Brazil: President Proposes Pension Reform, Including Raising Retirement Age

According to news sources, Brazilian President Jair Bolsonar's proposals for amending the constitution for pension reform include setting minimum retirement ages for women at 62 and for men at 65, and the number of years workers would have to contribute to the system from 15 to 20. In addition, the "proposal would eliminate an option to retire based only on the number of years workers contributed to the pension system, which currently lets women retire after 30 years of contributions and men after 35 years, regardless of their age."

The new rules would phase in over 12 to 14 years.

Source: Wall St. Journal "Brazil’s President Submits Proposal to Overhaul Pension System Brazil’s President Submits Pension-Reform Plan, in a Key Test" (February 21, 2019); The Economist "Jair Bolsonaro tackles Brazil’s pensions problem" (February 21, 2019); Bloomberg "Brazil Still Short of Votes for Key Pension Reform Bill, VP Says" (February 19, 2019); The Brazilian Report "Brazil's long-awaited pension reform proposal explained" (February 20, 2019)

South Korea: Supreme Court Raises Retirement Age for Physical Labor

The South Korea Supreme Court has issued a ruling that the maximum age a person can perform physical labor is 65, breaking a nearly 30-year precedent which set the retirement age at 60 in 1989. The court cited changes in key socioeconomic factors such as the increased average lifespan.

As Lee Suh-yoon notes in The Korea Times:

As the age limit is applied when calculating lost income in compensation cases on the premise that the person would have engaged in manual labor, the ruling is likely to affect the age limits for white-collar professions, which have already been varied, such as 65 for doctors and writers and 70 for lawyers or pastors.

The insurance industry is affected the most directly, because in car insurance, compensation is calculated with the age set at 60. If the age is pushed up to 65, the compensation amount would increase.

Sources: Chosun "Supreme Court Puts Retirement Age at 65" (Februarg 22, 2019); The Korea Times "Ruling on physical labor age limit to have huge ripple effects" (February 22, 2019); The Korea Times New maximum working age" (February 22. 2019)

Russia Raising Retirement Age to 65 for Men and 63 for Women

According to published reports, the Russian government has approved a bill on a gradual increase of the retirement age to 65 years for men and 63 years for women. Currently, retirement age is 60 for men, and 55 for women.

According to Russian Prime Minister Dmitry Medvedev, the bill "proposes to introduce a sufficiently long transition period - to start from 2019 to gradually reach retirement age of 65 for men in 2028 and 63 years for women in 2034."

Reuters states that "[t]he government is likely to introduce legislation into the State Duma, the lower house of parliament, in the near future to enact the VAT and retirement age changes," and that "[i]t is rare for the Duma, which is controlled by the ruling party, United Russia, to oppose the government on major policy initiatives."

Sources: Reuters "Russia, on quest for budget savings, to raise retirement age" (June 14, 2018); Tass "Russian government approves bill to raise retirement age" (June 14, 2018); CNBC "Russian government plans VAT hike and raising the retirement age" (June 14, 2018);

Slovakia Ruling Party Seeking Constitutional Amendment To Cap Retirement Age at 64

According to press reports, Slovakia’s ruling Smer party is proposing a constitutional change to cap the retirement age at 64, reversing a decision that had tied it to average life expectancy. Under current law, the retirement age was set at 62 years, 76 days, in 2071, and it will be extended by 63 days this year, and continue to rise every year as people live longer.

From the Slovak Spectator:

“If we do not cap the retirement age, children born this year will retire at the age of 71,” said Robert Fico, leader of Smer and former prime minister, after negotiating the capping of the retirement age with trade unions and Labour Minister Ján Richter on May 16. “We cannot simply accept this.”

The Reuters story explains:

Smer, a leftist party, originally wanted the cap at 65 years but now wants it lower after talks with centre-right junior coalition Slovak National Party.

A third coalition partner, the centrist Most-Hid party, does not back the measure but some opposition lawmakers said they were open to negotiations. Smer would need 90 votes in the 150-member parliament to pass the law as a constitutional measure.

According to calculations by an independent budget watchdog Budget Responsibility Council (RRZ), the pension age is expected to reach the cap of 65 after 2038.

