Populations in most OECD countries are ageing rapidly, as life expectancy rises and fertility rates decline. The share of people aged 65 and over in total population has more than doubled since 1960 across OECD countries on average and is projected to reach about 30% of by 2060. Living longer and ageing in better health are major accomplishments and a triumph of progress.
Rapid ageing puts public finances under mounting pressure. Age-related spending, mostly publicly financed, has increased in recent decades in the OECD area and will continue to rise. Pension spending alone could rise by around 2 percentage points of GDP on average by 2060, to over 10% of GDP. Pension systems, particularly pay-as-you-go schemes with defined benefits, already face strains that will intensify, as their finances depends crucially on contributions, replacement rates and retirement ages. At the same time, public health spending may reach 9% of GDP, while long‑term care costs could almost double over the next two decades as the over-80 population share increases rapidly. Without policy action, the already high debt ratio in the OECD area risks increasing further.
Even though these trends are concerning, policies can help economies adapt to population ageing, harnessing the benefits of longevity, and address fiscal pressures. While the scale of demographic change varies across countries, a comprehensive policy approach, combining both fiscal and structural reforms, is indispensable.
On the fiscal side, pension systems need to adjust to demographic realities through reforms in retirement policies that reduce early exit pathways and better align retirement age with longer life expectancies are essential. Ensuring viable healthcare systems is also critical. Promoting healthy ageing via prevention, such as tackling obesity and tobacco use, is crucial to contain public health costs and keep older people active and productive.
Long-term care requires fresh approaches as societies are ageing and costs soar. Sustainable funding mechanisms are essential, along with a more integrated approach to service delivery. Promoting home care can help contain long-term care spending, while satisfying the preference of many older people with care needs.
Fiscal reforms should be combined with structural reforms to increase the supply of older workers and other under-represented groups and make them more productive. Barriers to the employment of older workers such as mandatory retirement and seniority-based pay need to be removed. Allowing for flexibility in work-retirement transitions is essential for prolonging working lives, along with labor market reforms and the promotion of lifelong learning. Training participation remains low among older people who needs it most to stay employable.
OECD simulations illustrate the pay-off of policy action. Combining reforms to labor market policies and pension program would lower the fiscal pressure in 2060 by around 4 percentage points of GDP for the average OECD country, compared to no-policy change baseline scenario, by raising employment rates and extending working lives.
Fertility and migration policies must also be part of a comprehensive strategy to address the fiscal implications of ageing, though today’s fertility rates would only boost the share of workers in the population in around two decades. Immigration is unlikely to fully offset population ageing, but it can help ease labor shortages in the short to medium term, provided immigrants are effectively integrated.
Ageing need not be a looming crisis if met with timely, comprehensive policy action that can turn longer lives into a promise and a boon.
Vivian Koutsogeorgopoulou, Senior Economist, OECD Economics Department, OECD Crete Centre in Population Dynamics.
* Based on the OECD Economics Department Working Paper “Ageing populations, their fiscal implications and policy responses” (2025), No. 1844, OECD Publishing, https://doi.org/10.1787/6aec03b3-en, prepared under the research work programme of the OECD Crete Centre on Population Dynamics.
