A paper released Thursday by Aegon’s Center for Longevity and Retirement, in collaboration with the Transamerica Center for Retirement Studies, noted the shrinking working population and the growing older population are “disrupting the fundamental economics of government-sponsored social security systems around the world.” Reforms to address that disruption must include “dramatic changes in terms of how governments, employers and individuals view employment and retirement.”

In countries that are part of the Organization for Economic Cooperation and Development, the average life expectancy at birth is more than 80 years. Increasing “health expectancy” means people are living more of those years in good health. With lower birth rates, some countries don’t have enough young workers to replace retiring workers.

The survey questioned 16,000 people about their expectations for retirement and the support they receive to meet them. The vision presented in the report, “The New Flexible Retirement,” keeps older people in the work force longer, and relieves the pressure on social security systems. However, employers may not be doing enough to support those older workers. The most common method of supporting transitioning workers is to allow them to move from full time to part time — and is offered by less than a quarter of respondents’ employers. One in five have duties specifically suited for older workers and just 14% offer retraining. Almost a third offer no transition support at all.

First and foremost, employers should review the demographics of their work force and prepare for any future labor shortages, Aegon recommended. Intergenerational teams within the company can help break down stereotypes (about older and younger workers) and help transfer knowledge to the next generation.

Governments and employers facing a labor shortage can work together to retain valuable workers by increasing awareness of opportunities for older workers and eliminating disincentives like a fixed retirement age. Here’s how 10 countries stack up on options to let workers transition into retirement:

Sydney Opera House. (Photo: AP)

1. Australia

  • Retirement age: 65
  • Life expectancy at 60: 25
  • Population 65 and older: 15%
  • Employment rate of older workers: 62%

Australia’s retirement system is one of the most flexible in the report. Over three-quarters of Australians picture a flexible transition out of their working lives, compared with the global average of 55%, the paper found. Employers are supportive, with 38% of employers allowing workers to move from full-time work to part time, compared to the global average of 27%, and 12% offering retraining opportunities, compared a 9% average.

The country’s tax system makes working longer attractive, and the Department of Social Security allows older workers to continue taking “substantial income” while receiving their Age Pension benefits, according to the paper. The Work Bonus provides flexible tax benefits to workers above the retirement age.

Workers with a superannuation retirement plan also have incentives to reduce their hours and take a tax-advantaged “Transition to Retirement” pension. About 20% of workers 55 or older have taken advantage of that plan since it was introduced in 2005.

Toronto skyline.

2. Canada

  • Retirement age: 65
  • Life expectancy at 60: 25
  • Population 65 and older: 16%
  • Employment rate of older workers: 61%

Canada has offered transitional or phased retirements since the 1990s, driven by labor shortages and falling birth rates, according to the report. Canadian workers are eligible for Old Age Security benefits at age 65, although in April 2023, that will gradually increase to 67.

Increasing pension costs are also driving flexibility reforms, Aegon found, as the costs for benefits under the Old Age Security Act are expected to almost double to 96 billion Canadian dollars ($68.6 billion) by 2030.

Eleven percent of workers plan to retire before they are 65. Two-thirds want a flexible transition into retirement. However, only 24% say their employers allow them to reduce their hours, and just 5% offer retraining.

The Forbidden City in Beijing.

China

  • Retirement age: 55
  • Life expectancy at 60: 19
  • Population 65 and older: 9%
  • Employment rate of older workers: 60%

“The notion of retirement in China has traditionally meant stopping work altogether, with a retirement age that is low by global standards: 50 years for women, 60 years for men,” according to the report. Chinese respondents expect to retire at an average age of 55, and of those who are already 55, 89% expect to retire in the next 10 years.

However, the population of younger workers shrank for the first time in 2012, and Aegon found plans to raise the retirement age aren’t widely supported. “Support for increasing retirement age as a way to offset the cost of people living longer is not shared by everyone, with 39% of Chinese respondents saying that retirement age should remain unchanged,” according to the paper.

Employers in China are fairly supportive of flexible retirements. Twenty-eight percent offer retraining programs, more than three times the global average, and 26% allow workers to reduce their hours in retirement. Consequently, more than three-quarters of respondents said they have a strong sense of belonging to their employer.

Eiffel Tower in Paris. (Photo: AP)

France

  • Retirement age: 65
  • Life expectancy at 60: 25
  • Population 65 and older: 19%
  • Employment rate of older workers: 46%

Youth unemployment in France is 25%, Aegon found, so most of the focus is on improving opportunities for that demographic. There have been some attempts to raise the retirement age, but the report noted those have been controversial due to the increased competition it would create between older and younger workers.

However, by 2020, more than 20 million people in France will be over age 60. Over half of respondents said they plan to retire before age 65. “Often deprived of opportunities to keep working, an increasing number of these people are starting their own business or getting involved in volunteer work,” the report found.

Hamburg harbor.

