Slovenia: Pension Reforms Include Raising Retirement Age

Slovenia faces a new reform of its pension system in 2010. The blueprint presented in September 2009 envisages among other things the raising of the full retirement age to 65 for both men and women, a measure unacceptable for trade unions. In line with the plans unveiled by the government, changes would be introduced gradually between 2011 and 2020, with the turning point coming in 2015, which would count as the formal starting year for the new pension system.

The new system would include everyone under 55 at that point. All other citizens would fall under an updated version of the existing system. The changes envisage the raising of the minimum retirement age from 58 to 60 years, while full retirement would come at 65. In line with the existing reform from 2000, the full retirement age will stand at 63 for men and 56 years and eight months for women in 2010. It was planned to eventually rise to 61 for women.

Source: Government Communication Office "2010 Brings Pension Reform" (January 2, 2010)

China: Study Points Pension Reform to Deal with Coming Age Wave

A report from the Center for Strategic & International Studies warns that the aging of China’s population could usher in a new era of slower economic growth and mounting social stress as tens of millions of Chinese arrive at old age over the next few decades without pensions and with inadequate family support. The authors of "China’s Long March to Retirement Reform: The Graying of the Middle Kingdom Revisited" evaluate recent government efforts to prepare for the challenge and outlines an ambitious new reform plan and argue that, despite the current economic situation, delay in addressing address the long-term aging challenge is not an option.

Among other things, Richard Jackson, Keisuke Nakashima, and Neil Howe present a plan that provides for a universal poverty backstop that would protect all Chinese against an uncertain old age, and that would also create a national and fully portable system of funded retirement accounts. This would allow China to care for a much larger number of older people without overburdening its smaller working generation and help China to maintain rates of savings, investment, and living standard growth as its population ages. With respect to retirement age:

The minimum retirement age would initially be set at 60 for men and 55 for women, just as it is in the current basic pension system. These low retirement ages are necessary because today’s older workers often do not have the skills to compete in China’s rapidly modernizing economy. But as these workers are replaced by younger and higher-skilled cohorts and as China’s population ages, longer work lives will not only become feasible, but essential. Our plan therefore provides for gradually raising the minimum retirement age for both sexes to age 65 by 2030, after which it would be indexed to longevity.

Sources: Center for Strategic & International Studies Summary (April 22, 2009); Reuters "Age wave to come crashing soon over China's economy" (April 27, 2009)

Singapore: Prime Minister Reenforces Need for Employers to Retain Older Workers

Addressing the AARP-Council for Third Age Conference "Reinventing Retirement Asia", Singapore Prime Minister Lee Hsien Loong has urged employers to let seniors work longer, focusing on legislation that will require employers to offer re-employment to workers for three more years (until 65), though not necessarily at the same job or pay. According to Lee, "[t]he best way for people to adjust to longer lifespans is to continue working for as long as they can, and to keep themselves occupied after formal retirement."

With respect to retirement age, Lee said that government has only limited abilities to change habits. Thus, even though Singapore's official retirement age is 62, only six out of every ten men are still working at 62, the rest having already retired earlier, while even fewer women work till 62, most having dropped out of the workforce much earlier to raise their families. Accordingly, Singapore is not legislating to further delay the retirement age, but to require employers to offer re-employment to workers at 62 for another three years until 65, though not necessarily in the same job or at the same pay. Other efforts may be more involved:

We can also do more to raise the employment rate of older women. It is often tough for women to continue working while raising a family, even if the husband carries his share of the household responsibilities. We can help by adopting more flexible work arrange¬ments, developing family-friendly workplace policies, and providing accessible and affordable childcare. We should also encourage older women to return to the workforce, through targeted outreach and retraining.

Source: Prime Minister's Office Speech (January 8, 2009)

Sun Life Creates Unretirement Index: Measures Attitudes and Expectations towards Iissues Influencing Retirement

Sun Life Financial, Inc., had released its Unretirement Index to track the changing attitudes and expectations American workers have regarding retirement. It plans to release the Index multiple times each year and use it to gauge how economic, financial and societal forces are affecting working Americans, and forecast their future retirement decisions.

According to its initial release, 48% of the U.S. workforce believes it will still be working at the traditional retirement age of 67, and four of the five top reasons given were not financial in nature. Thus, for example, the most cited reason for continuing to work (83%) was "to stay mentally engaged."

