenues. - All countries: - Strive to improve the efficiency of payroll contribution collections. ### Role of private pensions and interactions - Mandatory private schemes in emerging economies are relatively new and not yet fully matured; private pension spending remains limited in many cases (example: Chile’s private pensions account for about a quarter of total pension spending). - Private pensions can present contingent fiscal risks if they fail to deliver adequate benefits and governments need to supplement them. *Source: Executive Summary, IMF staff paper (content unit: _122811 - Executive Summary).* ### Executive Summary ...................................................................................................... ### Executive Summary ### Overview and purpose - Public pension reform is a key policy challenge in both advanced and emerging economies over coming decades. - The paper provides: - (i) an assessment of the main drivers underlying spending trends over recent decades; - (ii) new projections for public pension spending in advanced and emerging economies over the next 20 to 40 years; - (iii) an assessment of the sensitivity of the country projections to demographic and macroeconomic factors, and risks of reform reversal; and - (iv) country-specific policy recommendations to respond to pension spending pressures. ### Recent spending trends and composition - After rising by 3½ percentage points of GDP over 1970–2010 in advanced economies and by 1½ percentage points of GDP over 1990–2010 in emerging economies, pension spending now accounts for about one-fifth of primary total spending in both advanced and emerging economies. - Composition of public pension spending (typical shares): - Old-age benefits: about three-fourths of total pension spending. - Survivor benefits: 10 percent. - Disability pensions: 15 percent. - Disability spending has varied substantially across countries; examples include increases of 10 percentage points or more in Australia, Ireland, New Zealand, and the United Kingdom, and declines of similar magnitude in Finland, Luxembourg, the Netherlands, and Portugal. ### Pension system design characteristics - More than three-fourths of public pension systems link benefits to earnings during working lives. - Means-tested elderly benefits: - Two-thirds of schemes in advanced countries have some sort of means-tested program targeting the elderly. - Less than half of schemes in the emerging countries have means-tested programs. - Only four countries have a flat-rate universal pension (Canada, Denmark, New Zealand, and Russia). - Mandatory private pensions: - Play a bigger role in emerging economies (many in Europe and Latin America use individual accounts). - Only two advanced countries have mandatory private pensions (Slovakia and Sweden). - Some emerging economies (India, Indonesia, and Malaysia) use provident funds that typically provide lump-sum benefits. ### Projections and aggregate outlook - Pension spending is projected to rise: - In advanced economies by an average of 1 percentage point of GDP over the next two decades. - In emerging economies by an average of 2½ percentage points of GDP over the next four decades. - During 2010–2030, increases in spending in excess of 2 percentage points of GDP are projected in nine advanced and six emerging economies. ### Risks to projections (quantified) - Life expectancy upside risk: - Under a scenario where life expectancy is higher than anticipated, pension spending would be over 1 percentage point of GDP higher than projected in 2030 in five economies. - Low labor productivity risk: - Under a low labor productivity scenario, pension spending would be over ½ percentage point of GDP higher in three economies. - Other risks include implementation risk of enacted reforms and contingent fiscal risks if governments must supplement private pensions that fail to deliver adequate benefits. ### Policy considerations guiding reform - Pension reforms are often a necessary part of fiscal consolidation and can: - Avoid deeper cuts in pro-growth spending (e.g., public investment). - Prevent worsening intergenerational equity associated with rising life expectancies and longer retirement periods. - Raise potential output when they increase retirement ages. - Reforms must preserve the role of public pensions in alleviating elderly poverty. ### Recommended reform options and country considerations - Increasing retirement ages has many advantages: - Avoids the need for further cuts in replacement rates beyond those already legislated. - Raises potential output over time. - Should be accompanied by measures to protect incomes of those who cannot continue to work. - Advanced economies: - There is room for more ambitious increases in statutory retirement ages in many advanced economies given continued gains in life expectancy; protect those unable to work. - Emerging Europe: - One possible strategy is equalizing retirement ages of men and women. - Other emerging economies: - Where pension coverage is low, consider expansion of non-contributory “social pensions” combined with reforms to place pension systems on sound financial footing, including raising statutory retirement ages. - Where average pensions are high relative to average wages: - Increasing statutory ages could be complemented by reductions in the generosity of pensions. - Where taxes on labor income are relatively low: - Consider increasing revenues. - All countries: - Strive to improve the efficiency of payroll contribution collections. ### Role of private pensions and interactions - Mandatory private schemes in emerging economies are relatively new and not yet fully matured; private pension spending remains limited in many cases (example: Chile’s private pensions account for about a quarter of total pension spending). - Private pensions can present contingent fiscal risks if they fail to deliver adequate benefits and governments need to supplement them. *Source: Executive Summary, IMF staff paper (content unit: _122811 - Executive Summary).