In particular, in 2011 the retirement age and the period for calculating the regulatory base were increased, and in 2013 the so-called “sustainability” factor was defined and the revaluation index of pensions was introduced. These measures will help to ease the pressure in the medium term arising from population ageing. The next step should be to develop the mechanisms to increase saving for retirement so that in the future this may complement defined-benefit public pensions. Turning to public revenue, according to the findings of the Committee of Experts – which delivered its report in March 2014 – and the recommendations of international agencies, a reform is needed to redress the problems which have become visible during the crisis. These problems include most notably the low revenue-raising capacity of the tax system, the high legal rates of taxation alongside low effective rates of taxation due to the proliferation of tax benefits, and a bias towards a more distortional system of taxation for economic growth and employment, namely, that levied on labour and capital. Given this diagnosis, the proposals of the Committee of Experts and international agencies coincide as to the need to increase the weight of indirect taxation to permit a reduction in the taxation of labour, particularly social security contributions, and also a lowering of the taxation of capital income. Additionally, the Committee suggests that tax rebates, reductions  6  BIS central bankers’ speeches  and allowances be eliminated and that progress be made towards greater neutrality across savings instruments.

In this connection, I will attempt to raise pertinent initiatives that will accord the opportunity for us to discuss and develop coherent and converging solutions which are both effective and timely. Firstly, the design of a suitable policy framework to provide incentives for more stable long term savings that could negate the effects of reducing living standards after retirement and fiscal strains in the government budget. In this regard, there is a strong need to pursue measures to incentivise and marshal long term savings without making it compulsory, a worthwhile effort in the wake of managing retirement risk implications. The measures involve  BIS Review 137/2007  3  raising financial literacy and public awareness of the perils of the aging, describing the uncertainties of health care and the limited capacity of government funded schemes; Secondly, with the increasing demand for suitable financial instruments to hedge long-term liabilities and with increased emphasis to strengthen asset-liability management practices to meet projected obligations, further development of the financial instruments that facilitate risk management is therefore critical. In this regard, the Government could play a crucial role in the development of financial instruments and the associated market infrastructure. For example, the issuance of large amounts of very-long dated bonds and index-linked bonds in some industrialised nations have helped mitigate risks associated with the duration gaps of asset against liability, inflation and longevity risks; Thirdly is the careful design and implementation of an appropriate tax mechanism for pension system that will encourage greater retirement savings.