Sources: Reuters "Slovak ruling party seeks to cap retirement age at 64" (May 24, 2018); Slovak Spectator "Retirement age may be capped in Slovakia" (May 17, 2018)

Malta Rejects European Commission Recommendation To Increase Retirement Age

In response to the European Commission’s Country-Specific Recommendation (CSR’s) on Malta’s 2018 National Reform Programme, the Maltese Government has stated that it "is committed to retain free health care for its citizens and to continue to work towards a more sustainable pension system without changing the pensionable age." In the CSR, the European Community recommended that, in 2018, and 2019, Malta "{e]nsure the sustainability of the health care and the pension systems, including by increasing the statutory retirement age and by restricting early retirement." According to the Community:

The pension system faces the dual challenge of achieving sustainability while ensuring adequate retirement incomes. The long-term sustainability prospects for pension expenditure have improved, mainly thanks to a more positive assessment of Malta’s long-term growth potential. However, the measures introduced in the 2016 budget had only a limited impact on long-term sustainability of the pension system, which therefore remains a significant challenge.

Source: Government of Malta Press Release (May 23, 2018)

Additional source: Times of Malta "Investors may be deterred by shortcomings fighting corruption - EU" (May 23, 2018)

Czech Republic: IMF Consultation Report Suggests Raising Retirement Age Will Aid Economy

As part of its staff concluding statement of the 2018 Article IV Mission to the Czech Republic, the International Monetary Fund--in reporting that the Czech economy is growing strongly, but that the challenge is to sustain stable growth through the cycle and over the long term--suggests that raising the retirement age will ease economic pressures. Thus, the report states that:

• Stresses on the pension system are manageable with increases in retirement age.
• Employment has risen very strongly, to rates now above the EU average. But policies can encourage further increases in participation of underrepresented groups. Further increases in retirement age would mitigate the decline in the working age population.
• The framework for life-long learning should be enhanced, given an aging workforce that will be retiring later in life.

Source: International Monetary Fund Mission Concluding Statement (May 16, 2018)

Switzerland: President Pushes for Tax Hike To Solve Pension Problem, Not Raising Retirement Age

In an interview with Neue Zürcher Zeitung, Swiss President (and Home Affairs Minister) Alain Berset has defended his proposed pension reform plans, which include a 1.7% increase in valued-added tax (VAT) to fund it. As reported in SwissInfo.ch, Berset specifically said that fixing a general retirement age will not solve the problem because companies will not employ older workers.

“Older workers continue to be disadvantaged. But it is true that, due to demographic changes and the shortage of skilled workers, they will be in greater demand in the future. Rigid fixation on a generally higher retirement age is the wrong approach. If we give the right incentives, more people will work longer voluntarily. The aim must be to raise the effective retirement age,” the minister told [the newspaper].

Source: "Berset pushes for tax-hike to solve pension problems' SwissInfo.ch (May 7, 2018)

Italy Debating Changes to Law Raising Retirement Age

According to published reports, Italy is considering scaling back the "Fornero" law which set raises in Italy's retirement age. Specifically, political parties are promising to lower the state pension age, and the Italian Senate voted to exclude workers in certain sectors from planned rises in retirement age, which reaches 67 years in 2019. "The measure would exclude 10% of employees due to retire in 2019, including 14,600 workers in 15 different sectors such as nurses, teachers and employees of the building sector."

Source: Investments & Pensions Europe "Italy considers unwinding ‘Fornero’ law’s state pension age rise" (December 4, 2017)

Hong Kong: Proposals Made to Scrap Public and Private Retirement Ages

According to a post in Time Out (Hong Kong), the Chinese University of Hong Kong’s Institute of Ageing says the government and firms should scrap their retirement age for employees. According to the reporter, Rachel Lau:

Professor Chan Kar-choi, a lecturer at CUHK’s department of social work, who specialises in gerontology, tells us: “In terms of the society at large, I think Hong Kong’s productive force is dwindling because of this population change. In order to maintain enough people to engage in the labour force, it makes sense to expand the retirement age.”

Lau writes that although Hong Kong has no compulsory retirement age, the government recently increased the retirement age of new civil servants from 60 to 65, and that, in the private sector, the retirement age remains around 60.