* ### 7. One distinguishing feature of pension systems is whether they are pay-as-you-go ### _122811 - 7. One distinguishing feature of pension systems is whether they are pay-as-you-go ### Pension system types and mechanisms - Pay-as-you-go (PAYG) systems: - Use employer and employee contributions to pay for current benefits to the retired. - Operate via a social contract between generations (via the tax system). - Most public systems are pay-as-you-go, although some have some degree of funding (Canada and the United States). - Funded systems: - Contributions are invested in assets with the objective of financing future retirement benefits. - Most private pensions are funded. - Funded systems can break the link between domestic consumption and domestic output by allowing investment abroad. - Functional equivalence: - Both PAYG and funded systems are two mechanisms for retired people to gain access to future production to support consumption. - Both are equally affected by demographics, though they may differ in implications for intergenerational equity and credibility of the transfer mechanism over the long term. ### Patterns in public pension spending (historical) - Advanced economies, 1970–2010: - Public pension expenditure increased from 5 percent of GDP in 1970 to 8½ percent in 2010. - Four drivers of change in spending as a share of GDP: aging; eligibility rates (pensioners as proportion of population 65 and older); replacement rates (average pension to average wages); and labor force participation rates. - 1970–1990: Increases reflected higher replacement rates, aging, and increased eligibility—the average statutory retirement age declined by 1 year over this period. - Increasing female labor force participation partially offset spending increases. - 1990–2010: Spending growth more contained due to tighter pension eligibility rules (including increasing retirement ages in the Czech Republic, France, Germany, Italy, Korea, New Zealand, Slovakia, and the United States) and further increases in labor force participation rates. - Emerging economies, 1990–2010: - Between 1990 and 2010, spending in all emerging economies increased on average by 1½ percentage points of GDP. - Emerging Europe: spending increased from about 7½ percent of GDP in 1990 to 9 percent in 2010; rapid increases in 1990s in Poland, Romania, Turkey, and Ukraine—main drivers were higher replacement rates and population aging; declining labor force participation also contributed. - Other emerging economies: spending increased from 2 to 3 percent of GDP over the same period owing to increases in replacement rates from relatively low initial levels. - Cross-country variation (2010): - Average spending in advanced economies: 8½ percent of GDP. - Average spending in emerging Europe: 9 percent of GDP. - Average spending in other emerging economies: 3 percent of GDP. - Advanced economies range: less than 5 percent of GDP (Australia, Canada, Iceland, Ireland, and Korea) to more than 12 percent (Austria, France, Greece, Italy, and Portugal). - No emerging European economy had spending below 6 percent of GDP. - Most advanced and emerging European economies have replacement rates between 40 and 60 percent, old-age dependency ratios above 20 percent, and nearly universal coverage. ### Outlook for public pension spending — Projections - Projection methodology: - Based on official estimates where available and subjected to “stress tests” for upside risks. - Advanced economies: initial spending levels include cash benefits for old-age, survivors, and disability pensions from the OECD Social Expenditure database; baseline adjusted to reflect differences between OECD and national authorities (for most countries discrepancy was under 0.5 percent of GDP in 2007). - Emerging economies: initial spending based on national authorities’ estimates. - Projections calculate implied eligibility ratios and replacement rates given demographics, labor force participation projections, and legislated increases in retirement ages. - Projected magnitude (2010–2030): - Pension spending in both advanced and emerging economies is projected to increase by about 1 percentage point of GDP over the next two decades (average increases). - Substantial cross-country variation: - Advanced economies with increases in excess of 2 percentage points of GDP: Belgium, Finland, Korea, Luxembourg, the Netherlands, New Zealand, Norway, Slovenia, and Switzerland. - Advanced economies with projected decreases: Denmark, Italy, Japan, and Sweden. - Emerging economies with increases exceeding 3 percentage points of GDP: China, Egypt, Jordan, Russia, and Turkey. - Emerging economies with projected decreases: Bulgaria, Chile, Estonia, Hungary, and Poland. - Average increase reported: Advanced average = 1.2 (percent of GDP); Emerging average = 1.0 (percent of GDP). [Figure 6 reference] - Role of past reforms: - Without reforms, demographic changes would increase public pension spending by 4 percentage points of GDP in the advanced economies and emerging Europe, and 2 percentage points in other emerging economies. - If enacted reforms are implemented as planned, they will lower average pension spending in 2030 by: - 2½ percentage points in the advanced economies. - 3½ percentage points in emerging Europe. - 1 percentage point in other emerging economies. - Fiscal cost (present discounted value): - Over the next 20 years, average PDV of pension spending increases is 9 percent of 2010 GDP in the advanced economies and 7 percent in the emerging economies. - Cumulative PDV of increases over 2010–2050: 36 percent of 2010 GDP in advanced economies and 48 percent for emerging economies. - Discounting assumption: discount rate of 1 percent (equivalent to assuming a differential between the interest rate and rate of growth of 1 percentage point). - Over an infinite horizon, PDV of pension spending increases: 190 percent of 2010 GDP in the advanced and 230 percent in the emerging economies. ### Risks to projections — uncertainty and upside risks - Demographic assumption risks: - Past 20-year projections have overestimated fertility rates by an average of 0.3 children per woman across advanced and emerging economies. - Twenty-year projections have underestimated life expectancy at birth by an average of 3 years in Australia, Canada, Japan, New Zealand, and the United States, and by about 1 year elsewhere. - Scenario impacts: - Low-fertility scenario (fertility rates are 0.5 children per woman lower): spending would increase by an additional 0.1 percentage points of GDP to 2030 in both advanced and emerging economies; additional increases of about 0.2 percentage points of GDP in Austria, Greece, Italy, and Slovenia. - High longevity scenario (life expectancy at age 65 increased in all countries to the highest level observed separately for advanced and emerging economies in 2010): spending would increase by about 0.3 percentage points in the advanced and 0.6 in the emerging economies; additional increases of more than 1 percentage point of GDP in the Czech Republic, Russia, Slovakia, Turkey, and Ukraine. - Immigration note: immigration boosts pension system revenues short term but increases pension spending long term; overall impact on spending as share of GDP likely moderate in advanced economies (example: U.S. estimate—about 30 percent drop in baseline migration increases average cost of Social Security by about 0.13 percent of payroll, less than 0.07 percent of GDP over next 25 years). - Macroeconomic assumption risks: - Lower-than-expected productivity implies lower wages which, if pensions are indexed to prices rather than wages, could raise replacement rates. - Low productivity scenario (productivity growth lowered by 0.25 percent or set equal to the 2000–07 average if this is lower): pension spending in 2030 would increase by 0.2 percentage points in the advanced and by 0.1 percentage points in the emerging economies. - Country-specific impacts: under this scenario, pension spending would increase by 1 percentage point of GDP in Italy and by ½ percentage point in Portugal and Spain. - Labor force participation sensitivity: assuming unchanged labor