"As our workforce evolves and attitudes are impacted by economic conditions and world events, the nature of retirement in America evolves as well," said Bob Salipante, President, Sun Life Financial U.S. "Traditional views on retirement are quickly evolving and more Americans are choosing to be unretired. This Index for the first time shows how changes in the economy, politics, healthcare and lifestyle are all critical factors in more and more Americans choosing to continue working during traditional retirement years."

Source: Sun Life Financial News Release (October 1, 2008)

U.S. Economists Urge Raising Social Security Retirement Age

According to a working paper issued by the National Bureau of Economic Research, absent adjustment for higher life expectancies, the percentage of the U.S. population eligible for full Social Security benefits will climb by 2050 to about 20%. In "Adjusting Government Policies for Age Inflation", economists John B. Shoven and Gopi Shah Goda find that historical adjustment of eligibility ages for age inflation would have increased ages of eligibility by approximately 0.15 years a year.

The authors state that, at the time Social Security was created in 1935, an average 65-year-old retiree could expect to live just over 12 additional years; however, by 2004, an average 65-year-old could expect an additional 19 years of life. Accounting for higher life expectancies, "the Normal Retirement Age for Social Security in 2004 would have to be at least 71…and more likely 73 or 74" to be consistent with the retirement age of 65 in 1935, the authors wrote.

Source: Wall St. Journal Blog "Economists Warn of Effects of Age Inflation" (August 19, 2008)

Hungary: Looking to Raise Average Retirement Age without Changing Pension Age

According to news reports, Hungary's government has rejected opposition calls to raise the pension age. Lajos Korózs, State Secretary of the Welfare and Labor Ministry, who also holds office as the National Council for Senior Citizens, said at a news conference that the government is aiming to raise the average age at which Hungarians retire or take earlier retirement.

While Hungary’s pension age is currently 62, Korózs said that, because of the number of people who take early retirement, the average age when Hungarians stop working is 58.6. It would like to focus on "cranking up this figure and bringing it closer to 62." In the view of the government, the proposal of opposition leader Fidesz to increase state pensions by no more than the inflation rate each year is unacceptable, Korózs emphasized.

Sources: BBJ "Hungary: No plans to raise pension age" (June 18, 2008); Portfolio "Retirement age hike unlikely in Hungary, State Secretary says" (June 18, 2008)

Survey: MetLife Employee Benefits Study Shows Increased Focus on Retirement and Aging Workforce

The workplace has become the dominant starting point for building a strong financial safety net, with more than half of working Americans (52%) obtaining the majority of their financial and retirement products through the workplace, according to MetLife. In addition to providing a picture of corporate employee benefits, its "6th Annual MetLife Study of Employee Benefits Trends" includes a look at a growing focus on retirement and the aging workforce.

Employers are implementing a range of programs and accommodations. Large companies outpace smaller employers when it comes to offering retirement guides/information and training. About one-third of companies with 500 or more employees offer resources and programs for an aging workforce. However, smaller employers provide greater flexibility for working part-time in retirement. Among companies that provide resources/programs for an aging workforce, 44% with 2 to 499 employees provide part-time employment to retirees, compared to 35% with 500 or more employees.

Smaller employers are less likely to anticipate being affected by the aging workforce. Only 35% of employers with 2 to 499 employees think they will be greatly impacted, compared to 50% with 500 or more employees. One reason could be that employees at smaller companies expect to work until an older age. While the average employee at companies with 500 or more employees is anticipating retiring from full-time work at age 63, the average employee at smaller employers is planning to retire at age 65.

Source: MetLife Press Release (April 7, 2008)

Sri Lanka: Head Hunter Encourages Rethinking Retirement Age

An article in Sri Lanka's Daily Mirror quotes the vetean head hunter Fayaz Saleem suggests that Sri Lanka's early retirement age (55, and in some cases 60) is creating an "an inopportune problem for those who have no choice but to retire and yet have a portfolio of experience that is worthy of a successful company." HR managers should HR departments should reconsider this age cut-off for the benefit of their companies: instead of shunning older workers, they should be recruited and retained because this of their loyalty and experience.

