Pension reforms implemented over the past three decades reveal three clear trends that are reshaping retirement systems across countries and regions, research by the Finnish Centre for Pensions (ETK) has found.

Over the past 30 years, reforms have been driven by population ageing, repeated economic shocks and profound changes in working lives, prompting governments to reassess both the financial sustainability and adequacy of their pension systems.

According to a new international comparative report from ETK, these pressures have produced three paradigmatic trends: structural shifts in earnings-related pensions, the growing role of supplementary provision, and increased individual choice over saving, retirement timing and benefit use.

The report showed that reforms have unfolded in distinct waves.

For example, it said the 1990s were marked by privatisation and funding initiatives, while the 2000s focused largely on parametric adjustments to strengthen financial sustainability. Since the late 2010s, however, the emphasis has increasingly shifted towards benefit adequacy and social sustainability.

While national outcomes vary due to institutional legacies and political choices, the three reform trends identified now cut across a wide range of pension systems internationally, ETK stated.

ETK senior researcher, Kati Kuitto, explained how structural reforms have led pension systems towards defined contribution (DC) models.

“There has been a significant shift from DB- to DC-based models, particularly within occupational pensions and other supplementary systems that enhance statutory pensions. For example, the Netherlands is currently undergoing a reform that will see its occupational pension system become DC-based by 2027,” she noted.

However, DC models are less common in statutory earnings-related pension systems.

Where they do exist, such as in Italy, Sweden, Latvia and Poland, ETK said they are typically implemented as notional defined contribution accounts (NDC). The model is not based on the accumulation of investment funds; instead, pension benefits are calculated based on the total contributions made over an individual’s entire career, and a notional rate of return.

The report also focused on efforts to increase supplementary pensions due to the increasing fiscal pressures on government finances caused by statutory pensions.

“Efforts to boost the uptake of supplementary pensions among employees have included introducing statutory obligations, automatic enrolment and, for example, a favourable taxation of supplementary pensions,” Kuitto said.

The most popular means of boosting supplementary coverage, ETK found, is automatic enrolment, which it said is “rapidly growing” and has helped to broaden coverage.

The third trend is the increased individual choice within pension systems. ETK liaison manager, Mika Vidlund, explained how it has shifted responsibility and risk from the pension system to the individual, which “may undermine the adequacy of retirement income in later life”.

He noted “extremes” such as the UK and Estonia, where individuals can withdraw their entire pension in a lump sum.

In most other countries, however, he said lump-sum withdrawals are permitted only under certain conditions or are limited to a portion of the pension savings.

---