Governments will need to raise retirement ages gradually to address increasing life expectancy, according to a new report.
The Pensions Outlook 2012 published by the Organisation for Economic Cooperation and Development (OECD) says the rise is needed to ensure that their national pension systems are both affordable and adequate.
Over the next 50 years, life expectancy at birth is expected to increase by more than seven 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 says that although increases in retirement ages are underway or planned in 28 out of the 34 OECD countries, these increases are expected to keep pace with improved life expectancy only in six countries for men and in ten countries for women. Governments should thus consider formally linking retirement ages to life expectancy, as in Denmark and Italy, and make greater efforts to promote private pensions.
“Bold action is required. Breaking down the barriers that stop older people from working beyond traditional retirement ages will be a necessity to ensure that our children and grandchildren can enjoy an adequate pension at the end of their working life,” said OECD.
The Pensions Outlook 2012 finds that reforms over the past decade have cut future public pension payouts, typically by 20 to 25%. People starting work today can expect a net public pension of about half their net earnings on average in OECD countries, if they retire after a full career, at the official retirement age. But in nearly all the 13 countries that have made private pensions mandatory, pensioners can expect benefits of around 60% of earnings.