force participation rates would increase 2030 spending by at least ½ percentage point of GDP in Brazil, Japan, Korea, Ukraine, the United Kingdom, and the United States. - Reform reversal risk: - Enacted reforms often imply ambitious reductions in pension spending; political pressure could lead to reversal or weakening of reforms. - Examples of reform impacts (relative to a no reform baseline, reductions in 2030 spending): - At least 5 percentage points of GDP: Austria, France, Hungary, Italy, and Poland. - At least 3 percentage points of GDP: Brazil, Bulgaria, Chile, Denmark, Estonia, Finland, Germany, Greece, Japan, Portugal, Sweden, and Ukraine. - Over 2010–2030 reforms imply large reductions in projected replacement rates in Austria, Germany, Portugal, and Sweden; and in eligibility ratios in the Czech Republic, Italy, Slovakia, and the United Kingdom. - Over 2030–2050 projected large reductions in replacement rates in Italy, Portugal, Slovakia, and Spain. - Implementation challenges: - Realizing reductions associated with lower eligibility ratios (increasing retirement ages) requires that the elderly do not exit the labor force through other routes such as claiming disability pensions. - Historical examples of partial reversal/delay: Sweden delayed implementation of automatic adjustments and cut benefits by less than automatic rules suggested; Germany modified indexation rules during the recent crisis to prevent pensions falling in nominal terms. - Policy design consideration: Replacement rate reductions should not undermine the ability of public pension systems to alleviate poverty among the elderly; some reforms (e.g., in Greece and Italy) reduced benefits while protecting low-income pensioners. *Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2011/_122811.pdf* ### 17. In emerging economies in Latin America and Europe, specific risks arise from ### _122811 - 17. In emerging economies in Latin America and Europe, specific risks arise from ### Risks from transition to multi-pillar structures - Pension reforms that introduced mandatory private pensions improved the long term sustainability of public finances but generated large transition costs by diverting contributions to mandatory private pensions, which have widened budget deficits and increased borrowing requirements in the near term. - Recent reversals or slowdowns of the transition in Estonia, Hungary, Romania, Latvia, Lithuania, and Poland were motivated by short-term fiscal constraints as captured by traditional deficit and debt indicators and have sometimes had adverse implications for long-term balances. - The reversals highlight the need to account for pension reforms transparently (see Section V). - Policy tools discussed: - Estimating long-term fiscal balance projections. - Calculating a “pension-adjusted balance,” defined as the sum of the non-pension fiscal balance and the intertemporal pension balance (net present value of all pension imbalances from today to a certain date in the future, e.g., 50 years). ### Funding shortfalls in defined-benefit private pension systems - Shortfalls in private defined-benefit (DB) pension systems can pose contingent liabilities to government if governments must support participants when plans fail to deliver promised benefits. - Examples of funding fluctuations and shortfalls: - United Kingdom: the funding position of corporate defined benefit schemes fluctuated between balance to a shortfall of 15 percent of GDP over the course of 2009. (Footnote: The funding position was in surplus (3 percent of GDP) in early 2010, but by September 2011 the shortfall was equivalent to 13 percent of GDP.) - United States: the 100 largest defined benefit corporate pension schemes reported a funding shortfall of 1½ percent of GDP. - Insurance schemes (Germany, Sweden, the United Kingdom, and the United States) protect participants in cases of corporate bankruptcies but are not designed to absorb widespread DB pension scheme closures; government exposure likely increases during times of crisis. ### Adequacy risks in defined-contribution schemes and distributional concerns - Risk that replacement rates in private defined-contribution (DC) schemes could be inadequate and create pressures for higher social pension spending; contingent liabilities can arise from implicit social obligations, especially for low-income groups. - The larger the role of DC schemes in providing retirement income, the more pronounced these risks are likely to be. - Prevalence of DC schemes: - In Australia, Chile, Denmark, Mexico, South Africa, Switzerland, and much of emerging Europe, more than three-quarters of pension fund assets are in defined-contribution schemes. - Cross-country evidence and projections: - Ratio of elderly incomes to non-elderly incomes (post-tax) is projected to fall between 2007 and 2040 in Canada, France, Italy, and Japan; remain stable in Germany, Spain, and Sweden; and rise in Australia, Netherlands, the United Kingdom, and the United States. - Median replacement rates are projected to be substantially lower than averages in several countries, indicating that those on low to modest incomes might not be contributing enough voluntarily. - Specific saving shortfalls to reach a 70 percent benchmark replacement rate for 50-year olds: - United Kingdom: need to save an additional $9,400 per year until retirement at age 65. - Ireland: $8,800 per year. - Spain: $7,300 per year. - Projection challenges noted: - Historical returns may not guide future returns in a low interest rate environment. - Longevity risk (people living longer than expected) complicates adequacy assessments. - Non-financial assets (e.g., housing) and differences in taxes on pension and labor incomes complicate cross-country comparisons. ### Considerations for pension reform — Fiscal consolidation - Objectives for pension reform: contribute to required fiscal consolidation, address equity issues, and support economic growth. - Rationale: - Many economies need significant fiscal consolidation to lower debt-to-GDP ratios over the next two decades. - Given high taxation levels, consolidation should focus on the expenditure side; containing public pension spending is a necessary part of consolidation packages, particularly in advanced economies. - Stabilizing age-related spending as a share of GDP would avoid larger cuts in other pro-growth spending and address intergenerational equity concerns. - Design considerations: - Pension reforms should account for consequences on both current and future budgetary balances; traditional deficit and debt indicators may not capture long-term effects. - Use of pension-adjusted balance or long-term fiscal projections is recommended to place reforms with near-term costs but long-term benefits (e.g., transition to funded private pensions) on a level playing field. ### Considerations for pension reform — Equity - Pension systems redistribute income within and across generations; redistribution patterns vary by country and design: - Australia, Canada, Netherlands, and the United Kingdom offer flat rate benefits unrelated to