EU in search of retirement age formula

Pensions 9June2010.JPG

Swedish Prime Minister Fredrik Reinfeldt recently said Swedes may have to stretch their working life from 65 to 75 years in order to keep the same standard of living. But societies in most EU countries are not prepared for such a drastic change, the EURACTIV network reports.

In France, retirement age is becoming a major topic in view of the presidential elections, with a first round on 22 April and a second on 6 May. A highly contested reform proposed by the French President Nicolas Sarkozy was adopted by the French parliament in November 2010, despite week-long mass protests.

The major reform featured an increase of the legal retirement age from 60 to 62 years from 2017 on.  In order to receive full pension payments, French will have to work until the age of 67 in the future.

Sarkozy announced his candidacy for re-election yesterday (15 February). But his main competitor, the Socialist François Hollande, would like to undo some parts of the reform.

According to him, people having started to work early would be able to retire at the age of 60 (instead of 62), as was the case before Sarkozy's reform. The sole condition: they must have paid their contributions for a period of about 42 years.

Germany as a model

In the French public debate, politicians have been increasingly comparing their their country with Germany, seen as a symbol of economic success. Sarkozy's camp often points out that in Germany, it was the Social Democrats, in coalition with the Greens, which voted for the gradual increase of the retirement age against the fierce resistance of trade unions.

the highly controversial pension reform became effective on 1 January 2012. The retirement age to obtain a full pension is to gradually rise from 65 to 67 by 2031.

Federal Labour Minister Ursula von der Leyen (CDU) said recently that she saw no alternative to a retirement age at 67. According to her, there are more and more older people receiving pensions and less and less younger ones working for them.

The only alternative for compensating this imbalance would be smaller pensions or a substantial increase of contributions. However, she said that those alternatives were "unreasonable". In Germany, retirement age has been used by politicians as a political tool to press EU countries under economic strain to accept reform.

Pushing for austerity

In May 2011 Angela Merkel blasted the heavily indebted southern European countries, saying they needed to raise retirement ages and reduce vacation days.

"It is also important that people in countries like Greece, Spain and Portugal are not able to retire earlier than in Germany – that everyone exerts themselves more or less equally. That is important," Merkel stated. She added: "We can't have a common currency where some get lots of vacation time and others very little. That won't work in the long term."

In spite that the fact that Merkel's statements were intended for a domestic audience,  Italy and Spain, left-wing parties backed budget cuts, raising the retirement age and freezes or reductions in public sector pay as part of austerity programs enacted to save those countries from being shut out of capital markets. In Greece, retirement before the age of 65 is a fading dream for those still in work.

Leftist parties are conservative

In the Czech Republic, pension reform is one of the main issues of the current Czech government of Prime Minister Petr Ne?as (Civic Democratic Party). Its final form was approved in September 2011 and the reform should come into force in January 2013.

According to the reform, people currently in their 50 will be able to claim pension at 63, people presently around 20 will retire at 69, and children born this year will retire at 73.

The Czech Social Democratic Party (CSSD), the primary opposition, has come out against the reform. Trade unionists in the country's larger cities organised a major strike last June. Ne?as stood firm however.

In Slovakia, the maximum retirement age was set at 62 years, both for men and women. Before the fall of the government in October 2011, there was a plan to link the life expectancy among the elderly and the retirement age since January 2016. The next steps will be clear after the early parliamentary elections in March. According to experts the current system is unsustainable and the retirement age will have to go up. 

In Poland, Prime Minister Donald Tusk and his ruling liberal Civic Platform (PO) have proposed raising the retirement age for women from 60 to 67 and for men from 65 to 67. This should happen gradually, starting from 2013.

Some parties, like the conservative opposition Right and Justice (PiS) and the leftist Alliance of the Democratic Left (SLD) want a referendum on this question. The trade union Solidarno?? has already gathered over a million of signatures and shall send its application for the referendum to Sejm (lower chamber in the Polish parliament) this week.

