A new pensions report suggests that countries will need to encourage more employment of older people to ensure that pension systems can provide adequate retirement incomes.
The Organization for Economic Co-operation and Development (OECD) says that increased longevity is likely to outstrip projected increases in retirement age.
The new OECD pensions report says that more reform is needed to address the impact of aging populations.
Comprising 35 members, the OECD is a forum where governments can come together to discuss problems and work out solutions that they can put in place to improve economic and social well-being worldwide.
Their new 167-page report, titled Pensions at a Glance 2017: OECD and G20 Indicators, reviews the pension reforms that OECD countries have “enacted or legislated” between September 2015 and September 2017.
However, while most OECD countries have undertaken pension reforms in the last 2 years, “they are fewer and less widespread than in previous years,” and as many as one-fifth of countries have taken no action at all.
More reform needed
And yet, to address the impact of aging populations, rising inequality among older people, and the changing nature of work, what is needed is further reforms, argues the report.
“The challenges of financial sustainability and pension adequacy mean that bold action from governments is still needed,” urges Angel Gurría, Secretary-General of the OECD.
“The world of work is changing fast,” he explains, “and policy makers must ensure that decisions made today take this into account and our pension and social protection systems do not leave anyone behind in retirement.”
The pensions report reveals that since 2000, while public spending on pensions in the OECD as a whole has gone up by 1.5 percent of GDP, spending growth is set to decelerate signficantly.
This will be happening at the same time as retirement income for many future pensioners is likely to drop as a result of recent reforms – unless they postpone their retirement.
Perhaps one solution is to facilitate flexible retirement, a subject that the pension report also takes a close look at.
Many workers want more retirement flexibility. Nearly two-thirds of workers in Europe would prefer to semi-retire and continue working part-time rather than fully retire. In Japan, more than two-fifths want to continue in employment past retirement age.
Looking closely at people’s reasons for wanting more retirement flexibility and how they want it to work reveals a very complex picture.
“Older workers are a diverse group,” note Stefano Scarpetta, OECD director for employment, labour, and social affairs, and Greg Medcraft, OECD director for financial and enterprise affairs in the foreword to the report.
” have different preferences on how and when to move from work to retirement,” they add, observing that some may want to stay in work for the income, some enjoy the social interactions of working life, and there are those who wish to continue because they “simply like their job.”
On the other hand, there are those who may have to retire earlier for health reasons, or who may wish to pursue other interest or “as is increasingly the case, to care for elderly relatives or grandchildren.”
Age discrimination still widespread
The pension report finds that the pension rules in many OECD countries do largely provide the type of flexible retirement that workers want and they do not discourage it. So why is the take-up rate so low? In Europe, for instance, only 10 percent of people in their 60s “combine work and pensions.”
The report argues that the barriers to increasing flexible retirement lie outside the realm of pension regulation.
For instance, part-time jobs for older workers are still uncommon and terms of employment often allow employers to terminate contracts when job-holders reach a certain age.
Age discrimination is still widespread, and too many employers hold the view that older workers are less productive or unable to learn new skills. Also, many wage systems reward seniority, which raises the costs of continuing to employ older workers.
The pensions report urges employers to provide more flexible solutions so that workers who want to stay on beyond official retirement age can do so, in ways that are mutually rewarding.
“In the context of population ageing and looming labour shortages in some countries this need is urgent,” Scarpetta and Medcraft conclude.
Video – how to manage the older worker
As the number of older people in the workforce increases, it will become increasingly likely that young supervisors will find themselves in charge of people who are much older than they are.
In the following video, Wharton Professor Peter Cappelli suggests some approaches that younger supervisors might use to manage older workers productively.
He also suggests how employers might develop formal schemes for engaging older workers, and gives examples from the armed forces, healthcare companies, and other organizations.