Filling the Pension Gap: Coverage and Value of Voluntary Retirement Savings

32 Pages Posted: 26 Mar 2009

See all articles by Pablo Antolin

Pablo Antolin

Organisation for Economic Cooperation and Development, OECD

Edward Whitehouse

Organization for Economic Co-Operation and Development (OECD)

Date Written: February 4, 2009

Abstract

The current generation of workers can expect lower pension benefits in retirement than the current generation of pensioners. Private, voluntary pension savings will therefore play a greater role in providing for old age. This paper calculates the size of the "pension gap": the difference between the benefits from mandatory retirement-income provision and a target pension level. It then computes the amount that people would need to save to achieve the target.

Data on coverage of private, voluntary pension schemes in a range of OECD countries are then presented. The paper also shows how coverage varies with age and earnings. The results show significant gaps in coverage, particularly among low earners and younger workers. The effect could be a resurgence of old-age poverty when these generations reach retirement. Data on contributions to private pensions show that these are, on average, at a level likely to fill the pension gap. Expanding coverage rather than raising contribution rates should therefore be the policy priority.

Five policy options for increasing coverage are assessed: (i) mandating private pensions; (ii) "soft compulsion", which is automatic enrollment in private pensions but with an opt-out; (iii) facilitating access to the means for saving for retirement; (iv) preferential tax treatment of retirement savings; and (v) improving financial awareness.

Suggested Citation

Antolin, Pablo and Whitehouse, Edward, Filling the Pension Gap: Coverage and Value of Voluntary Retirement Savings (February 4, 2009). Available at SSRN: https://ssrn.com/abstract=1368827 or http://dx.doi.org/10.2139/ssrn.1368827

Pablo Antolin (Contact Author)

Organisation for Economic Cooperation and Development, OECD ( email )

2 rue Andre Pascal
Paris Cedex 16, MO 63108
France
33-1-45.24.90.86 (Phone)
33-1-44.30.63.08 (Fax)

Edward Whitehouse

Organization for Economic Co-Operation and Development (OECD) ( email )

2 rue Andre Pascal
Paris Cedex 16, 75775
France

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