3. Parameters
THE MAIN FEATURES OF 53 COUNTRIES’ pension systems are summarized in tables 3.1 through 3.4. This follows the typology of the previous section (table 2.1), dividing the pension system into two tiers. The summary necessarily leaves out much of the institutional details. Complete descriptions are provided in country chapters in Part II of the report.
First-Tier, Redistributive Schemes The level of benefits under first-tier, redistributive schemes is expressed as a percentage of average earnings in each country. In the cases of minimum pensions and basic pension schemes, the benefit entitlement is shown for workers who enter the workforce at age 20 and work without interruption until they reach the standard pension eligibility age. The social-assistance level is shown under the targeted category only when there is no specific, targeted scheme for poor pensioners. (Only full-career workers with very low earnings will be eligible for the targeted and social-assistance programs; the majority of beneficiaries will be those with short and interrupted contribution histories.) The final row shows the total first-tier benefit to which a full-career worker would be entitled. This is relevant because, in some cases, workers can receive several different types of first-tier benefits at the same time, while in others, they are only eligible for one of the different programs. The average minimum retirement benefit across the 24 high-income OECD countries is 31 percent of average earnings. The basic pension in Japan and targeted schemes in Finland and the United States are on the low side, providing benefits worth approximately one-fifth of average earnings. At the other end of the spectrum, Luxembourg and Portugal have a minimum pension well above 40 percent of average earnings. The overall minimum retirement income is generally much lower in Eastern Europe and Central Asia than in the high-income OECD countries, averaging approximately 20 percent of average earnings. Only Latvia and Turkey have benefits close to the average of the high-income OECD countries. The average minimum retirement benefits in Latin America and the Caribbean and in the Middle East and North Africa lie between the averages of the other two groups of countries at approximately 28 percent. However, the range of benefit levels is more diverse. For example, the Islamic Republic of Iran has a minimum of two-thirds of average earnings and Colombia, one-half. The Republic of Yemen has no minimum pension, and the Arab Republic of Egypt pays just 7 percent of average earnings.
Second-Tier, Earnings-Related Schemes The second-tier insurance schemes offer several types of earnings-related plans: defined benefit, points, or notional accounts. The main parameter that accounts for differences in the value of these schemes is the accrual rate per year of contribution—that is, the rate at 11