People saving for retirement face longevity risk in addition to investment risk. Sharing these risks among stakeholders improves the sustainability and resilience of retirement savings arrangements. For risk sharing to be sustainable, it is important to have a regulatory framework that supports the objective of fairness in value transfers, the continuity of the arrangement through minimum funding requirements and the security of the promises.
This is from the OECD’s magnum opus, the seven chapter Pension Outlook 2020. It is in the preamble and leads to a brilliant examination of what is happening around the world in terms of “risk sharing”. The chapter that follows on Government interventions to improve retirement planning is also excellent.
But the OECD report comes with risk warnings!
There are a number of chapters to be avoided. Chapter 5 deals with an imaginary problem while chapter 2 has been exhaustively covered in the UK by the PLSA’s retirement income benchmarking. Chapter 3 is another look at integrating short and long term savings through sidecar saving, Chapter 4 is an undercooked study of default strategies while the opening chapter draws lessons from a crisis that has yet to run its course.
However , chapters 6 and 7 are good and need reading if your interest is in providing people with pensions.
The problem the OECD has is that the two chapters of the 210 page long full report start at page 155. The shortened version entitled “highlights” focusses on the 5 chapters that in the UK we are over-familiar with and the presentation given by the OECD team earlier in the month almost completely ignored the good stuff at the back.
The document’s scope is too wide. By providing us with an overview of the global aspects to retirement savings, they risk providing overviews that state the bleeding obvious
Policy makers should balance the
trade-offs between the short-term and
long-term consequences of their
responses to COVID-19
The heterogeneity of workers in nonstandard forms of work requires distinct approaches to help them save for retirement
Consequently, the reader is drowned by banality in the snooze-fest of the first 5 chapters and will miss out on the earnest and real discussion of the final two.
I am not going to spoil these two final chapters for you but ask you to download the document and begin it at page 155, it is then worth the read.
Weirdly, the accompanying “highlights ” document, focusses on chapters 1-5 to the exclusion of the meaty stuff. Avoid the highlights document and download the full report from this link