To be 65 or not to be?

David Knox, Worldwide Partner at Mercer, has published a paper exploring Australia’s position on the age pension.

As our population ages and a larger percentage of people sit in that over 65 age bracket, he asks whether a pension at 65 is still appropriate.

Knox outlines a number of adjustments to pensions around the world, including:

  • The US is gradually increasing its normal retirement age for Social Security from 65 to 66 between 2002 and 2009 and then increasing it again from 66 to 67 between 2020 and 2027; 
  • The UK announced in a 2006 White Paper discussing their new pensions system that they will gradually increase their State Pension age from 65 in 2024 to 68 in 2046; 
  • Germany is gradually increasing its pension age from 65 in 2012 to 66 in 2024 and then to 67 in 2029; 
  • Denmark is increasing the age threshold for the public old-age pension from 65 in 2024 to 67 in 2027. Furthermore from 2025, the eligibility age will be directly linked to changes in life expectancy at age 60; 
  • Japan is increasing its age for access to the earnings-related component of its pension from 60 to 65 by 2025 for males and by 2030 for females; 
  • Increases in pension age that affect both men and women are being implemented in the Czech Republic, Greece, Hungary, Italy and Korea (OECD, 2007).

What’s my point?  I’m certainly not suggesting that people don’t deserve the aged pension.  What I’m suggesting is that we need to look at the fact that, as our population ages, we are going to lose a pool of high skilled, knowledgeable and experienced workers who will retire when they still have many good years in them.  Is 65 really still the right age to retire?

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