Poverty rates for retirees declined through the 2008-'09 financial crisis in the 34 OECD countries, but challenges of adequacy and inequality in old age still remain, according to a new report from the Organization for Economic Co-operation and Development.
The poverty rate for people aged 65 and older in OECD countries fell to 12.8% in 2010 from 15.1% in 2007. The U.S. remains above the average at 19.9%, down from 22.2%. Canada was one of only three countries to see its rate rise, to 7.2% from 5%, but still remains one of the lowest among OECD countries. The OECD calls the reduction in pensioner poverty and current retirees increasing their incomes relative to the total population the greatest pension policy reform successes of the past decades.
However, the organization argues the wealth of retirees is “very unequally distributed,” which leads to greater inequality in the distribution of retirement income.
“In particular, wide gender wealth gaps exist, with women over 65 particularly affected as they generally live longer, have a lower pension (benefit) and are at greater risk of poverty when long-term care is needed,” the report states.
The OECD said recent pension reforms, which have taken place in all 34 countries over the last five years, have helped contain rising pension costs, but that governments still need to do more to encourage employees to work longer and save more for retirement in the face of decreasing benefits, such as the U.K. introducing an automatic enrollment defined contribution program for private employers. The retirement age is expected to be at least 67 in most OECD countries by 2050.
“Raising retirement ages and promoting private pensions are all steps in the right direction but alone they are insufficient,” said OECD Secretary-General Angel Gurria in a news release. “Governments need to consider the long-term impact on social cohesion, inequality and poverty. Ensuring everyone has a decent standard of living after a life of work should be at the heart of policies.”