lifetime earnings. - United States uses a progressive benefit formula favoring low-income earners relative to lifetime earnings. - Intergenerational redistribution: - Measured net taxes (contributions minus benefits) attributable to pension systems show: - United States: present generation of retirees receives benefits about 1.5 percent of lifetime earnings higher than current generation of workers will receive. - Italy: about just under 15 percent of lifetime earnings advantage for current retirees. - Japan: 6 percent. - Pension reforms have reduced intergenerational redistribution. - Poverty reduction: - In OECD economies, the ratio of the poverty rate of the elderly to the poverty rate of the entire population declined from 1.9 in the 1970s to 1.4 in the 2000s. - Public pensions and means-tested benefits account for about 60 percent of the total income of the elderly in OECD economies. - Regression evidence: a 10-percentage point decline in replacement rates increases those at risk of old-age poverty by 0.9 percentage points. ### Considerations for pension reform — Economic growth - Channels for growth effects: - Pension reforms most likely affect growth via labor supply; effects on national saving are ambiguous empirically. - Labor supply impact: - Raising retirement ages and tightening access to early retirement are likely to have the biggest impact on labor supply. - Historical trend: labor force participation rates of older men in advanced economies declined from about 80 percent in 1950 to about 40 percent in 2000. - Other parametric reforms (reducing benefits or increasing contributions) improve fiscal balances but have less positive (or possibly negative) effects on economic activity. - Raising payroll rates can reduce labor supply depending on labor supply sensitivity to labor taxes. - Savings effects and risks of offsetting behavior: - Evidence that 60 to 100 percent of fiscal savings from pension reform can be offset by higher public spending or lower revenues elsewhere (Bosworth and Burtless, 2004). - Prefunding of social security in the United States has been found to be fully offset by lower public saving outside social security (Smetters, 2003; Nataraj and Shoven, 2004). - In emerging economies of Latin America and Eastern Europe, mandatory private pension introductions diverted contributions from the public system; the revenue loss was generally offset by public borrowing rather than taxation or spending cuts, decreasing public saving. - Ambiguous effects on private saving: - Evidence across countries varies: positive national saving impacts in Chile and Kazakhstan; ambiguous effects in Colombia, Hungary, and Mexico. *Source: IMF staff chapter text.* ### 30. In countries where a decrease in savings as part of their long-term growth ### 30. In countries where a decrease in savings as part of their long-term growth ### Savings, consumption, and public pensions - Precautionary motives are important drivers of household saving and consumption behavior. - An expansion of pension coverage and higher public expenditure on pensions can help increase consumption. - For China, Baldacci and others (2010) find that a 1 percent increase in public spending on pensions would raise consumption by 1½ percent. - Cross-country econometric estimates in that study imply that, for emerging Asia countries, an increase in public pension spending of 1 percent of GDP would result in an average increase in household consumption of about 1¼ percent of GDP. ### Pension reform options — rationale and magnitude - The magnitude of the projected baseline pension spending increase is about 1 percentage point of GDP in both advanced and emerging economies. - Relatively modest additional reforms could stabilize pension spending over the next 20 years; deeper reforms may be needed where projected increases are larger or enacted reforms are not fully implemented. - Additional reforms could either further contain public pension spending or raise contribution revenues. ### Advanced economies — challenges - Many advanced economies face the double challenge of high debt and rising age-related spending, particularly in health care. - Countries with above-average pension spending and large projected increases include Austria, Belgium, Finland, Greece, Portugal, and Slovenia. - Countries with below-average current pension spending but substantial projected increases include Luxembourg, Korea, New Zealand, Switzerland, and the United States. ### Advanced economies — policy options and trade-offs (numeric tradeoffs to stabilize spending, 2010–2030) - With no increases in payroll taxes and no cuts in benefits, average statutory ages would have to increase by about another 2½ years to keep spending constant in relation to GDP over the next twenty years. - Relying only on benefit reductions would require an average 15 percent across-the-board cut in pensions. - Relying only on contributions would require an average payroll rate hike of 2½ percentage points. - To keep pension spending as a share of GDP from rising after 2030, additional reforms would be needed: for each decade, - retirement ages would have to increase by about 1 year, - benefits cut by about 6 percent, - or contribution rates increased by about 1 percentage point. ### Increasing retirement ages — benefits and safeguards - Gradually raising statutory retirement ages: - promotes higher employment levels and economic growth; - can boost the growth of real consumption by increasing lifetime working periods and earnings; - helps avoid larger cuts in replacement rates and reduces threats to elderly poverty; - may be easier for the public to understand given increasing life expectancies. - Evidence does not support the view that higher employment of older persons crowds out youth employment (see Box 2). - Many countries have room to raise statutory ages: the number of years men are expected to live beyond age 60 is expected to increase by an average of 5 years between 1990 and 2030, while the average statutory retirement age is being increased by only 1 year over this period. - One policy path: gradually raise statutory ages to 67 by 2030 and index thereafter to life expectancy (as already legislated in Australia, Germany, Iceland, Spain, and the United States). ### Protecting vulnerable groups when raising retirement ages - Increases in retirement ages should be accompanied by measures that protect incomes of those unable to continue working (disability pensions, social assistance). - Example statistic: in the United States, about a quarter of all workers in their sixties may find continued work difficult on account of disabilities or reduced health status. - Consider offsetting measures to preserve progressivity (e.g., reducing replacement rates for upper income households). ### Limiting early retirement and alternative pathways - Individuals claim pensions, on average, about 4 years earlier than the statutory age. - Many OECD economies have adjustments for early retirement that are below the 6–9 percent range estimated to be “actuarially fair.” - Limiting early retirement