Future retirement ages

Across countries, the average normal retirement age for a man with a full career from age 22 equalled 64.2 years in 2020 (Figure 3.8). For the generation entering the labour market in 2020, this age will increase to 66.1 years (hence around 2064). Meanwhile, the remaining life expectancy of men at age 65 is projected to increase on average from 18.1 to 22.5 years (see Chapter 6). So, the average increase in men’s normal retirement ages will account for about half the average increase in old-age life expectancy.

The normal retirement age of men will increase in 20 out of 38 OECD countries. The highest increase is projected for Turkey, from 52 currently to 65 years. Assuming that legislated life expectancy links are applied, also Denmark, from 65.5 to 74 years, and Estonia, from 63.8 to 71 years, will rapidly raise the retirement age. This is also true for Italy where the retirement age will increase from 62 in 2020 (as mentioned earlier, the retirement age in 2020 is temporarily lowered from 64.8 years) to 71 years for the modelled cohort.

The lowest future retirement age for men equals 62 in Colombia, Luxembourg and Slovenia. Normal retirement ages in G20 countries outside the OECD tend to be lower, both today and in the future; in Saudi Arabia even below 50 for both current and future retirees – the statutory retirement age is 58 but individuals can leave without penalty after 25 years so for this model the normal age is 47.

In 2020, gender differences in the normal retirement age existed in nine OECD countries (Figure 3.7). However, for the generation entering the labour market in 2020, gender gaps will have been phased out everywhere in the OECD except in Colombia, Hungary, Israel, Poland, Switzerland and Turkey (the legislated retirement age for women in Hungary is also 65, but they can leave without penalty after 40 years, hence 62 for this case). In Turkey, it will be phased out for those entering in 2028. Marked gender gaps also exist in several non-OECD G20 countries.

Table 3.6 shows the rules for early, normal and late retirement by pension scheme for a person entering the labour force at age 22 in 2020. The lowest normal age will apply in the FDC scheme of Chile for women, equalling 60 years. However, as women in Chile are not eligible to the targeted pension before 65 the latter is recorded as their normal retirement age.

Under the assumption of full annuitisation, FDC schemes benefits are automatically actuarially adjusted to the age at retirement and, therefore, only an early retirement age is specified, like in Norway and Sweden for NDC. The NDC schemes in Italy, Latvia and Poland still specify a standard retirement age indicated as normal age in the table.

All DB and points schemes, except in Colombia, Costa Rica, Hungary and Turkey, will allow to claim a pension early. In Luxembourg the early and normal retirement ages coincide for a full-career worker entering the labour market at age 22. Pension benefits for early retirees are usually reduced to reflect the longer durations in retirement. Only Belgium and Luxembourg do not impose such a penalty.

Residency-based basic and targeted schemes exclude the option for early pension receipt. The contribution-based schemes in the Czech Republic, Estonia, Greece, Japan, Korea and Luxembourg that pay both basic and earning-related components allow early retirement. Countries that combine basic or targeted schemes with occupational pensions typically set a comparatively low retirement age in the occupational scheme while the basic or targeted scheme assures a certain minimum retirement income only above 65.

Options for retirement deferral often mirror those for early pensions. DB, FDC and points schemes usually compensate the shorter expected retirement spell by bonuses which tend to be higher than the penalties for early retirement, with a maximum-rate of about 12% per year in case of a 10-year deferral in the basic/targeted scheme of Denmark and in some exceptional cases for a one-year deferral in the Portuguese DB scheme. Colombia, France in the mandatory occupational scheme, Greece and, again, Belgium and Luxembourg, deviate by not paying a deferral bonus in DB or points schemes. Many basic, minimum and targeted schemes do not pay a bonus either. Late retirement ages, maximum accrual rates and maximum pensions stop accrual of pension rights in some countries (see note of Table 3.4).

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