Pensions Outlook, published in early December, looks at the current
problems for pension systems in terms of increased life expectancies, fewer
active contributors compared to the number of pensioners, less stable
employment careers, lower returns and inadequate pensions for certain groups of
people. The resulting mistrust that people have in pension systems needs to be
addressed through more far-reaching reforms and by making regulatory and
supervisory frameworks for pension schemes more robust. The performance of the
systems should be adapted to economic and demographic conditions in order to
develop financially sustainable systems.
No easy solutions
The report acknowledges the reforms
undertaken in recent decades and recommends, among other things, a gradual
introduction of funded schemes while carefully monitoring the consequences. The
statutory retirement age should be linked to increased life expectancy. The
interplay between different pension schemes, safety nets for pensioners and the
tax system should mitigate the effect of raising the retirement age.
People should be encouraged by various tax
and non-tax incentives to save for their retirement. Straightforward, stable
tax rules should create consistent tax benefits across all income groups. More
flexibility in the retirement age, as well as the provision of innovative
pension products, should help address the problem of increased life expectancy.
The introduction of standard products should help people with little financial
knowledge to make appropriate decisions regarding their retirement. Finally, the
costs of managing retirement pensions should be aligned through various pricing
regulations and structural solutions. This also requires an increase in
In order for people to understand the
reasons for, and effects of, pension reforms, these need to be better
communicated by policy makers. Improved financial education also gives people a
better understanding of what they themselves need to do in order to secure
their retirement income. According to the report, this will restore people’s
trust in pension systems.