can be pursued by: - decreasing incentives for early claiming (making early claiming actuarially fair), - strictly controlling alternative pathways such as disability pensions through strict medical evaluations. ### Reducing replacement rates and indexation - Countries with relatively high projected replacement rates in 2030 include Austria, Greece, Italy, Norway, and Portugal. - Options to reduce replacement rates: - freeze pensions for a period of time, - reduce indexation for those receiving high pension benefits (most advanced economies index to inflation), - link benefits to demographic and economic variables via automatic adjustment mechanisms (examples include Austria, Canada, Germany, Japan, Italy, and Sweden). - Cuts should be progressive to avoid increasing elderly poverty. ### Increasing revenues and contribution-efficiency - In some countries, raising payroll contributions may be limited by already high tax wedges (Austria, Belgium, France, Germany, Hungary, Italy near or above 50 percent of total labor costs). - Countries with tax wedges at or below 30 percent that may have room to raise payroll contribution rates include Australia, Ireland, Korea, New Zealand, Switzerland, and the United States. - Options include lifting the ceiling on earnings subject to contributions or equalizing taxation of pensions and other income. - Alternative revenue sources such as consumption taxes could be considered, particularly to finance redistributive components of pension systems. - Scaling back subsidies for private pensions (tax relief or matching contributions) could be appropriate where these have little impact on national saving and benefit mostly higher income households. ### Payroll tax yield and administrative efficiency - On average, advanced economies raise about 0.4 percent of GDP for every percentage point in payroll taxes. - Payroll tax “yield” varies across countries: - nearly 0.5 percent of GDP in Finland, Norway, and Japan; - 0.4 percent or less in Austria, Canada, Greece, Ireland, Korea, Slovakia, Sweden, Switzerland, and the United Kingdom. - Variation reflects labor market structure and exemptions or ceilings on payroll earnings subject to taxes. - To improve efficiency, consider unifying revenue administration for tax and social security collection. ### Emerging Europe — priorities - Priority should be given to putting public pensions on a sound financial footing. - Emerging Europe resembles advanced economies more than other emerging groups in terms of public pension spending and the importance of aging. - Fiscal conditions are weaker than other emerging economies and gross financing needs remain above 10 percent of GDP in several economies. - Public pension spending is projected to rise sharply in some countries that have not reformed their systems, including Lithuania, Russia, and Ukraine; parametric reforms are needed in these cases. - For countries that have introduced mandatory private pensions, priority should be to stabilize spending in the pay-as-you-go component before further expanding mandatory private pension systems. *Content unit: _122811 - 30. In countries where a decrease in savings as part of their long-term growth* ### 42. One possible strategy would be to equalize retirement ages of men and women, ### _122811 - 42. One possible strategy would be to equalize retirement ages of men and women, ### Retirement ages, longevity, and eligibility - At age 60, life expectancy for women is four years higher than for men. - Over 1990–2030 average life expectancy at age 60 is projected to increase by 3 years but average retirement ages are only increasing by 1 year. - Policy recommendation: - Equalize retirement ages of men and women. - Increase retirement ages in line with life expectancy. - Tighten eligibility criteria for early retirement schemes. - Geographic note: - In Eastern European economies, retirement ages for women continue to be lower than for men (particularly Poland and Russia). ### Replacement rates, indexation, and pensionable base - Switching from wage to price indexation today, assuming an inflation rate of 2 percent and real GDP growth of 2 percent, would reduce spending in 2030 by an average of ½ percentage point of GDP. - Increasing the number of years used to calculate the pensionable base from 20 years to lifetime earnings would reduce 2030 spending by 0.2 percentage points of GDP. - Recommendation: - Index pensions to prices rather than wages. - Modify benefit formulas by reducing accrual rates and changing the pensionable income base to capture lifetime earnings. ### Mandatory private pensions and parametric reforms - Many countries stopped or reduced diversion of pension contributions from public to mandatory private schemes during the crisis; examples mentioned include Latvia, Poland, Estonia, and Hungary. - Consequence: - The shift back from mandatory private to public pensions could have a detrimental effect on public finances in the long term because contributions typically translate into higher benefit entitlements. - Recommendation: - Where mandatory private schemes were scaled back, consider additional parametric reforms to offset long-term fiscal pressures (e.g., raising contribution rates later, tightening benefit accruals). ### Coverage challenges in other emerging economies - Coverage rates are: - Particularly low in emerging Asia. - Somewhat higher in Latin America. - Still higher in Middle Eastern and African economies. - Drivers: - High degree of economic informality; those covered typically include public-service workers and parts of the formal private sector. - Decline in informal family-based support networks (e.g., due to rural-urban migration) increases urgency to extend formal coverage. - Recommendation: - Promote greater formalization of the economy to raise the ratio of contributors to pensioners. - Open existing defined-contribution pension schemes (e.g., civil service schemes) to all workers on a voluntary basis to aid formalization. ### Fiscal implications of expanding coverage and options for low-coverage countries - Scenario estimates and implications: - Increasing coverage in emerging Asia from 26 to 32 percent (the projected increase taking into account projected growth in GDP per capita) would increase spending by ¾ percentage points of GDP over the next two decades. - Increasing coverage in other emerging economies outside Europe from 64 to 73 percent would increase spending by 1 percentage point of GDP over the next two decades. - Recommendations to contain costs while expanding coverage: - Implement parametric reforms (raising retirement ages, lowering replacement rates). - Index minimum pensions to prices instead of wages. - Reform civil-service and other public sector schemes to contain future spending increases (examples given: India and Jordan). - For funded-pension transitions (Latin America and Egypt), offset transition costs with stronger fiscal balances where macroeconomic concerns over explicit public debt exist. - Social pensions: - For very low coverage rates, tax-financed social pensions (non-contributory cash