Further reforms are needed across OECD countries to mitigate the impact of population ageing, increasing inequality among the elderly and the changing nature of work, according to a new OECD report.
Pensions at a Glance 2017 says that public spending on pensions for the OECD as a whole has risen by about 1.5% of GDP since 2000. However, the pace of spending growth is projected to slow substantially.
At the same time, recent reforms will lower the incomes of many future pensioners. People will live longer and to ensure a decent pension would have to postpone the age of retirement.
“The challenges of financial sustainability and pension adequacy mean that bold action from governments is still needed,” said OECD Secretary-General Angel Gurría. “The world of work is changing fast and policy makers must ensure that decisions made today take this into account and our pension and social protection systems do not leave anyone behind in retirement.”
The net replacement rate from mandatory pension schemes for full-career average-wage earners entering the labour market today is equal to 63% on average in OECD countries, ranging from 29% in the United Kingdom to 102% in Turkey. On average, replacement rates for low-income earners are 10 points higher and range from under 40% in Mexico and Poland, to more than 100% in Denmark, Israel and the Netherlands.
Over the past two years, one-third of OECD countries changed contribution levels, another third modified benefit levels for all or some retirees and three countries legislated new measures to increase the statutory retirement age. Under legislation currently in place, by 2060 the normal retirement age will increase in roughly half of the OECD countries, by 1.5 years for men and 2.1 years for women on average, reaching just under 66 years. The future retirement age will range from 60 years in Luxembourg, Slovenia and Turkey to 74 in Denmark, according to the latest estimations.
The projected increase in retirement ages will be exceeded, however, by expected advances in longevity, meaning that the time people spend in retirement will increase relative to people’s working lives. Employment at older ages will need to increase further to ensure adequate pensions for many people, according to the report.
Pensions at a Glance 2017 also looks at ways countries can meet the growing calls for more flexible retirement options. Rigidly set retirement ages might not be beneficial for society as a whole. Currently, only around 10% of Europeans aged 60-69 combine work and pensions. Of those that do work beyond the age of 65, half work part-time — a share that has been stable since the 1990s. Several countries including Australia, the Czech Republic, France and the Netherlands allow for early partial-retirement schemes.
Obstacles to combining work and pensions after the official retirement age exist, for example through earnings limits in Australia, Denmark, Greece, Israel, Japan, Korea and Spain. Barriers to continuing to work beyond the retirement age also exist outside the pension system, especially through age discrimination from employers or in cultural acceptance of part-time work.
Overall, for people with full careers, retirement is more flexible around the retirement age in Chile, the Czech Republic, Estonia, Italy, Mexico, Norway, Portugal, the Slovak Republic and Sweden.
Policy makers need to ensure that postponing retirement should be sufficiently rewarding while not overly penalising people who retire a few years before the normal retirement age. In Estonia, Iceland, Japan, Korea and Portugal, the financial incentives to continue working after the retirement age are large but costly for pension providers. Flexibility should be conditional on ensuring the financial balance of the pension system, with pension benefits actuarially adjusted in line with the flexible age of retirement.
Pensions at Glance 2017 provides comparative indicators on the national pension systems of the 35 OECD countries, as well as for Argentina, Brazil, China, India, Indonesia, the Russian Federation, Saudi Arabia and South Africa.
Country notes are available for Australia, Canada, France, Germany, Italy, Japan, Spain, Switzerland, the United Kingdom and the United States.
A recent OECD report, Preventing Ageing Unequally, also analysed the impact of rising inequalities and population ageing. It found that younger generations will face greater risks of inequality in old age than current retirees and for generations born since the 1960s, their experience of old age will change dramatically relative to that of previous generations.
IEA hosts high-level meeting on Africa’s energy outlook
The International Energy Agency held a day-long workshop on Wednesday to discuss ways to promote greater energy development across the African continent.
More than a hundred senior representatives from governments, energy companies, financial institutions and academia attended the meeting, which was opened by H.E. Dona Jean-Claude Houssou, Minister of Energy of the Republic of Benin, and H.E. Chakib Benmoussa, Ambassador of His Majesty the King of Morocco to France.
Findings from the Workshop will provide input to a special report on Africa that will be published later this year in the World Energy Outlook, the IEA’s flagship publication. It will also inform the IEA’s first ministerial summit with the African Union Commission, which will be held in Addis Ababa, Ethiopia in June.
“Promoting access to energy across Africa is one of the world’s major development challenges and one of the IEA’s key priorities,” said Dr Fatih Birol, the IEA’s Executive Director, during his opening remarks. “While the challenges are important – particularly with regards to access to energy or clean cooking fuels – the continent’s energy resources are tremendous. With the right policies and investments, they could be harnessed to provide greater economic benefit for all populations across the continent.”
Developing Africa’s energy sector potential is an essential step to providing greater economic opportunities and prosperity across the continent, which is home to vast energy resources. Still, today more than 600 million people across the continent remain without access to electricity. The workshop addressed policies, technologies, business models and financing to accelerate the transition to a thriving and sustainable African energy sector, set against a favourable backdrop of declining energy technology costs, increasing digitalisation, and strengthened policy commitment, including through Africa’s Agenda 2063 and the United Nations’ Sustainable Development Goals.
