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In 27 out of 34 OECD member countries, there is institutionally separate retirement-income provision for some or all public-sector workers. But the scope of these pension schemes varies significantly: from a modest top-up to the national pension arrangements (covering private-sector workers as well) to entirely independent retirement-income regimes. Average expenditure on these schemes amounts to about 1.5 percent of GDP, or nearly a quarter of total public pension spending. Public-sector pension reform is an issue of great political importance in many countries. Central governments' workforces are ageing rapidly in all but four of the 26 countries for which data are available. One in three of central-government employees were aged 50 and over in 2009, compared with 22 percent in 1995. This rapid ageing is pushing up the cost of pension schemes at a time when many OECD countries are embarking on fiscal consolidation. This paper examines the arguments and the options for reforming public-sector pension schemes from an international viewpoint. It assesses five different policies to reduce expenditures or increase contribution revenues, showing how these can have very different effects in a public-sector scheme than with national retirement-income arrangements.

Intro -- Contents -- Preface -- Acknowledgments -- About the Authors -- Executive Summary -- Acronyms and Abbreviations -- Glossary -- 1. Overview -- Chapter 2: Initial Conditions for Pension Reform -- Chapter 3: Taking Stock of Pension Systems in the Middle East and North Africa -- Chapter 4: A Framework for Reform -- Chapter 5: Improving the Management of Pension Funds -- Chapter 6: Progress to Date and Prospects -- 2. The Initial Conditions for Pension Reform -- Demographics -- Macroeconomics -- Overview of the Financial Sector -- Conclusions -- 3. Mandatory Pension Systems in the Middle East and North Africa -- Institutional Organization and Coverage -- Size and Shape of the Schemes -- Incentives -- Equity within and across Genders -- Pension Costs, Financial Sustainability,and Fiscal Implications -- Conclusions -- 4. General Guidelines for a Comprehensive Reform Program -- Choosing the Mandate of the Public Pension System and Implementation Mechanisms -- Bringing Current Defined-Benefit, Pay-As-You-Go Systems up to the Standard -- Benefits and Costs of Higher Funding -- Expanding Coverage to the Vulnerable and Poor: A Role for Social Pensions? -- Improving the Institutional Configuration, Administration, and Regulation of Pension Systems -- 5. Management of the Public Pension Funds -- Lessons from International Experience in Pension Fund Management -- Pension Fund Management in the Middle East and North Africa Region -- Improving the Management of Public Pension Funds: Constraints and Opportunities -- Conclusions -- 6. Progress to Date and Prospects -- Countries in the Early Stages of Reform -- Countries in Motion -- Countries Leading Pension Reform -- Conclusions -- Appendices -- A Demographic Indicators -- B Methodology for Demographic and Employment Projections -- Life Expectancy, Total Fertility Rate, and Population Projections.

Reforming pensions looms large over the policy agenda of OECD countries. This is hardly surprising since public spending on pensions accounted on average for 7 per cent of OECD GDP in 2005; and this pension spending effort is set to increase significantly over the coming decades in response to population ageing. Pension policy is indeed challenging and controversial because it involves long-term decisions in the face of numerous short-term political pressures. However, the status quo does not always win out so far as pension reform in concerned: public finance crises and the looming threat of ageing populations have proved effective spurs for reform. As a result, much has been done since the early 1990s to make pension systems fit for the future. Nearly all the 30 OECD countries have made at least some changes to their pension systems in that period. In 16 of them, there have been major reforms that will significantly affect future benefits. The purpose of this paper is to summarise these reforms and highlight the main lessons. Section 1 looks at which countries reformed their pensions systems and which did not. It also examines the fiscal challenges posed by public pensions. Section 2 describes the measures in the reforms themselves. These include, among other things, increases in pension age, changes in the way benefits are calculated and smaller pension increases in retirement than in the past. Section 3 explores the impact of these reforms on future pension entitlements of today's retirees, showing a clear trend to a lower pension promise for today´s workers than for past generations. This means that people will need to save more for their own retirement via private pension schemes, an issue examined in Section 4. This is followed in Section 5 by a review of the main outstanding challenges facing pension systems in OECD countries. The final section presents some concluding remarks.