“This generation shows a strong demand for working beyond retirement for financial reasons as much as them wanting to use their skills and experience,” he says. He adds that in order to reintroduce them to the workforce it is important to enforce widespread changes in employer’s practices relating to training, retention and recruitment. The older professional with the aptitude and training for mentoring could see it as a way to remain in the industry for another few more years.

In addition, Saleem notes that, in light of the brain drain that Sri Lanka is experiencing with younger people, it is necessary "to retain this older generation who are no longer interested in lifespan jobs."

Source: Daily Mirror "A Vanishing Workforce" (April 28, 2008)

Australia: Minister Discusses Proposals to Raise Retirement Age

Premier Morris Iemma of New South Wales, in the runup to the 2020 Future Summit in Canberra hoped to raise the issue of the potential for lifting the official retirement age. The state of New South Wales is pushing for the retirement age to be lifted because of fears of a massive financial burden. While NSW Minister for Aging, Kristina Keneally has denied that there will be an increase in the age at which one is entitled to the age pension, currently 60 for women and 65 for men, Iemma said that the 30-year-olds of today are looking to have a retirement that will last 20 to 30 years, and it is due to this that a plan must be looked at to deal with the demographic challenge as well as the financial impact.

Source: Post Macquarie News "Keep working, says govt" (April 21, 2008); Scopical "Retirement age could be lifted says Iemma" (April 18, 2008)

United Kingdom: Prudential Survey Shows Workers Retiring Early, but Golden Age is Ending

Accounts of a new Prudential survey in the United Kingdom state that, despite widespread concern about the pensions crisis, people planning on retiring in 2008 have in many cases never had it so good. Nevertheless, according to the rudential Class of 2008 Retirement Report, 2008 could be the beginning of the end for the golden age of retirement with younger generations facing a very different retirement future as experts warn 80% of final salary schemes are now closed to new members.

Reporting to be the first major study of people retiring in a specific year, the study finds the average age for men to give up work is 60 while women are retiring at an average 58 compared to statutory retirement ages of 65 and 60. Specifically, around 11% of men retiring in 2008 will be more than 65, while 33% of women will be more than 60.

Source: FirstRung.com "Retiring next year? You've never had it so good" (November 24, 2007)

Canada: Recommendations in Quebec To Stop Encouraging Early Retirement and Pushing Normal Retirement Age to 67

According to an Economic Note published by the Montreal Economic Institute, economist Norma Kozhaya, ending the encouragement of early retirement right away and gradually pushing back normal retirement age from 65 to 67 are among the measures needed to reduce the impact of aging on Quebec's public finances as well as to ease labour shortages. The Note--"The retirement age in Quebec: A worrying situation"--concludes that “it is essential to start the necessary reforms right away before demographic phenomena lead to lower economic growth that will reduce wealth creation in Quebec.”

The focus of the Note was the fact that the aging of the population and the impending mass retirement of baby boomers are already starting to create labour shortages and will soon cause weaker growth in the economy. The goal of the recommendations was to suggest a number of moves that could be considered to raise the participation rate of older people on the job market and to reduce the negative economic effects of aging while helping maintain the viability of existing retirement plans.

Source: Montreal Economic Institute Media Release (June 18, 2007)

Italy: Prodi Government Proposes Raising Retirement Age, Other Pension Reforms

According to a report from La Republica, Italy's Prime Minister Romano Prodi plans to discuss pension reforms with unions immediately after being re-instated by parliament, including a proposal to increase the retirement age from from 57 to 58 on January 1, 2008, after 35 years of pension contributions. The retirement age would then gradually be increased, it said.

Source: AFX News Limited "Italy govt to discuss pension reform with unions after confidence vote - report" (February 26, 2007); La Republica "In pensione a 58 anni dal 2008
il governo scrive la sua riforma" (February 26, 2007)

Korea: Government To Raise Retirement Age

According to a report in the Korean Herald, the government plans to raise workers' retirement age as one prong of a strategy to fend off anticipated labor shortages. Another prong is to reduce the length of compulsory military service.

With respect to retirement, the government will push measures to extend the retirement age by five years--raising the age for receiving public pension payments by five years to 65 by 2033; currently, Koreans on average retire at 56.8 years of age. In addition, the government will provide support for employers to allow their workers to retire later and also remove some discriminatory rules against senior workers.