Dr Mak Kin-wah, chairman of the Hong Kong Society for the Aged (Sage), agrees with this perspective and says that an ageing population working past the typical retirement age could be a triple win. “It’s a win for the employer, a win for the community and a win for the individual person. The elderly are probably more patient. They’re more experienced and more educated, so they’re actually good employees. In Hong Kong, especially, where our economy is not really based on hard labour and is instead based on knowledge, this group of people can certainly contribute and pass their experiences on to the next generation of workers.”

Source: Time Out "Put out to pasture: Should Hong Kong scrap its retirement age?" (November 23, 2016)

Slovenia Proposes to Raise Retirement Age to 67

According to an article by Marja Novak, Slovenia’s labor ministry proposed raising the retirement age to 67 from 59, in line with a suggestion from the International Monetary Fund. However, this was qualified later;

Prime Minister Miro Cerar told reporters later on Wednesday that government had not yet decided when it will prepare a new pension law and pointed out that a previous pension reform, enforced at the start of 2013, was still ongoing.

In line with the 2013 pension reform the retirement age will be gradually raised to 65 by 2019.

Source: Reuters "Slovenian ministry proposes retirement age increase to 67 from 59" (April 13, 2016)

Sweden: Looking at Retirement Age and Proposals to Strengthening Labor Participation by Older Workers

SeniorPolittik.no is running a series of articles on Sweden and retirement. According to the lead story, even though, under Swedish law, an individual has no right to remain in employment after age 67, and Swedes have the right to withdraw retirement pension as early as age 61, among both employers and employees it is a deeply rooted belief that the earlier retirement age of 65, the normal retirement age.

Swedes work longer than workers in many other countries, such as Denmark and Finland. However, labor force participation among Swedes aged 65 and older is generally not as high as in for example Norway. Labour force participation among older Swedish women, however, higher than in Norway. Nevertheless, politicians are worried and stressing among other things, that Norway has been more successful in changing attitudes away from a fixed retirement age.

Drawing on a report prepared for the Swedish parliament earlier in 2014, it is apparent that negative attitudes towards older workers is common. The report notes that Norway's creation of a center for senior policy is a cause of the attitudes in Norway being less negative, and it concluded that it is not enough just to raise the retirement age to change the perception of older workers. Information and knowledge are also needed.

While the Swedish report notes that "everyone can not work indefinitely, but many are able to work with and much longer than is the case now," there are proposals to raise the statutory right to continue in employment to 69. In addition, a year ago, proposals were submitted o the government to raise the age for the earliest opportunity to receive a pension from the government gradually from 61 years, on the grounds that life expectancy is projected to increase.

Sources: SeniorPolittik.no, Retirement Age in Sweden: "Mener Norge har lyktes bedre" [Believe Norway has succeeded better], "Fant sin egen vei videre" [Found their own way forward], "Bør være en menneskerett å få arbeide" [Should be a human right to work] (June 2014);

United Kingdom: Study Calls for Upping Retirement Age, Saying Pension System Creates Incentives for Early Retirement

A report issued by the Institute of Economic Affairs says that recent United Kingdom government commitments to continue to increase state pension expenditure in real terms are both unaffordable and irresponsible, and that the government must accelerate the introduction of a later retirement age and urgently reform labor market regulations to enable people to work longer.

According to "Income from Work—The Fourth Pillar of Income Provision in Old Age" by Gabriel Sahlgren, the current state pension system is "incentivising" early retirement, and that employment protection legislation raises unemployment at older ages, including before state pension age. Furthermore, later retirement benefits the individual through improved health and higher incomes, and benefits taxpayers by reducing the costs of ageing populations.

The report makes ten recommendations to "ease the state pension time bomb," including:

• accelerating the rise in retirement age, suggesting that, from November 2018, the state pension age for men and women should increase by two months every quarter, which would get the pension age to 68 by January 2023;
  
• linking retirement with life expectancy from January 2023;
  
• exempting older workers from employment protection legislation, which would encourage employers to take on older workers and also enable greater labor mobility and flexible working patterns; and
  
• introducing a pilot scheme to exempt older workers from age discrimination laws.

