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Government Culture Finance

The Push for Pensions

Marching for work and retirement, photo: marcovdz/flickr

Europeans are talking about retirement. Yet, in France at least, it’s the youth who are most angry. Today the biggest protest movement since President Sarkozy took office continued for a tenth day. Airports have been disrupted, health risks have reached ‘pre-epidemic levels’ with refuse collectors on strike, even the Louvre was closed as staff blockaded the museum entrance.

The cynical readers among you will view this tête-à-tête as more déjà vu than coup d’état. Nonetheless, there remains a fundamental question in the developed world over how to balance the right to a ‘long and happy retirement’ against the gerontological and economic realities of modern times.

In financial terms it’s hard to argue with the figures. According to Allianz, a leading German financial services company, public pension expenditure for the European Union as a whole will increase to 12.8 percent by 2050. Compare this with France, Greece, or even Italy – where expenditure will increase to 25 percent of GDP by 2050 – and it seems inevitable that the budgetary axe should fall at this time of fiscal ‘belt-tightening’ across the continent. In Britain, for instance, the new measures are projected to save £5 billion a year. Furthermore the financial crisis has hit one rather traditional quirk of European retirement rights, namely that of a gender-based pension entitlement, with both the UK and Greece removing a woman’s prerogative to beat her husband to the pension pot.

However, this is one problem we can’t blame on the bankers. Aging populations are a direct result of our successful economic development – as the social, technological and cultural effects of modernization and urbanization mean lives are lengthened and people have fewer children to keep their populations youthful. As the New York Times put it in response to the protests, “it is hard to conjure a situation in which people move back to the countryside and again have larger families.” In fact, the Oxford Institute of Ageing – which published the seminal 2008 Global Ageing Survey – predicts that the West’s future search for a younger workforce will be instrumental at improving lives in the developing world, where in Africa only five percent are projected to be 65 or older in 2050 – compared to 29 percent in Europe.

The reality therefore is that without reform, retirements will certainly be long – but increasingly less happy. Although the French (and Greeks before them) have had a particularly loud way of expressing their frustrations, it is abundantly clear that populations in developed countries need to have this conversation as part of the broader debate on deficit reduction versus fiscal stimulus. Below are the retirement figures for some of the world’s most developed countries, with a consensus clearly formed in the 60s bracket – but steadily increasing. Nonetheless, as the French clash over raising the retirement age from 60 to 62, spare a thought for Japanese men who, on average, will wait until 70 before saying au revoir to the workplace.

FRANCE: French workers have been able to retire at 60 since 1983, when then president François Mitterrand lowered the age from 65.  The current law under consideration will raise the retirement age by four months every year until 2018. The age to retire on a full pension, whether a person has made a full contribution to their state pension or not, will also rise from 65-67 between 2016 and 2023.

GERMANY: The statutory retirement age is 65. Recent reforms will increase the retirement age to 67 by 2029.

GREECE: Under significant pressure from the Eurozone group, the retirement age for women will rise from 62 to 65 to match that of men. But women and men will still be able to retire earlier provided they have worked at least 37 years.

JAPAN & KOREA: In most countries, the effective age of retirement is well below the official age for receiving a full old-age pension. Japan and Korea are notable exceptions where the effective age of retirement is close to 70 for men despite an official retirement age of 60.

RUSSIA: Current retirement age is 60 for men, 55 for women. Many retirees work beyond that to supplement their pensions. Some want the age raised but others say with Russia’s high mortality rates it doesn’t make sense.

SPAIN: Spain faces one of the world’s most severe demographic challenges. The ruling Socialist government has adopted legislation to raise the retirement age from 65 for both sexes to 67 from 2013. While early retirement is possible at 60, pension payments are substantially reduced in this case.

SWEDEN: French lawmakers have cited Sweden’s 1994 pension legislation as a model for future changes to its own system. Under Sweden’s reforms, which split retirement plans between private and public schemes, the minimum pension age is set at 61 for both men and women, with no maximum retirement age.

UK: With a slightly more favorable demographic development than the EU as a whole, the statutory retirement age is set at 65 for men and 60 for women. Current reforms have slated a new retirement age for men and women to reach 66 by 2020, and 68 for both sexes by 2046.

UNITED STATES: While the normal retirement age to receive unreduced benefits from Social Security, or Old Age Survivors Insurance (OASI), historically has been 65, it is gradually increasing to 67.

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