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Pensions Reforms Around the World Moderator: Sara Rix, AARP Presentation: Mark Pearson, OECD Social Policy Division Edward Whitehouse, OECD Social Policy Divison Discussant: David John, Heritage Foundation.

Event Description:

Reforming pensions is one of the biggest challenges for developed countries because it involves making extremely difficult long-term decisions in the face of intense short-term pressures. In the United States, it is often said that reforming the Social Security System is the “third rail” of American politics: touch it and you die. A recently released OECD report, Pensions at a Glance, finds this to be the case in many of the 30 OECD countries as well. In spite of this, some countries have succeeded to dramatically change their pension systems.

Mark Pearson, Head of the OECD Social Policy Division, and Edward Whitehouse, a Senior Economist in the Social Policy Division, will discuss the recently released report and its implications for Social Security Reform in the United States. The report provides a comprehensive assessment of pension reform in 30 OECD countries, nearly all of which made changes to their pension systems since the early 1990’s. Among the key findings of the report are:

• People in OECD countries will have to save more for their retirement as a result of the major pensions reforms carried out in recent years. The average pension promise in 16 OECD countries studied was cut by 22%. For women, the reduction was 25%.

• The most common feature of the reform packages is a change in pension age. When reforms are complete, most OECD countries will have a standard retirement age of 65 years, although in Denmark, Germany, Iceland, Norway, the United Kingdom and the United States, the pension age is or will be 67. Only France, Hungary and the Czech and Slovak Republic plan to have pension ages below 65.

• The pension reform process in OECD countries seems to take one of two approaches:
o The first approach is one of transparency and consensus: some countries chose to negotiate reform with all political parties, the social partners and civil society in order to build consensus on the most important measures and explain the reform to the general public.
o The second approach is “reform by stealth” – a process by which reforms are introduced without providing a full explanation of their consequences to the general public.

• Often, change has been more radical than some governments are given credit for. In 16 countries, there have there been major reforms that will significantly slash future benefits by as much as 25 to 30 percent from what people would have been entitled to before the reforms.

David John, a pension policy expert at the Heritage Foundation, will provide comments on the report.

OECD Pensions at a Glance:

The second edition of this report will be presented at this briefing. Pensions at a Glance uses a novel framework to assess the future impact of today’s pension policies, including their social and economic objectives. It details the rules of pension systems but summarized in a way that allows meaningful comparisons to be made. As the framework is flexible to changing assumptions, the impact of policy reforms and economic developments can be simulated.

Biographies:

Sara Rix, PhD is a Director of Policy Research and Development with the Economics Team of the Public Policy Institute of AARP, where she focuses on the economics of aging, labor force and demographic trends, employment and retirement policy, and older worker employment issues. She has written and spoken extensively on the older workers, an aging society, and aging issues for over 25 years. She is also a fellow of the National Academy of Social Insurance, the Gerontological Society of America, and the Royal Society for the Encouragement of Arts, Manufactures and Commerce. Before coming to AARP, she was director of research for the Women's Research and Education Institute (WREI), a nonpartisan, policy-oriented research organization in Washington, DC.

Mark Pearson leads the OECD division that investigates how best to design income transfers and social and employment policies to help individuals to fulfill their potential and so build a dynamic economy. He has also worked on employment-oriented social policies, reform of tax and benefit systems; and links between social protection, inequality and economic growth. Prior to this, he worked in the Fiscal Affairs division of OECD and at the Institute for Fiscal Studies in London.

Edward Whitehouse co-ordinates the OECD’s work on analyzing pension systems. He has previously worked on pensions for the World Bank, editing the Bank’s Pension Reform Primer and advising government directly on designing pension systems. He was also economics leader writer for the Financial Times.

David John has been involved in Washington’s top policy debates for almost 30 years and he continues that career as Heritage’s lead analyst on issues relating to lead analyst on issues relating to pensions, financial institutions, asset building, and Social Security reform. Since coming to Heritage, John has written and lectured extensively on the importance of reforming the nation’s retirement system. During this time, he has testified before a number of House and Senate committees on subjects ranging from Social Security and pension reform to improving the nation’s flood insurance program. John came to The Heritage Foundation from the office of Rep. Mark Sanford, R-S.C. where he was the lead author of Rep. Sanford’s plan to reform Social Security by setting up a system of personal retirement accounts.