Thursday, December 10, 2015

Pension gloom

Old age pensionable retirement is a relatively recent social institution. Throughout most of the past workers by and large continued to work until death or major disability. They were obliged to continue working to due to the absence of pension systems, little accumulated personal savings and low life expectancies. Bismarck introduced the world’s first national pension program for workers, setting the pensionable age at 70, many years beyond the Germany’s life expectancy at birth. In 1935 the United States established its social security program with the normal pensionable age set at 65, or about three years beyond U.S. life expectancy at that time.

Pensionable retirement ages and government pension programs have been established for men and women in countries around the world. Nevertheless, retirement remains an unlikely option for most people. 48 per cent of all people above pensionable age do not receive a pension, according to the International Labour Organization. And for many who do, the pension levels are inadequate. Consequently, the majority of world’s elderly, especially women who more often work outside the formal labor force, lack income security, have to work as long as they can and in many instances are obliged to rely on family for support and assistance.

In about twenty countries, mostly in sub-Saharan Africa, retirement ages exceed life expectancies at birth. In high mortality countries, such as Angola, Chad, and Nigeria, the chances of a 15-year old dying before reaching age 60 are about 1in 3. And in some extreme cases, such as Lesotho and Swaziland, more than half of 15-year olds are not expected to survive to age 60.

More than half of all countries and most developed countries have adopted changes during the past five years to increase the pensionable retirement age or reform pension systems, including reducing retiree benefits, increasing contribution levels and rates, encouraging work beyond normal retirement age, and linking retirement ages to life expectancies. Continuing to increase retirement ages would certainly reduce governmental pension expenditures for the elderly. Among the OECD countries, for example, retirement ages have increased by several years, with 67 becoming the new 65 in many countries. Some countries are also considering moving towards a retirement age of 70, including the Czech Republic, Denmark, Ireland, Italy and the United Kingdom. A consequence of recent pension reforms has been transferring more of the costs directly to the elderly. Unfortunately, most of the world’s elderly and near elderly do not have sufficient financial resources in savings, investments or private pension schemes that would permit them to retire adequately.

Over the past century noteworthy progress has been made globally in establishing pensionable retirement ages and tax-financed pension programs for the elderly. However, for most of world’s population these pension programs are either unavailable or insufficient to meet their needs in old age. Consequently, except for the well off, men and women should expect to continue working well beyond normal pensionable retirement ages in order to have sufficient income for old age.

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