I have written in favour of raising the Super entitlement age a number of times. I once made the suggestion that as Super is linked to the average wage and the CPI, why not life expectancy? That idea makes an appearance below.
Here's what the OECD is saying:
11/06/2012 - Governments will need to raise retirement ages gradually
to address increasing life expectancy in order to ensure that their
national pension systems are both affordable and adequate, according to a
new OECD report. At a time of heightened global economic uncertainty,
such reforms can also play a crucial role in governments’ responses to
the crisis, contributing to fiscal consolidation at the same time as
Over the next 50 years, life expectancy at birth is expected to
increase by more than 7 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 Pensions Outlook 2012
says that increases in retirement ages are underway or planned in 28
out of the 34 OECD countries. These increases, however, are expected to
keep pace with improved life expectancy only in six countries for men
and in 10 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 grand-children can enjoy an
adequate pension at the end of their working life,” said OECD
Secretary-General Angel Gurría. “Though these reforms can sometimes be
unpopular and painful, at this time of tight public finances and limited
scope for fiscal and monetary policy, these reforms can also serve to
boost much needed growth in ageing economies.”
The Pensions Outlook 2012 finds that reforms over the past decade
have cut future public pension payouts, typically by 20 to 25 per cent.
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.
Conversely, in countries where public pensions are relatively low and
private pensions voluntary, such as Germany, Ireland, Korea, Japan and
the United States, large segments of the population can expect major
falls in income upon retirement.
This could cause pensioner poverty to increase significantly. Later
retirement and greater access to private pensions will be critical to
closing this pension gap, says the OECD.
However, making private pensions compulsory is not necessarily the
answer for every country. According to the report, such action could
unfairly affect low earners and be perceived as an additional tax.
Auto-enrolment schemes – where people are enrolled automatically and can
then opt out within a certain time frame – might be a suitable
Italy and New Zealand have already introduced such schemes and the UK
is set to roll one out in October 2012. However, the report finds that
results are mixed, with a major expansion of coverage of private
pensions in countries like New Zealand, and having only a small effect
in others like Italy.
More broadly, reforming tax reliefs to encourage private pension
savings is also needed, as low earners and younger workers are much less
likely to have a private pension. Facilitating matching contributions
or giving flat subsidies to savers, such as in Germany and New Zealand,
would improve their incentives to contribute. To boost confidence in
private pensions, governments also need to improve their oversight of
funds to ensure that charges are kept low and risks minimised.
This inaugural edition of the Pensions Outlook also includes the
first comprehensive evaluation of national Defined Contribution systems,
which are now a central feature of many countries’ pension systems.
Among other recommendations, the report argues that it is critical to
set the minimum or default contribution rate in Defined Contribution
systems at an appropriate level.
Contributions to these systems need to be high enough so that
together with public pensions they generate sufficient income at
retirement. While Australia is moving in the right direction by
increasing its contribution rate from 9% to 12%, it remains too low in
countries such as Mexico and New Zealand (6.5% and 3%, respectively).
For comment or further information, journalists should contact Juan
Yermo of the OECD’s Financial Affairs division (tel. + 33 1 45 24 96 62)
or Edward Whitehouse of the OECD’s Social Policy division (tel. + 33 6
25 89 56 67).
Highlights of the report are available at www.oecd.org/daf/pensions/outlook
General Debate 26 May 2013
22 minutes ago