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Net Pension Replacement Rates

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For average earners, the net replacement rate across OECD averages 69%, which is 12 percentage points higher than the gross replacement rate. This reflects the higher taxes and contributions that people paid on their earnings when working than they pay on their pensions in retirement. Net replacement rates again vary across a large range, from under 40% in Mexico, Ireland and Japan to well over 100% in Greece for average earners. For low earners (with half of mean earnings), the average net replacement rate across OECD countries is 83%. For high earners (150% of mean earnings) the average net replacement rate is 63%, lower than for low earners. As with gross replacement rates, the differences with earnings reflect progressive features of pension systems, such as minimum benefits and ceilings on pensionable earnings.

Document Type: Review Article

Publication date: 2011-03-01

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