Fixed retirement age should be abolished, says report
The fixed retirement age or default retirement age (DRA) should be abolished globally, say researchers from the Universities of Hull, East Anglia and Southampton in England.
They add that current pension systems worldwide are unsustainable.
The study, published in the peer reviewed journal Personnel Review, is titled “Retirement in a global labour market: A call for abolishing the fixed retirement age.”
“We have a global problem with funding pensions, which assume people will retire around their mid-60s. Young people are tending to start work later and in-turn start paying tax and pension contributions later. Older people are living longer, often in to their 90s, creating, in some cases, up to 30 years of retirement to provide for with their cover. This creates a funding gap.”
“Our study advocates the abolition of the default retirement age worldwide by governments and private companies – allowing people to consider a range of options on how and when to stop work, as well as greater flexibility over their pension plans. This would help ease funding problems.”
UK has no fixed retirement age
The fixed retirement age was abolished in the UK in 2011, although a number of organizations can set their own DRA if they can justify why it is necessary.
Several nations around the world have a fixed retirement age. In order to examine the benefits and disadvantages of having a more flexible approach to retirement, the researchers used the UK as a case study.
Professor Baruch, together with Dr Susan Sayce from the University of East Anglia, and Professor Andros Gregoriou from the University of Hull, carried out a financial analysis based on Monte Carlo simulation methodology to interpret pensions and other financial data.
A financial analysis assesses an entity’s viability, solvency, profitability, and stability.
Current pensions systems are unstustainable
They found that in countries where a fixed retirement age is in place, the pensions system over the long-term is unsustainable. They recommend ending its use, in line with what the UK has done.
“We would like to see a situation where people globally can be much more in control of when they retire. For example, they may want to work into their 70s or even 80s, but perhaps want to change the type or volume of work they take on.”
“Our study suggests that old age can be seen as holding the prospect of long-term stable contributions to society, rather than a decline or preparation for giving up work altogether – which can lead to pressure on the public purse.”
In order to abolish the default retirement age effectively worldwide, the researchers say there needs to be a change in cultural attitudes towards older employees and the perception of their productivity and value.
The labor market needs to help older workers find employment, as well as helping them out of jobs.
Although the policy of abolition is the best route, the investigators add that the effects of getting rid of a fixed retirement age will vary from-nation-to-nation.