transfers) could be considered to reduce old-age poverty. - Cost example: social pensions can be substantial—around ½ percent of GDP. - Design guidance: - Means-test to target the needy and contain fiscal costs. - Set benefits sufficient to alleviate poverty but low enough to minimize incentives to remain outside the formal pension system. ### Summary of issues and prioritized policy recommendations - Need for reform varies across countries; priorities depend on country-specific circumstances and projected age-related spending increases over 2010–2030. - High-level recommendations: - Give priority to increasing retirement ages—many advantages and may reduce need for larger cuts in replacement rates. - Curtail eligibility for early retirement, especially in advanced economies with high eligibility ratios in 2030 (listed countries in the source). - Where replacement rates are projected to be relatively high in 2030 (example: Italy and Norway), consider reducing replacement rates while ensuring progressivity to avoid elderly poverty. - Revenue measures can complement eligibility/replacement reforms in countries with relatively low tax wedges (examples in source). - Improve efficiency of collections where room exists (examples in source). - For emerging economies with high eligibility ratios in 2030 (examples: Eastern Europe, Brazil, South Africa), equalize retirement ages of men and women and tighten access to disability pensions. - For countries with low replacement and eligibility rates (examples: India, Indonesia, Pakistan), focus on fiscally sustainable expansion of retirement systems. *Source: _122811 - 42.* ### Appendix 1. Methodology and Data ### Appendix 1. Methodology and Data ### Public Pension Expenditure Identity - Aging measured by the old-age dependency ratio (the ratio of the population 65 years and older to the population aged 15–64). - Eligibility: number of pensioners as a proportion of the population 65 years and older; depends on qualifying conditions for a pension, particularly statutory retirement age and possibility of early retirement. - Replacement rates: ratio of average pensions to average earnings; capture generosity of pension benefits. - Changes in labor force participation rates affect both the numerator (future eligibility and replacement rates) and the denominator (higher labor force participation implies higher GDP). - For any year t, the analysis uses O(t) = old-age dependency ratio, E(t) = pensioners ratio, G(t) = replacement rate, and L(t) = inverse of the employment ratio. The methodology calculates the change in pension spending as a share of GDP between two years (t1 and t2) using this identity. ### Data Sources and Calculations — Pension Spending 1970–2010 - OECD economies covered (Australia, Austria, Belgium, Canada, Chile, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Korea, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden, Switzerland, Turkey, the United Kingdom, and the United States) 1980–2007: OECD Social Expenditure Statistics database. - Spending includes cash benefits for old-age, survivors, and disability pensions. - For some countries, public spending includes special pension schemes for public employees (Austria, Belgium, France, Greece, Germany, Portugal, and the United States). - Canada figures exclude teachers’ pension plans. Mexico OECD data do not include state government plans. - Earlier data (1970–79) for many OECD countries come from Holzmann (1988); for Chile, Hungary, Iceland, Luxembourg, Mexico, Poland, and Turkey 1970–79 are imputed from ILO’s The Cost of Social Security. - In-between years without observations: spending figures estimated using linear interpolation between observed points. - Bulgaria, Latvia, Lithuania, Romania: primary source 1990–2008 is ESSPROS (EUROSTAT); 1970–1989 imputed from ILO’s The Cost of Social Security; in-between years linearly interpolated. - Other emerging economies: most recent spending as a share of GDP from IMF documents (Egypt, Jordan, Saudi Arabia), country authorities’ estimates (Argentina, Brazil, China, India, Indonesia, Pakistan, Philippines, South Africa, Russia, Thailand, Ukraine), or ILO’s World Social Security Report 2010/11 (Malaysia). - Some country data may include social security spending other than pensions (Brazil). - For countries with few data points, years up to 2010 imputed based on demographics; when not available, data for 1990 and later years imputed from ILO’s The Cost of Social Security; in-between years linearly interpolated. ### Projected Pension Spending 2010–2050 - Starting point: latest available number from OECD, EC, EUROSTAT, ILO, IMF, World Bank documents, or country authorities’ estimates. - Projections rely on authorities’ estimates when available (Appendix Table 7). - For most European economies, authorities’ projections available in Stability and Convergence Programmes; methodology applies the rate of increase of the share of GDP in the authorities’ estimates to the initial spending point. - Example approach: where latest data point is from OECD for 2007 and authorities’ estimates for 2007, 2010, 2030 are available, projections for 2010 and 2030 are calculated by scaling the OECD 2007 base by the rate of increase implied by the authorities’ estimates. - If authorities’ estimates start after the latest observed figure, the spending figure is projected forward using demographic changes only. - Methodology caveat: spending figures might not always match authorities’ figures because of different bases (OECD may have broader coverage than official estimates — e.g., United States OECD includes state and local plans; authorities’ estimates may include only national Social Security). - For countries without readily available projections (mostly emerging economies outside Europe), projected spending: - Reflects impact of changing demographics. - Is adjusted to account for reforms where information exists (Chile, Brazil, Mexico). - When no reform information is available (Argentina, China, Indonesia, Malaysia, Pakistan, Philippines, Russia, Saudi Arabia, South Africa, Thailand, Ukraine), assumptions are: (i) constant coverage ratio of pensioners to population aged above 65 years and constant replacement rate; and (ii) changes driven by employment ratio and old-age dependency ratio. - China: baseline projections in this paper are closer to Oksanen (2010), which project substantial increases in pension spending 2010–2030 assuming first-pillar generosity remains at current level; contrasts with Sin (2005) which assumes full implementation of the second pillar and finds declining spending as share of GDP. ### Population 1970–2050 - Population estimates come from the United Nations’ World Population Prospects: The 2008 Revision. ### Number of Workers - Number of workers defined as population aged 15 and older that is economically active. - Constructed for each 5-year age group (15–19, 20–24, ..., 75–79, and 80+) separately for men and women for 1970–2050. - Share of the population that is economically active: combines fourth (data for 1950–2010) and sixth (data for 