Participation in pension plans
In the OECD area, 19 countries had mandatory or quasi-mandatory pension plans in 2022, covering over 75% of the working-age population in 12 of them. In 9 OECD countries, voluntary pension plans (occupational and personal) covered more than 40% of the working-age population. Automatic-enrolment programmes now apply to 7 OECD countries at the country level.
In 2022, 19 of the 38 OECD countries had some form of mandatory or quasi-mandatory pension plans in place (Table 9.1). These plans cover over 75% of the working-age population in 12 of these countries, such as in Finland and Switzerland where employers must operate an occupational pension scheme and contribution rates are set by law. In some countries, the obligation is not set out at the national level but the decision is rather left at the industry or branch level. Through industry-wide or collective bargaining agreements, employers establish pension plans that employees must join. As not all sectors may be covered by such agreements, these arrangements are classified as quasi-mandatory (e.g. Denmark, the Netherlands and Sweden). In these countries, the participation rate is close to the one in countries with mandatory occupational arrangements. Mandatory personal accounts are prevalent in Latin America (e.g. Chile, Colombia, Costa Rica and Mexico) and some other OECD countries (e.g. Denmark (ATP) and Sweden (premium pension system)). While participation is over 80% in Chile, Costa Rica, Denmark, Mexico and Sweden, it is not the case in Colombia where people can choose to participate either in the public pay-as-you-go or in the private asset-backed pension systems. A high incidence of informal employment may also account for the relatively lower participation level in Colombia (55%) than in other similar systems.
Participation in voluntary occupational pension plans varies across countries. These plans are voluntary because employers, in some countries jointly with employees, are free to set up a plan. Personal pension plans are voluntary when individuals can freely decide whether to join them or not. The participation rate in voluntary pension plans (occupational or personal) is above 40% in Belgium, Czechia, Germany, Iceland, Ireland, Japan, Poland, the Slovak Republic and Slovenia. By contrast, participation in voluntary pension plans is very low (below 5%) in countries such as Greece.
Six OECD countries had implemented auto-enrolment programmes with an opt out option at the national level by the end of 2022: Italy (since 2007), Lithuania (since 2019), New Zealand (since 2007), Poland (since 2019), Türkiye (since 2017) and the United Kingdom (since 2012). The Slovak Republic introduced a similar programme in 2023. New Zealand has achieved a participation rate above 80% in the “KiwiSaver” scheme. In the United Kingdom, which initiated its auto-enrolment programme more recently than New Zealand, 50% of the working-age population was participating in an employer-sponsored pension plan in 2022. In Italy, since 2007, the severance pay provision (so-called Trattamento di Fine Rapporto – TFR) of private-sector employees is automatically paid into an occupational pension plan unless the employee makes an explicit choice to remain in the TFR regime. However, a vast majority of workers has chosen to do so, and only 13% of the working-age population is now participating in an occupational pension plan. Poland and Türkiye also have a relatively low participation rate in plans with automatic enrolment (13% and 15% respectively), potentially due to the recent introduction of the programme and a potential lack of people’s trust in it. By contrast, Lithuania has already a relatively high participation in the second pension pillar (over 75%) despite the recent introduction of its auto-enrolment programme in 2019. The second pillar already existed prior to 2019 and employees joining the scheme voluntarily could not leave it afterwards. Automatic enrolment is also encouraged by regulation in Canada and the United States but at the firm level. In Germany, automatic enrolment can be implemented in occupational defined contribution pension plans for private-sector employees in the case of deferred compensation, and it needs to be specified in collective agreements.
Definition and measurement
The term “pension plans” refers to plans that individuals access via their employer or a financial institution, and in which they accumulate rights or assets. Assets belong to plan members and finance their own future retirement. These assets may accumulate in pension funds, through pension insurance contracts or in other savings vehicles offered and managed by banks or investment funds. Employers may set up provisions or reserves in their books to finance the retirement benefits of occupational pension plans.
Several measures of participation in a pension plan coexist. To be a member of a pension plan from the perspective proposed here, an individual must have assets or have accrued rights in a plan. The proportion of individuals having a plan may be higher than the proportion of individuals actively saving for retirement and paying contributions to the plan.
Counting individuals more than once may arise when using administrative data as individuals can be members of both occupational and personal voluntary pension plans. Therefore, the overall participation rate in voluntary pension plans cannot be obtained by summing the participation rates of occupational and personal plans.
Further reading
OECD (2019), Financial Markets Insurance and Pensions: Inclusiveness and Finance, OECD, Paris, https://www.oecd.org/finance/Financial-markets-insurance-pensions-inclusiveness-and-finance.pdf.
OECD (2012), OECD Pensions Outlook 2012, OECD Publishing, Paris, https://doi.org/10.1787/9789264169401-en.