Life expectancy differs substantially

According to Solidarno?? leader Piotr Duda, Poles still live statistically shorter lives than citizens of the older EU members and that is why they should have the possibility to retire earlier than the others. Life expectancy in Poland is of 71.5 years for men and 80.1 years for women.

Indeed, life expectancy differs starkly throughout the EU. According to Eurostat, life expectancy for women is the highest in France (85 years), Spain (84.9) and Italy (84.5). For men, it is at 78 in France, 78.6 in Spain and 79.1 in Italy.

However, the figures are dramatically lower for countries like Estonia, Latvia, Lithuania, Bulgaria and Romania. In Lithuania the life expectancy for men is 67.5 for men and 78.7 for women, in Latvia, it is 68.1 for men and 78 for women. In Estonia, it is 69.8 for men and 80.2 for women. In Bulgaria, it is 70.1 for men and 77.4 for women, and in Romania – 69.8 for men and 77.4 for women.

In Romania, the most recent developments in the pension law require men to retire at the same age as women, 65. Any retirement at an earlier date will be penalized. This law will start applying for men as of 2015 and for women as of 2030.

The first women to retire at 65 will be the ones born in 1965. Romanian workers' unions have opposed this law because, they say, Romanians have fewer chances to find a job after 45, unlike citizens in other European countries, and their life expectancy is considerably lower than that of their European neighbours.

In Bulgaria, according to the recently passed pension reform, retirement age will grow gradually from the present 60 years for women to 63, and for men, from the present 63 years to 65.

The European Commission is working to convince member states to adopt "automatic adjustments" in their pension legislation so that the retirement age is pegged to life expectancy, EURACTIV has learned. A Commission White Paper on the future of pensions is expected to be published today.

?In Serbia, a country hoping for to receive EU candidate status at the 2 March European Council summit, reforms of the pension system similar to those in countries of the bloc are underway.

"It is not the same as when someone in Norway retires at the age of 65, because people there live longer on average," Katarina Stani?, associate at the Centre for Liberal Political Studies think tank, told EURACTIV Serbia.

Pension system experts warn that, in tightening conditions for retirement, one should bear in mind that Serbs' lifespan is shorter than that of EU citizens. The life expectancy for men in Serbia is 71.4 years and 76.6 for women.

Amendments to legislation have increased the retirement age for men to 65 and to 60 for women. During the stand-by arrangement with the International Monetary Fund (IMF), in 2010 Serbia tightened conditions for retirement, which envisaged an increase of the minimal number of years of service – a prerequisite for retirement – as well as of the minimal age, and downsized the group of jobs that allow for accelerated retirement.

The IMF insisted on leveling the age limit for men and women and there were demands for increasing the limit to 67 years of age. However, the proposal was scrapped due to enormous pressure from the unions and ruling coalition member Party of United Pensioners of Serbia.

The argument against the idea is also that women in Serbia have had to take the brunt of the burden of transition and that their quality of life is conspicuously worse than men's.

James Vaupel, director of the Max Planck Institute for Demographic Research in Rostock, and one of the world's foremost experts on the topic, called a further increase of the retirement age due to increasing life expectancy "inevitable". According to research conducted by the Institute people would be living ten years longer by 2050.

This would mean that the retirement age should be increased by about five years to 72. However one should also be working less hours per week by then, so that young workers could find more time for their family and in return not burden the pension funds too much towards the end of their life, Vaupel told the Sunday newspaper 'Welt am Sonntag'.

Since 1960, life expectancy has climbed by eight years and demographic projections foresee a further five-year increase over the next four or five decades. Europeans are living longer and, together with low birth rates, Europe's population is ageing rapidly, as is happening in other countries all over the world except the poorest.

A recent Eurobarometer survey has found that the majority of Europeans (71%) are aware that the population is getting older, but this is a concern for only 42%.

Definitions of 'old' and 'young' differ across countries. On average, Europeans believe that people start being considered as old just before 64 years and are no longer considered young from the age of 41.8 years.

  • 16 Feb: The European Commission will issue today a White Paper on the future of pensions in Europe

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