GOVERNANCE Pensions
©Dylan Martinez/Reuters
Pensions Where to look now? Fiona Stewart, OECD Directorate for Financial and Enterprise Affairs
Pension funds suffered a blow in the financial crisis. So did public confidence. How can pensions be made more secure?
O
ld age, said Leon Trotsky, is the most unexpected of all the things that can happen to a man. Lifetimes do indeed fly, but if there is one event that even quite young people in OECD countries need to prepare for nowadays, it is their retirement. But with many pension funds in trouble from the 2008 collapse in financial markets, even some of the best laid retirement plans have had to be put off. No wonder trust is so low and the question of public versus
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OECD Observer
No 273 June 2009
private schemes has become such a hot debate. In recent years, we have increasingly had to save for our retirement ourselves. We are all living longer–which is a good thing–but this has made it increasingly expensive for governments and employers to cover pension costs. Unfortunately, this meant that the financial turmoil and ensuing economic crisis has had a major impact on private pension
assets–OECD estimates that these have plummeted by US$5.4 trillion globally, 20% of their value. Countries where pension funds were heavily invested in equities, such as Ireland and the US, faced the heaviest blows. No wonder confidence in private savings is being sorely tested and there are calls to return to what is seen as the “safe haven” of government pensions. Yet there are many problems and dangers with making such a reverse turn. First it should be noted that pensions are long-
