Pension systems remain under strain in many countries amid slow economic growth and moves by governments to shore up financial stability in the wake of the global financial crisis, a new report by the Organization for Economic Co-operation and Development suggests.
"The economic recovery remains sluggish in most OECD countries and, as a consequence, pension contributions remain low while fiscal pressure adds urgency to reforming public pension systems," the report said.
"Going forward, the likely protracted uncertainty in financial markets, low returns and record-low interest rates cast doubts on the ability of defined-contribution systems and annuity schemes to deliver adequate pensions."
The report suggests the average retirement age in OECD countries will increase to 65.5 years from 64 by 2060 based on current legislation.
"The main objective of recent reforms was to delay retirement by raising the statutory retirement age, tightening early retirement provisions and increasing incentives to work longer," the report said.
Few countries have cut benefits
The OECD also said governments around the world have moved to contain future spending by making indexation or future increases in pension benefits less generous, although almost no countries have made direct cuts to benefits.
Meanwhile, the OECD cautioned that for those unable to extend their working life, there is a risk that retirement benefits may not be enough to prevent a sharp fall in their standard of living and even poverty in old age.
The report noted that several countries have taken steps to increase the coverage of voluntary private pension schemes.
In Canada, the former Conservative government introduced changes to gradually raise the eligibility age for Old Age Security to 67 from 65 years beginning in 2023. It also introduced new pooled registered pension plans to help Canadians save for retirement.
However, the new Liberal government had campaigned on a promise to change the eligibility age back to 65 and has pledged to increase the guaranteed income supplement by 10 per cent for single, low-income seniors.
During the recent election campaign, the Liberals also promised to work to enhance the Canada Pension Plan, however what that will look like is not clear.
Ontario is moving ahead with its own Ontario Retirement Pension Plan that will require mandatory contributions from employers and workers at any company that does not already offer a workplace pension.