Source: Institute of Economic Affairs Press Release (January 8, 2014)

Reaction: "Actuaries Buck Consultants have disagreed with the ‘dramatic’ rise in state pension age proposed by the Institute of Economic Affairs, saying changes must be balanced to protect those close to retirement." See The Actuary (January 14, 2014)

United Kingdom: Government Announces Acceleration in Increase of Pension Age

In his Autumn 2013 speech to Parliament, the Chancellor of the Exchequer announced, among other things, that the state pension age must continue to track life expectancy. While exact dates are to be determined, increases to pension ages of 68 and 69 would be accelerated. The full statement from the speech follows:

But we also have to guarantee that the basic state pension is affordable in the future, even as people live longer and our society grows older.

The only way to do that is to ensure the pension age keeps track with life expectancy.

The Pensions Bill, currently going through Parliament, puts in place reviews of the pension age every five years.

Now we set the principle that will underpin those reviews.

We think a fair principle is that, as now, people should expect to spend up to a third of their adult life in retirement.

Based on latest life expectancy figures, applying that principle would mean an increase in the state pension age to 68 in the mid 2030s and to 69 in the late 2040s.

The exact dates will be set by the future statutory reviews and in line with the most up to date demographic data, of which the next update is published next week.

A Background Note from the Department of Work and Pensions on the principles underlying this approach states that the United Kingdom "has decided to use the age of 20 as the appropriate starting age for the purpose of calculating the proportion of adult life spent in receipt" of a state pension, and that the government is currently legislating for a review of the pension age to take place once in every Parliament.

Sources: Gov.UK "Chancellor George Osborne's Autumn Statement 2013 speech" (December 5, 2013); Department of Work and Pensions Background Note (December 5, 2013)

United Kingdom: Study Finds Women and Husbands Working Longer Since Female Pension Age Was Raised

The change at which age women can first receive a state pension in the United Kingdom has had a strong effect in increasing employment among those women directly affected by the reform, but has also changed the behaviour of some of the husbands of the affected women, according to new research. According to the Institute for Fiscal Studies Working Paper ("Incentives, shocks or signals: labour supply effects of increasing the female state pension age in the UK"), the affect on men may possibly be because they are delaying their own retirement so they both retire together or perhaps to cover their wives’ lost pension income with additional earnings.

Under legislation enacted in 1995, since April 2010 the age at which women can first receive a state pension has been rising from 60. It is currently at 61 years and 5 months and is due to rise to 66 by 2020. The findings show that, as a result of the one year increase in the female state pension age--from age 60 to 61--that occurred between April 2010 and April 2012:

• employment rates among 60 year old women have increased by 7.3 percentage points: in other words, in April 2012 there were 27,000 more women in work than there would otherwise have been;
• employment rates among their husbands have increased by 4.2 percentage points: in other words, there were 8,300 more men in work than there would otherwise have been;
• 1.3 percentage points more women aged 60 were unemployed: in other words, there were 5,000 more women aged 60 not in work but looking for work than there would otherwise be;
• the UK’s public finances have been strengthened by around £2.1 billion.

According to Jonathan Cribb, a research economist at the Institute for Fiscal Studies and a co-author of the report:

So, despite the weak performance of the UK economy over these two years, many have been able to limit the loss of state pension income through increased earnings. These results apply only to the first groups affected and how women and men respond may change as the pension age rises further. But this is initial evidence that raising pension ages can have significant positive effects on employment.

Source: Institute for Fiscal Studies Press Release (March 8, 2013)

United Kingdom: Illness Forces Many Older Workers To Stop Working Before Retirement Age

The United Kingdom's Trades Union Congress (TUC) has released an analysis of official labor market data showing that disability and poor health are preventing nearly half a million people approaching retirement from working, a figure that the TUC says will only increase as the state pension age starts to rise. Specifically, the TUC research finds that the employment rates for those approaching the current SPA are low, with just 54% of men aged 60-64 and 62% of women aged 56-60 in work.

As nearly two in five of those approaching retirement age are economically inactive, with long-term sickness and disability cited as the main reason for then not working, the TUC argues that the UK government is wrong to raise the state pension age without first addressing the health inequalities that are forcing many people out of work well before they're able to draw their pension. Instead, the government should focus on tackling age discrimination, extending access to flexible working and supporting those who are actively seeking work to re-enter the jobs market. TUC General Secretary Brendan Barber said:

While more people are working past their state pension age, often as the only way to get a decent retirement income, a far greater number of older people are unable to work due to ill-health or because they are trapped in long-term unemployment.