Source: The Korea Herald "Seoul to raise retirement age" (February 6, 2007)

Urban Institute Research Assess Impact of Raising Social Security Retirement Age

Research from the Urban Institute's Retirement Policy Project looking into proposals that would raise the age at which workers can first receive Social Security retirement benefits suggests that lifetime benefits for all groups would be lower, but less so for those with lower lifetime earnings and less education. However, it would push more retirees into poverty: raising the age to 69, for example, would increase the share of retirees with incomes below the wage-indexed poverty level in 2050 from 14.4% under the current system to 16.2% percent, an increase of 1.5 million people.

The Urban Institute's research is included in five separate research briefs. One--"How Long Do Boomers Plan to Work?" by Gordon Mermin, Richard W. Johnson, and Dan Murphy--finds that as boomers approach retirement, "they intend to work longer than people born a dozen years earlier did, a shift that will help promote economic growth and partly offset the economic pressures created by an aging population." Among workers ages 51-56 in 2004, 51% said they expect to work past age 62, up from 47% among comparable workers in 1992.

The other four reports are:

• "Would Raising the Social Security Retirement Age Harm Low-Income Groups?"
• "Minimum Benefits in Social Security: Design Details Matter"
• "Minimum Benefits in Social Security Could Reduce Aged Poverty"
• "Racial Differences in Baby Boomers' Retirement Expectations"

Source: Urban Institute Press Release (January 30, 2007)

United Kingdom: Pension Secretary Predicts Rise in Pension Age

According to BBC, the Work and Pensions Secretary John Hutton told a conference organized by the The Work Foundation that some increase in the state pension age from 2020 is "inevitable."

Mr Hutton acknowledged that raising the state pension age was "a fairly blunt tool for changing effective retirement ages".

But he added: "If we aren't prepared to consider the option of raising the state pension age, we will simply pass an even greater burden onto our children."

Source: "Pension age 'set to rise' in 2020" BBC News (February 7, 2006)

United Kingdon: Pensions Commission Recommends Raising Retirement Age and Other Reforms

The United Kingdon Pensions Commission has issued its report A New Pensions Settlement for the 21st Century with recommendations to increase the retirement age gradually to age 68 and to implement an integrated set of policies that can ensure that increasing life expectancy becomes not a problem but an opportunity for everyone. Key proposals from the Pensions Commission’s report include:

• The establishment of a National Pensions Saving Scheme into which all employees without good existing provision would be automatically enrolled but with the right to opt out.
  
• Reforms to the state system to ensure a sound foundation on which pension saving can build.
  
• Measures to improve the position of people with interrupted work records and caring responsibilities, who are disadvantaged by the existing contributory system.
  
• Measures to facilitate later working and flexible retirement for those who want it.

Other resources available online include the text and slides of Lord Adair Turner's presentation.

Source: Press Release The UK Pensions Commission November 30, 2005

Senator Hagel Proposes Raising Retirement Age

In a speech at the University of Nebraska-Lincoln on Social Security Reform, Senator Chuck Hagel (R-NE) proposed raising the retirement age from 67 to 68. Furthermore, his proposal would "maintain the current early retirement age at 62, but would adjust benefits for those who choose to retire early" so that workers who retire early would receive 63% of the traditional benefit, rather than the current 70%.

Source: Hagel Speech Detailing Social Security Reform Plan Senator Chuck Hagel (March 7, 2005)

Australia: Mercer Recommends Raising Pension Age

In response to the Draft Report on "Economic Implications of an Ageing Australia" of Australia's Productivity Commission, Mercer Human Resource Consulting has recommended that the following policies be considered to alleviate some of the adverse economic implications arising from Australia’s ageing population.

• Provide a framework which encourages employers to recruit and/or retain older workers;
  
• Encourage older workers to remain in the workforce through appropriate financial incentives;
  
• Review the lack of any clear integration between superannuation benefits and eligibility for the age pension by establishing a framework that provides a clear relationship between the benefits;
  
• Bring forward the funding of the existing unfunded superannuation liabilities through a program of decreasing capital injections;
  
• Gradually increase the eligibility age for the age pension from 65 to 67;
  
• Reduce the front end taxation of superannuation, with some increases to taxes on benefits over the longer term.
  

Source: "The Mercer Response to The Productivity Commission's Draft Report 'Economic Implications of an Ageing Australia'"Mercer Human Resource Consulting (February 23, 2005)