Germany

  • Retirement age: 65
  • Life expectancy at 60: 24
  • Population 65 and older: 21%
  • Employment rate of older workers: 64%

More people are dying in Germany than being born, Reuters reported last year, noting the birth rate increased in 2014 for the first time since 2004. Faced with a shrinking population, Germany is increasing its retirement age to 67 by 2030 and offering more generous benefits to workers who postpone retirement, Aegon found.

There are also plans to create tax incentives for both employers and employees to retain older workers, according to the report. Still, 34% of workers 55 or older plan to retire in the next 10 years.

The Taj Mahal in Agra, India. (Photo: AP)

India

  • Retirement age: N/A
  • Life expectancy at 60: 17
  • Population 65 and older: 5%
  • Employment rate of older workers: 55%

India is one of the few countries in the report where the government does not set an official retirement age, although public institutions set their own retirement ages. It also has the youngest population; more than half of Indians are younger than 25.

However, life expectancy is expected to rise from 66 to 73 in 2050, and some institutions have already started raising retirement ages. “Because Indian households are often multigenerational, there is less of a need for formal pension arrangements,” according to the report. Indeed, more than half of respondents said they expect to receive financial support from a family member during retirement.

More than a quarter of respondents older than 55 said they expect to retire in the next 10 years, and 71% envision a flexible transition. Almost a quarter of employers offer retraining programs, compared to the global average of just 9%, and 41% allow workers to move from full-time work to part-time.

Mount Fuji, in the Yokohama bay area (Photo: AP)

Japan

  • Retirement age: 65
  • Life expectancy at 60: 26
  • Population 65 and older: 26%
  • Employment rate of older workers: 67%

“Japan is a unique example of a country in which flexible retirement is more of a reality than an expectation or an aspiration,” according to Aegon. The country has raised the retirement age from 60 to 65 in recent years. When workers reach age 60, employers are required to either increase the retirement age to 65; drop the mandated age entirely; or introduce a continued employment program that offers flexible work opportunities on a yearly basis until they reach age 65.

Japan has the highest life expectancy globally, the report found, and these changes are necessary to sustain the pension system. Just 12% of respondents said they plan to retire before age 65. Half are expecting a flexible transition. In spite of the need to keep older workers, just 8% of employers offer retraining opportunities, and 15% allow workers to move to part time.

A cyclist passes the Rijksmuseum in the center of Amsterdam. (Photo: AP)

The Netherlands

  • Retirement age: 65
  • Life expectancy at 60: 24
  • Population 65 and older: 18%
  • Employment rate of older workers: 60%

The 2010 Pension Accord allowed pension plans to accommodate more flexible retirement ages, in both employer-based plans and government social security programs. Dutch workers have typically been covered by defined benefit plans, but the past few years have seen a switch to collective defined contribution plans. Unlike DC plans in the United States, where participants have individual accounts, collective DC plans pool investment assets and distribute them to participants based on a career-average benefit formula.

The Netherlands is increasing the retirement age for General Old Age Pensions to 66 in 2018 and 67 in 2021, and legislative changes have made it easier for workers to continue to work past normal retirement age. However, the report notes that other legislative changes make it easier for employers to dismiss older workers.

Just 7% of Dutch workers plan to retire before 65, and 46% are planning on a flexible transition. Ten percent of employers offer retraining programs, and 31% allow a switch to part-time work.

Westminster Abbey in London. (Photo: AP)

United Kingdom

  • Retirement age: 65
  • Life expectancy at 60: 24
  • Population 65 and older: 17%
  • Employment rate of older workers: 60%

The mandatory retirement age of 65 was phased out in 2011. However, the official retirement age to begin collecting state pension benefits is 65. Benefits can be deferred up to five years to accrue higher payments, and Aegon found benefits are about 30% higher if deferred.

Currently, the state pension age for men is 65, and varies between 60 and 65 for women born between 1950 and 1953. The age will be equalized to 65 for both men and women by 2018, and will rise to 66 by 2020 and 67 in 2028.

Just 12% of workers plan to retire before 65, and 61% are planning a flexible transition. However, only a third of employers allow workers to switch to part-time work, and just 5% offer retraining programs.

Washington, D.C. Skyline.

United States

  • Retirement age: 66
  • Life expectancy at 60: 23
  • Population 65 and older: 14%
  • Employment rate of older workers: 61%

The full retirement age gradually increases to 67 for people born after 1959. Just 14% of respondents plan to retire before age 65, and two-thirds are planning a flexible transition.

However, only a quarter of employers allow a flexible transition, and just 4% offer retraining programs, one of the lowest in the survey. Furthermore, workers looking for post-retirement work are competing for jobs with more than 83 million millennials, according to the U.S. Census Bureau.

Federal employees can phase into retirement with partial benefits if they spend at least 10% of their time mentoring younger workers, although Aegon found very few government agencies make this option available to their workers. 

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