1990–2020) editions from the ILO’s Economically Active Population database. - A consistent series for 1970–2020 obtained by using the latest edition as base and interpolating employment activity from 1990 to 1970 using observed changes in the earlier data. - Data for 2025–2050 projected using a fixed-effects regression on a 5-year cohort (c) for every 5-year period (t) over 1950–2020 (EA_c,t = α EA_{c-1,t} + β EA_{c,t-1} + β EA_{c,t-1} + γ EA_{c,t-2} + γ YEAR). - Projections assume economic activity rate in year t for cohort c depends on economic activity of the group 5 years younger than cohort c in 2020, and observed economic activity rate of cohort c in 2015, 2010, and 2005. - Regression performed for all countries in the ILO database to produce consistent series for men and women by five-year age groups 1970–2050. ### Number of Pensioners - All individuals above the statutory retirement age are considered “retired” (Appendix Table 8). - To account for early retirement: the share of the population aged 50–64 that was economically active at ages 45–49 but is no longer active is added to the pool of “retired”—calculated for cohorts 50–54, 55–59, 60–64, separately for men and women. - Total number of “retired” multiplied by pension coverage (percent of those above the statutory age of retirement receiving a public pension) from ILO (2010) to obtain number of pensioners — adjustment accounts for public pension coverage since not all retirees receive public pensions. ### Compensation to GDP - Total employee compensation from GDP from the United Nations System of National Accounts 1993 (data.un.org). - The latest observed share of compensation in GDP is used and assumed constant throughout 1970–2050. ### Replacement Rates - With all other components computed, replacement rates are estimated by dividing pension spending per pensioner by average earnings (replacement rates computed implicitly from the identity and data components described above). _Italic: Source — Appendix 1. Methodology and Data (content unit)_ ### Appendix Figure 2. Average Disability Pension Spending by ### Appendix Figure 2. Average Disability Pension Spending by Type of Program, 2007 (Percent of GDP) ### Key finding on reforming disability pensions - "Reforming disability pensions should proceed with caution. Reducing disability pensions for persons with disabilities, either through lowering pension income or reducing participation, could significantly reduce the welfare of some beneficiaries whose incomes are often already well-below national averages. Unless matched by offsetting measures, this could have an adverse impact on poverty." ### Displayed numeric values and chart labels (preserve exactly as shown) - Standalone numeric values shown: 0.9 1.0 1.3 1.9 - Axis tick labels shown: 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 2.0 - Program category labels as displayed: - Mean -tested an d co n tribution req uirements - No t mean -tested an d co ntribution req uirements - Mean -tested an d n o co ntribution requirements - No t mean-tested an d n o contribution requirements ### Empirical analysis linking replacement rates and elderly poverty - Model definitions and data: - Pension = log of the aggregate replacement rate, defined as the ratio of median individual gross pensions of persons aged 65–74 relative to median individual gross earnings of persons aged 50–59, excluding other social benefits. - Poverty = log of the share of persons 65 and older with a disposable income below 60 percent of the national median income (after social transfers) ("at-risk-of-poverty" rate). - Main data source: EUROSTAT, including data for 26 European countries between 2003 and 2010. - Regression results and quantitative implications: - Elasticity of the at-risk-of-poverty rate with respect to the replacement rate: -0.42. - Interpretation: "a 10 percent reduction in the aggregate replacement rate would result in a 4.2 percent increase in the at-risk-of-poverty rate of the elderly." - Projected average change in replacement ratio between 2010 and 2030: "decrease by about 4 percentage points (equivalent to a 7 percent cut in benefits)." - Projected average impact on elderly poverty (2010–2030): "raising elderly poverty by 0.6 percentage points." - Countries with the highest increase in poverty (percentage points) for 2010–2030: Bulgaria, Estonia, Poland, and Slovenia (per Appendix Figure 3). - Estimated average poverty impact by 2050 (2010–2050): "Relative to 2010 poverty, these reductions in replacement ratios would, on average, increase elderly poverty by 2.5 percentage points, exceeding 4 percentage points in Estonia, Bulgaria, Latvia, and Poland." - Elasticity estimate from a model without country fixed effects: "around -0.7" (noting this indicates potential bias). ### Policy implication - Reformers should proceed cautiously because: - Reductions in disability pension income or participation can "significantly reduce the welfare of some beneficiaries" with incomes often far below national averages. - "Unless matched by offsetting measures, this could have an adverse impact on poverty." - Quantitative trade-off highlighted: - Modest average cuts in replacement rates (about 7 percent equivalent between 2010 and 2030) can produce nontrivial increases in elderly at-risk-of-poverty rates (0.6 percentage points on average for 2010–2030; larger by 2050). *Source: IMF staff estimates.* ### 0.30 to 0.70Italy ### 0.30 to 0.70Italy (Content unit) ### Empirical estimates from literature (selected studies and estimated ranges) - Attanasio and Rohwedder (2001): -0.05 to 0.90 — United Kingdom - Avery, Elliehaen, and Gustafson (1986): 0.11 to 0.66 — United States - Bernheim (1987): 0.77 — United States - Blinder, Gordon, and Wise (1983): 0.39 — United States - Bottazzi, Jappelli, and Padula (2006): 0.30 to 0.60 — Italy - Bottazzi, Jappelli, and Padula (2011): 0.80 — Italy - Diamond and Hausman (1984): 0.25 to 0.40 — United States - Draper (1994): -0.40 — Netherlands - Feldstein (1974): 0.35 — United States - Feldstein (1980): 0.54 to 0.37 — 12 OECD - Feldstein (1996): 0.60 — United States - Gale (1998): 0.39 to 0.82 — United States - Hubbard (1986): 0.16 — United States - Jappelli (1995): 0.10 to 0.20 — Italy - King and Dicks-Mireaux (1982): 0.27 to 0.51 — Canada - Koskela and Viren (1983): No significant effect — 16 OECD - Kotlikoff (1979): No significant effect — United States - Modgliani and Sterling (1983): No significant effect — 21 OECD - Munnell (1974): 0.62 — United States - Pitelis (1985): 0 — United Kingdom - Poterba, Venti, and Wise (1995): No significant effect — United States - Shome and Saito (1980): No significant effect — Several Asian countries - Venti and Wise (1990): 0.10 to 0.20 — United States - Venti and Wise (1996): No significant effect — United States - Villagomez and Hernandez (2010): 0.45 to 0.60 — Mexico - Waters (1981): 0.50 — Canada - Yamada, Yamada, and Liu (1992): 0.68 — Japan ### Pension ages and actuarial adjustments, 2010 (selected country entries and parameters) - Sources: OECD, SSA. - Presentation: Scheme — Early age Reduction (in