OECD study published in November 2019 focuses on non-standard forms of work and their effects on old-age security

Demographic change and longer life expectancies are putting pressure on pension systems. Reforms have been implemented or started in many countries to ensure the sustainability of pension systems in the future. Generally speaking, these reforms aim to increase the retirement age and/or reduce pension levels.

The economic upturn of recent years has significantly improved the financial situation of pension systems. However, the OECD strongly criticises the fact that the financial pressure to reform has eased considerably as a result. In some countries, reforms that had been agreed upon have even been reversed or suspended. However, according to the study, pension legislation should not be used for short-term political gain; rather, long-term measures are needed to ensure adequate pension incomes while maintaining the financial sustainability of pension systems.

Non-standard work

Non-standard work is defined as work not done on an open-ended contract for a single employer. More than one third of all workers are in non-standard employment. This share is expected to increase further.

Most pension systems are structured on the basis of stable, linear careers and do not provide adequate protection for non-standard workers.

Lower income (e.g. in part-time employment) and frequent job changes (e.g. due to temporary contracts) regularly result in lower pension entitlements. Greater representation in part-time work and lower earnings are among the reasons why women’s average pensions are 25% lower than for men in the OECD. According to the study, the gender pension gap is highest in Germany at 46%, while it is below 10% in Denmark, Slovakia and Estonia. Career breaks due to raising a child and unemployment also have a significant impact on expected pension entitlements.

Protection of the self-employed is also a complex issue that is difficult to solve. In some countries it is not mandatory for the self-employed to join income-based pension schemes. Even if they are included in pension schemes, the self-employed tend to make lower contributions. There are various reasons for this, such as the fact that they are only obliged to pay minimum contributions or that they have a relatively high degree of flexibility in setting the contribution base. According to the study, the self-employed have on average 22% lower pension entitlements than employed persons, in Germany this figure is 50%. The study further states that the limited ability of self-employed persons to acquire entitlements under occupational pension schemes also has a negative impact on the level of pension entitlements.

The emergence and growth of new forms of work (gig economy, platform work) also pose challenges for pension systems. These new forms of work make it very difficult to distinguish between employment and self-employment. There is a high risk being wrongly classified as self-employed.

The full study can be read here. A more in-depth look is available in our background paper (German only).