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June 13, 2012 at 08:28 AM
The Organisation for Economic Co-operation and Development (OECD), a global forum advocating for sound fiscal policies, recently released a report, Pensions Outlook 2012, that recommends governments raise the retirement age to address increasing longevity and keep national pensions healthy.
According to the Paris-based organization, over the next 50 years, life expectancy at birth is projected to rise by more than seven years in developed countries. In half of OECD countries, the long-term retirement age will be 65, while in 14, it will be between 67 and 69. The group further points out that increases in retirement age ceilings are underway in 28 out of 34 OECD nations. Yet those changes are expected to keep pace with improved life expectancy in only six countries for men and in 10 for women.
Therefore, the report urges countries to formally link retirement ages to heightened longevity, as Denmark and Italy have done.
Another recommendation is to promote private pensions. However, the report states that making such plans compulsory is not the answer for every country since it could unfairly affect low-income earners and be perceived as an additional tax. A better method may be to automatically enroll workers into private pensions from which they could opt out within a certain time frame.
Encouraging tax reforms that make putting savings into private pensions more favorable as well as better government oversight of how those funds are managed would also help. Enabling matching contributions by companies or giving flat subsidies to savers, which is already done in Germany and New Zealand, would also incentivize contributions.
