17/03 Report Urges Even Higher Global Retirement Ages

March 17, 2011
By MATTHEW SALTMARSH

PARIS — Retirement ages in advanced economies will have to rise more than currently planned if countries hope to cover the increase in costs caused by aging populations, a global economic organization warned Thursday.

Ángel Gurría, secretary general of the Organization for Economic Cooperation and Development, said that more “fiscally and socially responsible” measures would be needed to avoid “a resurgence of old-age poverty in the future.”

He added, “This risk is heightened by growing earnings inequality in many countries, which will feed through into greater inequality in retirement.”

In a report, the organization said that by 2050, the average age in industrialized countries for drawing pensions would reach 65 for both sexes. This represents an increase of about 1.5 years for men and 2.5 years for women from current levels.

But the trend toward later retirement and other recent changes, like promoting private pensions, will still not cover the assumed increase in liabilities as the working population shrinks and the number of retirees climbs.

The report, “Pensions at a Glance 2011,” said life expectancy was rising faster than the increase in pension ages, by an average of two years for men and 1.5 years for women.

The size of the working-age population in the 34 countries belonging to the organization will peak around 2015 and fall more than 10 percent by 2050, meaning that a smaller group of workers will be supporting a larger number of retirees.

Thus, financial sustainability for retirement systems “is not guaranteed unless pension ages are increased beyond current plans in most of the O.E.C.D.,” the report said.

Pension changes in member countries since the early 1990s have already helped to cut estimated future pension payouts by 20 percent on average, the report said. The main tool has been to push up the retirement age.

In October, French lawmakers agreed to lift the minimum age for retirement to 62 from 60, and for a full pension to 67 from 65, despite protests. Britain plans to raise its retirement age to 68 starting in 2044, from 65 now. Germany has agreed to increase its retirement age in steps to 67, from 65, by 2029. In the United States, the retirement age is 66 and will rise to 67 by 2022.

In the organization’s region, public pensions remain the “cornerstone” of old age incomes, accounting for 60 percent on average. The other 40 percent is made up almost equally of income from work and from private pensions and other savings.

As public benefits continue to be reduced, private sources will increasingly need to fill the gap, the report said.

The basic state pension provision varies widely across the organization.

In Britain, the full basic state pension for a single person was £90.70 ($146), a week in 2008, equivalent to nearly 14 percent of average weekly earnings. In the Netherlands, the equivalent was about 265 euros ($371), a week, or 29 percent of average earnings.

“Higher pension ages are only part of the answer,” Mr. Gurría said. “Countries need to do more to fight discrimination, to provide training opportunities for older workers and to improve their working conditions. This would help employers adapt to a grayer work force.”