percent) — Normal age — Increase (in percent) - Australia: Tn.a. — 67 — 0.6 — -3.6 - DC: 60-67 — - - Austria: DB — 62M/60F — 4.2 — 65 — 4.2 - Belgium: DB — 60 — 0.0 — 65 — 0.0 - Canada: Basic/Tn.a. — - — 65 - DB: 60 — 7.2 — 65 — 8.4 - Czech Republic: DB — 60M/59-60F — 5.3/8.9 — 65M/62-65F — 8.9 - Denmark: Basic/Tn.a. — 67 — 5.6 - Finland: T — 62 — 4.8 — 65 — 7.2 - France: DB — 56-60 — 0.0/5.0 — 65 — 5.0 - DB (Occ): 55 — 4.0-7.0 — 60 — 0.0 - Germany: P63 — 3.6/0.0 — 67 — 6.0 - Greece: DB — Any age/55/60 — 0.0/6.0 — 65 — 0.0 - Iceland: Basic/Tn.a. — 67 - DB (Occ): 62 — 7.0 — 67 — 6.0 - Ireland: Basic/Tn.a. — 66/65 — n.a. - Italy: NDC — Any age/61 — 2.3-2.9 — 65M/60F — 0.0/2.6-2.9 - Japan: Basic/DB — 60 — 0.0 — 65 — 8.4 - Korea: DB — 60 — 0.0 — 65 — 6.0 - Luxembourg: DB — 57/60 — 0.0 — 65 — n.a. - Netherlands: Basic — n.a. — 65 — n.a. - New Zealand: Basic — n.a. — 65 — n.a. - Norway: DB — 62 — 3.8-4.7 — 67 — 4.9-5.4 - DC: n.a. — 67 — - - Portugal: DB — 55 — 4.0-6.0 — 65 — 4.0-12.0 - Slovak Republic: P60 — 6.5 — 62 — 6.5 - DC: 60-62 — - - Slovenia: DB — 58 — 1.2-3.6 — 63 — 0.0 - Spain: DB — 61 — 6.0-7.5 — 65 — 2.0-3.0 - Sweden: Tn.a. — 65 — - - NDC: 61 — 4.1-4.7 — 65 — 4.9-6.1 - DC: 55/61-65 — - - Switzerland: DB — 63M/62F — 4.5 — 65M/64F — 5.2-6.5 - DB (Occ): 60M/59F — 2.9 — 65/64 — 2.9 - United Kingdom: Basic/DB — n.a. — 68 — 10.4 - United States: DB — 62 — 5.0-6.7 — 78 — 8.0 - Argentina: DB — n.a. — 65M/60F — n.a. - Brazil: DB — 53M/48F — 6 — 65M/60F — 0.0 - Bulgaria: Points — n.a. — 63M/60F — 1.1 - DC: n.a. — 63M/60F — - - China: NDC/DC — 55M/50F — 60M/50-55F — 0.0 - Chile: Basic/Tn.a. — 65 - DC: Any age — -65/60 — - Estonia: Points — 60 — 4.8 — 63 — 10.8 - DC: 60-63 — - - Hungary: DB — 63 — 3.6/4.8 — 65 — 6.0 - DC: 63-65 — - - India: DB+DC — 50 — 30.0? — 58/55 — - - Indonesia: DC — Any age — 55 — - - Latvia: NDC — 60 — 50 until 62 — 62 - DC: 60 — 50 until 62 — 62 - Lithuania: DB — 57.5M/55F — 4.8 — 62.5M/60F — 8.0 - Malaysia: DC — 55 — - — 55 — - - Mexico: Min — 60 — 0.0 — 65 — 0.0 - DC: Any age/60-65 — - - Pakistan: DB — 55M/50F — 6.0 — 60M/66F — - - Philippines: DB — n.a. — 60 — - - Poland: NDC — n.a. — 65M/60F — 4.3-4.8M/3.7-4.2F - DC: n.a. — 65M/60F — - - Romania: Points — 58.8M/53.8F — 63.8M/58.8F - DC: 58.8M/53.8F — 63.8M/58.8F - Russia: NDC — n.a. — 60M/55F - DC: n.a. — 60M/55F - Saudi Arabia: DB — Any age — 60M/55F — - - South Africa: Basic — n.a. — 60 — - - Thailand: DB — n.a. — 55 — 1.5 - Turkey: DB — n.a. — 65 — 0.0 - Ukraine: DB — n.a. — 60M/55F — 3.0 (Note: table entries in source include additional scheme-level detail and multiple rows per country; above are selected entries preserving numeric values exactly as presented.) ### Pension spending data sources (selected country-year-source mappings) - Advanced economies (last data point and sources compiled by IMF staff): - Australia 2007: OECD / Intergenerational report 2010 - Austria 2007: OECD / ECFIN 2011 - Belgium 2007: OECD / ECFIN 2011 - Canada 2007: OECD / Actuarial report CPP and OAS 2009 - Czech Republic 2007: OECD / ECFIN 2011 - Denmark 2007: OECD / ECFIN 2011 - Finland 2007: OECD / ECFIN 2011 - France 2007: OECD / ECFIN 2011 - Germany 2007: OECD / ECFIN 2011 - Greece 2007: OECD / ECFIN 2011 (convergence programmes 2009-10 referenced) - Iceland 2007: OECD / OECD (economic surveys) - Ireland 2007: OECD / ECFIN 2011 - Italy 2007: OECD / ECFIN 2011 - Japan 2007: OECD / (IPSS cost2008 data) - Korea 2007: OECD / (Korean NABO publication) - Luxembourg 2007: OECD / ECFIN 2011 - Netherlands 2007: OECD / ECFIN 2011 - New Zealand 2007: OECD / (Treasury forecasts BEFU2011) - Norway 2007: OECD - Portugal 2007: OECD / ECFIN 2009-10 - Slovakia 2007: OECD / ECFIN 2011 - Slovenia 2007: OECD / ECFIN 2011 - Spain 2007: OECD - Sweden 2007: OECD / ECFIN 2011 - Switzerland 2007: OECD / Sustainability report 2008 - United Kingdom 2007: OECD / Fiscal sustainability report 2011 - United States 2007: OECD / SSA, OASDI Trustees report 2011 - Emerging economies (selected): - Argentina 2010: National authorities - Brazil 2010: National authorities - Bulgaria 2008: Eurostat / ECFIN 2011 - China 2006: National authorities - Chile 2007: OECD / IMF Staff calculations - Egypt 2009: IMF / IMF Staff calculations - Estonia 2007: OECD / ECFIN 2011 - Hungary 2007: OECD / ECFIN 2011 - India 2010: National authorities / Sixth Central Pay Commission - Indonesia 2010: National authorities - Jordan 2010: IMF / IMF Staff calculations - Latvia 2008: Eurostat / ECFIN 2011 - Lithuania 2008: Eurostat / ECFIN 2011 - Malaysia 2004: ILO / IMF Staff calculations - Mexico 2007: OECD / IMF Staff calculations - Pakistan 2010: National authorities - Philippines 2010: IMF / IMF Staff calculations - Poland 2007: OECD / ECFIN 2011 - Romania 2008: Eurostat / ECFIN 2011 - Russia 2010: National authorities - Saudi Arabia 2009: IMF / IMF Staff calculations - South Africa 2010: National authorities - Thailand 2010: National authorities - Turkey 2007: OECD / IMF Staff calculations - Ukraine 2010: National authorities ### Pensionable ages, 1970–2030 (selected country time series and averages) - Sources: OECD, SSA. - Note: Pensionable ages represent the age at which people can draw full benefits assuming individuals start to work at age 20. Figures for France, Italy, and Spain take into account recent reforms. - Select country series (Men's / Women's where provided), preserving numeric entries exactly: - Australia: 1970 65 — 1990 65 — 2010 65 — 2030 66 — 60 62 66 - Austria: 1970 65 65 — 1990 65 65 — 2010 65 65 — 1970 60 60 — 1990 60 60 — 2010 63 - Belgium: 1970 60 60 — 1990 60 60 — 2010 60 60 — 2030 60 60 - Canada: 1970 68 66 — 1990 65 65 — 2010 65 68 — 2030 66 65 - Czech Republic: 1970 60 60 — 1990 61 64 — 2010 55 57 — 2030 59 63 - Denmark: 1970 67 67 — 1990 65 67 — 2010 67 62 — 2030 65 67 - Finland: 1970 65 65 — 1990 65 65 — 2010 65 65 — 2030 65 65 - France: 1970 65 60 — 1990 61 62 — 2010 65 60 — 2030 61 62 - Germany: 1970 63 63 — 1990 65 65 — 2010 60 60 — 2030 65 65 - Greece: 1970 57 57 — 1990 57 60 — 2010 57 57 — 2030 57 60 - Iceland: 1970 67 67 — 1990 67 67 — 2010 67 67 — 2030 67 67 - Ireland: 1970 70 65 — 1990 65 65 — 2010 68 70 — 2030 65 65 68 - Italy: 1970 60 55 — 1990 59 66 — 2010 55 55 — 2030 59 66 - Japan: 1970 60 60 — 1990 60 64 — 2010 65 55 — 2030 56 62 65 - Luxembourg: 1970 65 65 — 1990 60 60 — 2010 65 65 — 2030 60 60 - Netherlands: 1970 65 65 — 1990 65 65 — 2010 65 65 — 2030 65 65 - New Zealand: 1970 60 60 — 1990 65 65 — 2010 65 60 — 2030 65 65 - Norway: 1970 70 67 — 1990 67 67 — 2010 67 70 — 2030 67 67 - Spain: 1970 65 65 — 1990 65 67 — 2010 65 65 — 2030 65 67 - Sweden: 1970 67 65 — 1990 65 65 — 2010 67 65 — 2030 65 65 - Switzerland: 1970 65 65 — 1990 65 65 — 2010 60 62 — 2030 63 64 - United Kingdom: 1970 65 65 — 1990 65 65 — 2010 66 60 — 2030 60 66 - United States: 1970 65 65 — 1990 66 66 — 2010 67 65 — 2030 66 67 - Averages shown in source (preserved exactly): - Average 63 62 62 63 60 60 61 62 - Advanced 64 63 64 65 62 62 63 64 - Emerging 60 61 61 61 57 58 58 59 *Source: IMF staff compilation from the same PDF unit.* ### 17439. 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