First OECD pensions forum in the Arab World held in Bahrain
In the first pensions forum for OECD in the Arab World, the global economic think-tank says:
- The world needs to improve sustainability and increase flexibility in pension arrangements
- Coronavirus is causing an unprecedented shock to labor markets as well as to pension systems
- Even before COVID-19, pension funds were already facing significant challenges of an aging population and declining investment returns
- Pension systems could be more resilient to future challenges if pension funds include two accounts, one for retirement and the other for emergencies.
Manama— Bahrain: The Organisation for Economic Co-operation and Development (OECD) launched its seminal OECD Pensions Outlook Report 2020 in the MENA region for the first time, from the Kingdom of Bahrain. The event was at the invitation of “Fintech Robos – for Savings & Pensions Apps”, the organizer of the annual Arab Pensions Conference.
A 5-strong team led by Pablo Antolín, the OECD’s principal economist on pensions, and also including Romain Despalins, a statistician in the OECD Directorate for Financial & Enterprise Affairs, and three pensions policy analysts, namely Diana Hourani, Stéphanie Payet and Elsa Favre-Baron, spoke in the event that drew more than 140 delegates from the public and private sectors, and the financial industry.
Speakers stressed the need for policy makers and relevant departments to improve sustainability and increase the resilience of pension systems, by striking a balance between the different trade-offs when making decisions about how to improve these systems.
They also pointed out that the Coronavirus has caused an unprecedented shock to labor markets and pension systems alike, noting that even before COVID-19, pension funds were already facing the daunting challenges of an aging population (longer ages that should be funded in retirement and fewer numbers of entrants to labor market) and an environment characterized by low economic growth, wage growth, low investment returns and low interest rates.
Among the key lessons learned in the Corona crisis is that to make pension systems more flexible and resilient for similar challenges in the future, pension schemes need to consist of two savings accounts for each individual; one for pension and another for emergencies.
The forum also touched on the importance of adequacy of pension income for the individual and household in retirement; and the importance of creating a framework for that, including goals, related risks and standards that measure and control appropriate retirement income, in a way that does not affect other aspects of pension funds, especially their sustainability.
The OECD speakers also highlighted the importance of and how to provide pension programs for workers outside-the-standard forms of work, such as contract workers, irregular worker, part-timers and those who do not work in formal institutions and companies, as well as workers in crafts and individual industries, and that a framework of nudges should be introduced to incentivise these people to enroll in pension systems.
Additionally, the forum focused on the significance of communications between pension systems and their members, more in private pension systems, where individuals have many options and decisions to make around offerings and investment decisions that best secure their future retirement; but also similarly in public pension funds run by governments, in order to create a better understanding of the dynamics within which these funds work, and how pension benefits might be affected.
“Our partnership with the OECD to bring their exceptional global pension research and learning curve to Bahrain and the MENA region is part of our passion to foster communications and forward thinking on pension development and reforms in the region,” said the CEO of Fintech Robos and Chairman of Arab Pensions Conference, Ebrahim K Ebrahim.
Mr. Ebrahim also elaborated that governments need to improve the sustainability and resilience of retirement savings systems. COVID-19 has dealt an unprecedented shock to the labour markets and pension arrangements across the world, making governments act swiftly to address many of the ensuing challenges. Many countries, including Bahrain, have extended job retention schemes and unemployment benefits, allowing workers to keep accruing entitlements in state-pension funds.
With 37 member countries spanning the globe, from North and South America to Europe and Asia-Pacific, the OECD manage consultancy and reform projects in more than 100 countries around the world.