Accelerating the rise in the state pension age will simply push more people into poverty. We will end up with a new limbo zone for people in their mid-60s who are too young for a pension, but too old to have any realistic chance of a job. With a benefits system that gets meaner and tougher each year, even 66 year olds who have worked for decades before stopping work will be treated as work-shy scroungers.

By raising the state pension age and ignoring persistent health inequalities, the government risks overseeing a dramatic rise in pensioner poverty.

Source: Trades Union Congress News Release (August 30, 2012)

China: Official Proposes Pushing Retirement Age to 65 by 2045

He Ping, director of the Social Security Research Institute under the Ministry of Human Resources and Social Security (MOHRSS), has proposed that China should gradually push back the retirement age for both men and women to 65 by 2045. Announcing his proposal at a workshop on coping with the aging population, he said that the changes should begin in 2016 by adding one year every two years over a period of ten years.

In China, the retirement age is currently 60 for men, 55 for female civil servants and 50 for other female workers. Li Jun, an expert with the Institute of Quantitative & Technical Economics under the Chinese Academy of Social Sciences (CASS), also recommended a timely increase in the retirement age. He expressed that this aim is not to promote growth but to reduce the speed of the shrinking of the overall labor force size, to weaken the anticipated increase in costs to the labor force. But he pointed out that the age of retirement is extremely important, and must be treated cautiously in policy making.

Cai Fang, director of the CASS Institute of Population and Labor Economics, argued that China can gradually push back its retirement age in response to the dramatic decline in working age population. However, Cai did indicate that the circumstances for China to extend its retirement age are yet to mature since the country's older generation usually lacks the sufficient educational background to meet the new requirements of their job positions. Therefore, it would be better for the government to adopt a flexible policy in this regard and, at the same time, provide more training opportunities for the elderly.

Sources: Morning Whistle "China should push retirement age to 65 as aging problems grow, official says" (July 2, 2012); China.org "Proposal to push retirement age to 65" (July 2, 2012); ChinaSmack "Experts Propose Increasing China’s Reitrement Age to 65" (July 2, 2012)

OECD Pension Outlook: Work Longer Before Retiring and Smaller Public Pensions.

The OECD says that governments will need to raise retirement ages gradually to address increasing life expectancy in order to ensure that their national pension systems are both affordable and adequate. Even so, the OECD report "Pensions Outlook 2012" finds that reforms over the past decade have cut future public pension payouts, typically by 20 to 25%.

According to the OECD, over the next 50 years, life expectancy at birth is expected to increase by more than 7 years in developed economies. The long-term retirement age in half of OECD countries will be 65, and in 14 countries it will be between 67 and 69. The report states that increases in retirement ages are underway or planned in 28 out of the 34 OECD countries, but these increases will only keep pace with improved life expectancy in six countries for men and in 10 countries for women. Thus, OECD calls on governments to consider formally linking retirement ages to life expectancy, as in Denmark and Italy, and make greater efforts to promote private pensions.

Private pensions are not a panacea either, as OECD notes that in countries where public pensions are relatively low and private pensions voluntary, such as Germany, Ireland, Korea, Japan and the United States, large segments of the population can expect major falls in income upon retirement.

The report also includes the first comprehensive evaluation of national defined contribution systems. These are:

now a central feature of many countries’ pension systems. Among other recommendations, the report argues that it is critical to set the minimum or default contribution rate in Defined Contribution systems at an appropriate level.

Contributions to these systems need to be high enough so that together with public pensions they generate sufficient income at retirement. While Australia is moving in the right direction by increasing its contribution rate from 9% to 12%, it remains too low in countries such as Mexico and New Zealand (6.5% and 3%, respectively).

Source: OECD News Release (June 11, 2012). See also, OECD, Media Brief.

Australia: Economic Reform Report Calls for Raising Participation Rates of Older Workers

The Grattan Institute, in issuing reform recommendations for providing Australia economic benefits over the next decade, noted that no other reform opportunity compared to tax reform and raising participation rates for women and older Australians. With respect to the latter, the report — "Game-changers: Economic reform priorities for Australia" — said that "Increasing the workforce participation rate of older people would mean that Australia’s GDP would be about $25 billion higher by 2022."

