The Economist argues that by 2040Given increasing life expectancy, high levels of public debt in developed economies and continued economic uncertainty, what should we do about retirement age and the associated cost of pensions system? A recent Economist front page headline read '70 or Bust!' with the sub 'Current plans to raise the retirement age are not bold enough'.
Europe should have a mean retirement age of 70 while ‘...America, with a younger population, can afford to keep it a smidgen lower'. The problems are set to be even more severe in France Germany and Italy where by 2050 there will be only 1.9, 1.6 and 1.5 workers supporting each pensioner compared to 2.6 in the States.
The whole notion of 'a retirement age' and the pension system is being challenged. It was Bismarck, then Prime Minister of Prussia who in 1889 first instituted the retirement age and state pension - set at 70 years old. This at a time when average Prussian male life expectancy was 46.3. He clearly wasn't expecting many people to show up to collect!
Pension systems across the developed economies are now creaking as more and more people spend longer and longer in retirement. We now face the prospect of people living 20-25 years beyond retirement age. A baby born in the UK 2011 will, on average, live for more than 90 years and nine months. In the last year alone, men, who typically have shorter life spans than women, saw their average life expectancy increase by 44 days.
Another pertinent issue regarding prolonging working lives is the divide between those in sedentary and manual jobs. An extra five years of office work is a world apart from five extra years at, in many cases literally, the coal face.
There is also the question of affordability - for both the individual and the state. For many in low paid jobs an extended retirement will prove to be simply unaffordable and legislation effectively ending a career could cause suffering to those still physically and mentally able to work.
For the state it is economically injudicious to forcibly remove a selection of your tax base and put their care on the state's tab. In a sign of things to come perhaps, the UK government has announced that forced retirement is to be abolished by October 2011. However, once workers reach the current state retirement age of 65 employers will no longer be required to pay pension benefits or provide private medical insurance