OECD Warns against Reverting to Early Retirement Policies

This week the Organisation for Economic Co-operation and Development  (OECD) warned that governments should resist backtracking on pension reforms and relaxing the rules on early retirement as a short-term expediency in the current global economic downturn.

The authors of its latest biennial report Pensions At A Glance 2009 concede that: “The short-term political pressures on governments are huge. But it is important to resist expedient reactions that threaten the long-term stability and sustainability of retirement income provision…… The crisis may lead to further changes that are not consistent with the long-term strategy needed for a sustainable pension policy.”

It cites the case of Italy where Silvio Berlusconi’s Government has postponed planned reforms to the retirement age and the benefits paid. It also points to other nations, such as the Slovak Republic, which have attempted to undo earlier reforms – a move which the OECD fears could happen elsewhere should finance ministries feel too much pressure.

The report warns that such actions and postponements could lead to more damaging, longer term impacts further down the road.  It fears that strains in the pension systems, in both private and public provision, threaten to turn the financial crisis into a social crisis lasting for decades.

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