New Policy Proposals
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The OECD has undertaken further
study of the reform of social security, including the option of increased
reliance on private pensions. An important aspect of pension reform is
the implications for intergenerational equity: current programmes imply
a transfer of income from the current young to the current old. And even
with funded systems, material goods and services have to be transferred
in this way. There is much merit in this approach in addressing the anti-poverty
objectives of pensions. It is more problematic in earnings-related pensions
where, in some countries, high benefits and other design features encourage
early retirement and living standards among the retired are reaching
those of the population as a whole and are exceeding those of young families
with children. It would make more sense to use collective resources for
areas that have higher priority and to allow individuals more choice
on when to retire and on the kind of income they want in retirement.
More reliance on private pensions and savings can be a step in this direction.
The consequences of ageing on capital-markets have also been explored.
Ageing will change saving and investment patterns nationally, not least
through the build-up and subsequent unwinding of private pension assets. |
Differences in ageing patterns
across countries particularly between the OECD and the non-OECD regions
will give rise to shifts in patterns of saving, investment and international
capital flows. All these movements will be mediated through national
and international capital markets, and their improved functioning will
contribute to higher output growth and higher returns on pension funds
by efficient allocation of savings. |
So that capital markets can fulfil this enlarged role, the
legal and regulatory infrastructure for securities markets will have to
be strengthened. Rules governing insider trading and take-overs should
enhance the capability of the capital markets to provide discipline over
corporate entities. Measures should be introduced to protect the rights
of minority investors, including those that enable investors to exercise
corporate governance. Accounting and disclosure rules should promote transparency
and accountability. The regulatory and supervisory framework for pension
schemes should be modernised, with the use of the latest techniques of
risk-management encouraged. At the very least, measures inhibiting the
development of innovative financial instruments should be reviewed carefully
although governments may also wish to consider giving some support to the
development of instruments that are useful in providing retirement income
(index-linked instruments, for example). |
In addition to putting a premium on raising productivity
growth, policy development should address the lifelong requirements of
the voters and taxpayers in the OECD countries. These initiatives involve
measures to encourage the employment of older workers; reforms to the provision
of long-term health care and of retirement income; reforms to education
and changes to the provision of social services. |
The OECD analysis of the determinants
of health, learning, productivity and the economic and social well-being
of the old has been
developed in the context of the life-course perspective of decisions
on education, work and retirement. For example, young people's educational
experiences are a central determinant in work decisions, productivity
and
well-being later in life. It also emphasises the importance of co-ordinating
policies across traditional departmental responsibilities in government.
Finally, it makes clear that the time-frame for policy analysis and decision-making
must be considerably lengthened. The agenda that emerges policies that
can deliver higher growth, increase the emphasis on individuals' life-courses
and enhance the role of capital markets allocating long-term savings
efficiently, as well as reforms to pension and other transfer programmes
may seem a
tall order. |
But if action is taken now first to develop and then put in
place the right package of policies, the social and economic stresses that
will inevitably accompany such an historic demographic shift can be mitigated.
The OECD will continue to assist its member governments in designing and
implementing the requisite action in both economic and social disciplines,
with due regard to political dimensions, in both OECD and non-OECD countries. |
OECD BIBLIOGRAPHY: Maintaining Prosperity in an Ageing Society, forthcoming 1998 Ageing in OECD Countries: A Critical Policy Challenge, 1997 |