Summary:
Evidence presented in this study indicates that measures of income replacement based on public pension only give a misleading account of income adequacy during retirement. When taking into account all sources of retirement income and direct taxes paid, replacement ratios are much higher and exhibit greater uniformity across countries. This suggests that individuals may, to some extent, adjust to institutional and market constraints to achieve some target replacement ratios. There are,
however, large differences in economic conditions within the retired population. Reforms of public pension programmes need to take account of this heterogeneity, to avoid major disruptions of living standards for the most vulnerable groups, thereby also lessening resistance to reform.