6. Demographics and the Pension System
A higher life expectancy and lower fertility rates have led to population ageing in developed countries, which implies a shrinking of the working-age population. The old-age dependency ratio, which measures the number of elderly people as a share of those of working age, has increased in recent decades. It is projected to increase further in the decades ahead, which poses a big challenge to pension systems. Hence, in order to maintain the financial sustainability of pension systems, most developed countries have recently agreed to reforms and have increased the pensionable age. There have also been changes with regard to the labour force participation rate, as well as the employment-population ratio of older employees (55 to 64 years), which rose significantly in most industrialised countries.