Finding that "[o]lder people generally stop working for discretionary reasons, such as opting to retire once they reach ‘retirement age’, rather than because of difficulty finding work, or barriers such as disability," the Grattan Institute calls for increasing the ages at which people become eligible for the aged pension and eligible to access their superannuation. Specifically, the report recommends raising both the pension age (the age at which people can qualify for the age pension — currently 65 for men and 64 for women, to rise to 65 for both sexes by 2014) and the preservation age (the age at which a worker can access their superannuation — currently 55) to 70.

According to the report, "[m]easures to encourage businesses to employ older workers, such as the Commonwealth Government’s recently announced Jobs Bonus and related initiatives, are likely to have a relatively limited effect on older age participation." In fact, it suggests that "it is not clear that governments can do much to alter employer perceptions. It may be that increasing the pension and preservation ages would do more than anything else to change both employer and employee expectations."

Those retiring today have benefited from an ‘unexpected’ increase in longevity, and it is reasonable that in enjoying this benefit, they share some of the costs that it imposes. The only generation that is ‘unfairly’ treated by increases in the pension age is the cohort that has already retired. Younger people will have to work to any increased retirement age as well.

Source: Grattan Institute Media Release (June 7, 2012)

Germany: Chancellor Merkel Addresses Demographics of Aging, including Workforce

Chancellor Angela Merkel convened and addressed a demographic conference on how Germany needs to respond to its aging population. Among other things, she reenforce the need to to raise the retirement age to 67 "by saying that demographic changes in Germany called for it and added that having more experienced employees would increase companies' productivity," according to a press report.

According to Merkel, "Deshalb bin ich zutiefst davon überzeugt, dass wir Ältere im Erwerbsleben auch wegen ihrer großen Erfahrung wirklich brauchen." She also argues for more flexibility to work into old age and transition into retirement: "Mehr Flexibilität beim Arbeiten im Alter und beim Übergang in den Ruhestand – das ist eine ganz wichtige Sache, die viele auch wollen."

Working is just part of her demographic strategy, which addresses six main points: support for families, putting in place the right conditions for a longer working life, finding ways for older people to choose the way they work, cooperation among federal, state and municipal institutions, securing wealth and growth and limiting state debt. The Cabinet is set to approve this plan.

On the Chancellor's website, there is a copy of her speech to the conference, as well as video of her remarks.


Source: Deutsche Welle "Aging society keeps Germans working" (April 25, 2012)

South Korea: Debate on Raising Retirement Age Continues with Generational Conflict at Issue

According to an article in the Korea Herald, social consensus around raising the retirement age seems to be still out of reach, even as major employers are filling jobs with older employees. Kim Kyung-ho writes that generational tensions are at issue, as some "express concerns that extending retirement age would lead to a further reduction in job opportunities for young people, whose jobless rate is hovering around 8%." In fact, the trilateral commission looking in to the retirement age issue has launched a separate subpanel on "co-existence between generations" and have tasked it with "drawing up methods to increase jobs in a way that avoids a zero sum game that forces a choice between jobs for the young and employment for the old."

In framing the debate, the article contrasts:

Many labor experts have argued that extending the retirement age has little impact on youth employment, saying concerns over intergenerational competition or conflict over jobs are exaggerated in most cases.

“On the level of an individual company, they may appear to be substituted for each other,” said Phang Ha-nam, a senior researcher at the Korea Labor Institute, a non-profit research organization in Seoul.

with a report released by the Samsung Economic Research Institute suggesting job opportunities for young people have been at least partly substituted by the elder generation’s extended employment:

A 1 percentage point increase in the employment rate of people in their 50s translated into a 0.5 percentage point decrease in that of 20-somethings between 2005 and 2010, according to the report.

Particularly from 2007-09 when the global financial crisis brewed and peaked, the rate declined by 0.84 percent for the young but rose by 1 percent for the old.

“It would be desirable for jobs to increase at the same time for both the older and younger generations, but in reality that is not the case,” said Tae Won-you, a SERI research fellow.

Source: Korea Herald "Intergenerational tension over jobs" (March 27, 2012)