A report released last week by the Organization for Economic Co-operation and Development (OECD) warns that advanced economies will have to rise their retirement ages more than currently planned if these countries hope to cover the increase in costs caused by ageing populations.  These conclusions are based on the observation that “by 2050 the average retirement age in OECD countries will reach 65 for both sexes.”  This means that retirement ages will have increased “about 1.5 years for men and 2.5 years for women from current levels.”  However, “life expectancy is rising even faster” than the retirement age, “outstripping the increase in pension ages by about 2 years for men and 1.5 years for women.”  As a result, despite the increase in retirement ages, the time retirees spend  in retirement “will continue to grow,” thus requiring more resources.

While concluding that raising the retirement age is necessary, the organization also warned that “governments should consider the impact of benefit cuts on the most vulnerable.”  The report affirms that “public pensions are the cornerstone of old age incomes today, accounting for 60% [of income] on average.”  However, the OECD is concerned by the fact that “pension reforms in OECD countries since the early 1990s have reduced future benefits on average by 20 per cent.”  This trend “risks a resurgence of old-age poverty in the future,” said OECD Secretary-General Angel Gurría.

As highlighted on the video below, these two findings highlight the dilemma that governments face when making decisions about retirement benefits and ages in their countries.  On the one hand, they must ensure their fiscal situations, while they must also work to prevent hardships on their constituents on the other.

Looking towards the future, “higher pension ages are only part of the answer,” said Mr Gurría.  “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 greyer workforce.” Encouraging people to invest more in private pensions is also key, adds the report.

Take a few minutes to watch the video below and share your thoughts on this report with IAHSA.

For more information:

Organization for Economic Co-operation and Development

The New York Times

International Business Times Australia