Numerous countries have increased the national retirement age in the last 5-10 years. Several more are planning to do the same in the near future. The reasons for raising the age of retirement are as varied as the effects of doing do. Here is a look at some of these causes and effects.
Since January 2017 the retirement age in Finland has been raised by 3 months annually. By 2027 it will reach 65 years. After that, further changes in the retirement age will be linked to life expectancy. For persons born in 1954 or earlier the retirement age is set at 63. The increase was motivated by the need to reduce the number of new retirees on disability pension. The country’s pension system is stressed because of an aging population. The fertility rate in Finland has declined. The national fertility rate for 2019 was the lowest on record, at 1.35 children per woman.
According to Finnish Prime Minister Antti Rinne, a major reason for the decline in fertility is that parenthood substantially reduces the pensions of women in the country. This dissuades women who are able and willing to start a family from doing so. Moreover the Finnish government aims to make it more difficult for Finns to leave the workforce before reaching the new pension age.
Portugal is one of the few countries where the legal age for access to pension is already indexed to average life expectancy. Furthermore, according to the ‘2019 Pensions Overview’ of the OECD, Portugal is one of the countries where the retirement age will increase the most. Life expectancy in Portugal in 2021 is 82.29 years, a 0.22% increase from 2020. In 2014 the official retirement age in Portugal was raised from 65 to 66 years and 5 months. The Portuguese government plans to continue adjusting the retirement age in line with life expectancy statistics. This is to plan for a slowly ageing population. The pension age is due to reach 67 in 2029. By 2050 it will reach 73.2. At this time Portugal will be the country with the fourth oldest population in OECD. Vast communities of migrants live and work in Poland. They regularly send remittances to their home countries via the Ria Money Transfer App and similar trusted channels. Increasing retirement age is an opportunity to be gainfully employed for longer. Migration is also a factor which influences the country’s age demographic.
In 2019 the minimum retirement age in Sweden was raised from 61 to 62. Further increases are scheduled in 2023 and 2026. Swedes now have the right to remain employed until age 68. The new provision was passed by the Parliament in June 2019. The age bar will be further raised to 69 by 2023. The measures are part of a greater overhaul of the Swedish retirement system. It is meant to reflect the increased life spans of the citizens. From 2026 the state retirement age will be adjusted in line with a target age. This will be based on average life expectancy, with a 6-year delay.
The full retirement age in the US is currently 66 years and 2 months for those born in 1955. It will gradually increase to 67 for those born in 1960 and after. According to CNBC, mandating a higher threshold could help people by allowing them to work longer. It also delays claiming retirement benefits and other welfare payments. US News said that people are living longer than ever. They are physically able to continue working into their 60s and 70s. The economy will need more workers because retirees are being replaced by a smaller number of younger workers.
The state retirement age in Ireland in 2021 is 66 years. The state pension age was set to rise to 67 in 2021, before the government reversed the change. However the retirement age is set to increase over the next few years. By 2028 it will be 68 years.
Multiple factors are contributing to a shift in the age composition of populations. People are living longer and having fewer children. Many countries in the Northern Hemisphere, particularly Japan, find themselves in a more advanced stage of this demographic transition. Others, mostly in Africa, are in the early stage.
Countries in advanced stages of transition face the issue of a shrinking labor force. It also means that fewer people will pay into pension systems. Meanwhile the need to ensure that people have decent living standards after retirement is ever-present. The IMF said that countries in the early stage of the demographic transition must create a large number of new jobs every year to absorb a rapidly growing working-age population.
About the author:
Hemant G is a contributing writer at Sparkwebs LLC, a Digital and Content Marketing Agency. When he’s not writing, he loves to travel, scuba dive, and watch documentaries.