The workshop marked an important milestone in the IEA’s strengthened engagement with Africa. In recent years, the IEA welcomed Morocco and South Africa to its family and recently forged a strategic partnership with the African Union Commission (AUC). The IEA is also stepping up its collaboration with African countries and regional organisations on capacity building for data and long-term planning, and technical policy dialogues on a range of topics.
The workshop was followed by deep-dive sessions on energy access, energy and gender, energy and growth, and power system reliability and sustainability.
EU is strengthening its political partnership with Latin America and the Caribbean
The European Union is strengthening its political partnership with Latin America and the Caribbean by focusing it on four priorities – prosperity, democracy, resilience and effective global governance – for common future.
The vision for a stronger and modernised bi-regional partnership focused on trade, investment and sectoral cooperation is set out in a new joint communication presented by the European Commission and the High Representative. This new partnership aims at working together in changing global and regional realities that require joint efforts to address common challenges and opportunities.
On this occasion, High Representative/Vice-President Federica Mogherini commented: “Latin America, the Caribbean and Europe have social, cultural and economic deep links, a long history of common work for peace and prosperity, and share the same attachment to cooperation and multilateralism. With this communication, we lay the ground for further strengthening our collaboration, for the sake of our peoples and of the whole world.”
Commissioner for International Cooperation and Development Neven Mimica said: “Our commitment remains to continue engaging with countries in the region according to their different levels of development through tailor-made partnerships and innovative forms of cooperation such as transfer of knowledge or triangular cooperation. In this context, we will pay particular attention to countries least developed and in situations of conflict where the potential to raise finance is the lowest. Only when we join forces can we deliver on our ambitious Agenda 2030 for Sustainable Development or the Paris Agreement”.
Building on the achievements of the last decades, the partnership should concentrate on four mutually reinforcing priorities, underpinned by concrete initiatives and targeted EU engagement with the region:
Partnering for Prosperity – by supporting sustainable growth and decent jobs; reducing socio-economic inequalities; transitioning towards a digital, green and circular economy; as well as further strengthening and deepening the already solid trade and investment relationship
Partnering for Democracy – by strengthening the international human rights regime including gender equality; empowering civil society; consolidating the rule of law; and ensuring credible elections and effective public institutions
Partnering for Resilience – by improving climate resilience, environment and biodiversity; fighting against inequalities through fair taxation and social protection; fighting organised crime; and deepening dialogue and cooperation on migration and mobility, in particular to prevent irregular migration, trafficking in human beings
Partnering for effective global governance – by strengthening the multilateral system, including for climate and environmental governance; deepening cooperation on peace and security; and implementing the 2030 Agenda.
The strategic partnership between the European Union, Latin America and the Caribbean is based on a commitment to fundamental freedoms, sustainable development and a strong rules-based international system. As a result, there is an unprecedented level of integration and our economies are closely interconnected.
The EU has signed association, free trade or political and cooperation agreements with 27 of the 33 Latin American and Caribbean countries.
Close to six million people from both regions live and work across the Atlantic, and more than one third of Latin American and Caribbean students studying abroad do so in the EU. The EU is the third largest trade partner of Latin America and the Caribbean and the first investor. Total trade in goods amounted to €225.4 billion in 2018, while foreign direct investment reached €784.6 billion in 2017.
The EU has promoted the cooperation in areas of strategic interest, efforts to tackle anti-microbial resistance, improving aviation safety, working together against climate change and promoting a safe and human-centric digitalised economy are some concrete examples that illustrate this partnership towards a common future.
The EU has been the largest provider of development cooperation to its partners in Latin America and the Caribbean, with €3.6 billion in grants between 2014 and 2020 and over €1.2 billion in humanitarian assistance in the last 20 years, including assistance under the EU Civil Protection Mechanism in case of natural disasters.
The EU and LAC countries often align in the United Nations, and have closely cooperated on the 2030 Agenda for Sustainable Development and the Paris Agreement.
EU plans to invest €9.2 billion in key digital technologies
The Digital Europe Programme is a new €9.2 billion funding programme whose goal is to ensure that all Europeans have the skills and the infrastructure needed to meet a full range of digital challenges.
It is part of a strategy to further develop the digital single market, which could help to create four million jobs and boost the EU’s economy with €415 billion every year while increasing the EU’s international competitiveness.
“For too many years, Europe’s tech sector has lagged behind third countries such as the US and China. We need a coherent Union-wide approach and an ambitious investment to secure a solution to the chronic mismatch between the growing demand for the latest technology and the available supply in Europe,” said Austrian ALDE member Angelika Mlinar, one of the MEPs repsonsible for steering the plans through Parliament.
A part of the budget would be allocated to encourage small and medium-sized enterprises and public administrations to use technology more often and better, while other parts will cover strategically important fields such as supercomputers, artificial intelligence and cybersecurity.
“We can count on European excellence when it comes to research and innovation, but our businesses, especially SMEs, still found it difficult to access and take advantage of new solutions,” said Milnar. “This programme has been crucially designed to tackle the low take-up of existing testing technologies. We are on track to deliver one of the most promising and necessary funds for Europe’s future.”
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