THE golden years look very different depending on where in the world you are, and, increasingly, which generation you are in. Aging populations and decreasing birthrates are spurring countries across the globe to reassess how retirement works — and what needs to change in order to extend the benefits available today to future retirees.
Many are not optimistic. Nearly half of those surveyed in a recent report by the Aegon Centre for Longevity and Retirement say future generations would be worse off than those now in retirement, partly because people are living longer. According to the United Nations, the number of those over 60 worldwide is expected to double by 2050 to 2.1 billion. In the 1950s, that segment of the world’s population was around 205 million.
“WHEN age 65 became the magic retirement number in the United State, people didn’t live that long,” said Catherine Collinson, executive director of the Aegon Centre and chief executive and president of the Transamerica Institute, a nonprofit organisation that researches health and retirement. “Now many people may find themselves living to their 100th birthday.
“A 30- to 40-year retirement is very different than a 10- or 20-year retirement.”
The Aegon survey found that a new global retirement model would need to include universal access to a retirement savings system for workers, greater financial literacy, and affordable healthcare, among other solutions.
A look at retirement in some countries:
JAPAN
The country has the world’s most rapidly ageing society, and it also has the world’s longest life expectancy. Facing labour shortages (because of decades of low birthrates), mounting debt and a declining population, Japan has encouraged older workers to delay retirement. Government surveys show that more than half of Japanese men over retirement age do paid work, significantly more than their US or European counterparts.
Prime Minister Shinzo Abe told the Nikkei Asian Review in September that he wanted to raise the minimum retirement age above 65 and provide an incentive for people who postpone their state pension benefits beyond age 70.
GERMANY
The retirement age is 65 years and seven months, and will gradually increase until it hits 67 in 2029. The Flexirentengesetz (Flexible Pension Act), which was passed in 2016, was designed to help older workers transition to retirement in a way that best suited individual needs. It provided incentives for those who wanted to work beyond the usual retirement age and made it easier to draw partial pensions that could be supplemented with income. The OECD noted that Germany’s future retirees were likely to net about 51 per cent of their salary in pensions, which was lower than that in many other developed countries.
FRANCE
The minimum retirement age was recently increased to 62 from 60, and pensions are mostly state-funded. France spends nearly 14 per cent of its gross domestic product on the public pension, much more than the OECD average of 8.2 per cent. Pension reform has proved to be political poison (more than one million protested in the streets when former president Nicolas Sarkozy attempted a change). But an overhaul of the system by President Emmanuel Macron, while unpopular with many constituents, will go into effect in 2025. The plan would create a single pension system, unifying the dozens of different plans in the public and private sectors. According to the OECD, France has low rates of poverty among the elderly, and people over 65 earn on average more than the general population.
CHINA
China’s one-child policy, which lasted nearly four decades to 2015, and the expansion of benefits to rural citizens have helped to create the perfect storm of a shrinking workforce and a growing pension deficit. Restrictions on the country’s pension funds were relaxed in recent years, allowing the funds to invest in the stock market for the first time. The government is also encouraging the growth of a private pension system to put the onus on the individual to save for retirement and to ease the reliance on the largely state-funded coverage.
BRITAIN
As The New York Times has reported, Britain’s extended stretch of austerity measures has chipped away at the country’s social safety net. An OECD report found that the United Kingdom had high levels of poverty among those 75 and over because of the low state pension. It also said British workers would receive about less than a third of their working salary in retirement benefits, which is the lowest among developed countries. In October, two regulatory bodies announced a review of the pensions process, noting concerns that many future retirees won’t have enough money, or little money, to live on. Britain does not have a mandatory retirement age, but the government recently announced it was gradually increasing the pension age for women from 60 to 65 to get it in line with the pension age for men. The pension age will then increase to 66 for both men and women from 2019 to 2020, with a further increase to 67 planned for 2026. NYT