Pensionsåldersutredningen

GOVERNMENT COMMISSION FOR LONGER WORKING LIFE AND RETIREMENT AGE

Measures for a longer working life (SOU 2013:25)

Helsingfors 22 May 2013

Pensionsåldersutredningen

WHEN WE LIVE LONGER, WE MUST WORK LONGER

• An increasing share of older people have good health, higher education and better cognitive capacities, they can and would like to have a longer working life

• Unless the retirement behavior changes pension levels will be too low, which will threaten confidence in the pension system

• The dependency burden becomes unsustainable for those who are working

• Difficult to maintain an acceptable standard in our welfare system

• Risk for labor shortages

Pensionsåldersutredningen

WHY WE NEED MEASURES

• The idea was that pension reform, tax incentives and major information initiatives etc. should lead to a longer working life

• Despite some positive tendencies in employment levels, the changes have been modest and do not match increases in life expectancy

• More older people want to work longer, but are not able because of different obstacles

Pensionsåldersutredningen

SWEDEN STILL HAS A DE FACTO NORMAL RETIREMENT AGE OF 65

61 år 62 år 63 år 64 år 65 år 66 år 67 år 68 år 69 år 70 år0

10

20

30

40

50

60

70

80

901938

1939

1940

1941

1942

1943

1944

1945

1946

Retirement age

%

Källa: Pensionsmyndigheten

Pensionsåldersutredningen

CA 50 PROPOSALS TO INCREASE EFFECTIVE RETIREMENT AGEStrengthen older people’s ability and resources to work longer• Improving work conditions and environment• Strengthening measures against age discrimination• Better conditions for training and upgrading skills• Guarantee Pensioners should benefit from longer working life• Government-social partners discussion on occupational pensions

and flexible working hours• Information needs to be developedA coherent strategy for synchronized age limits• “Recommended retirement age” which follows average life

expectancy• Regulated in Law and calculated annually, most age limits linked to

this “recommended retirement age”

Pensionsåldersutredningen

IMPROVE THE WORK CONDITIONS AND ENVIRONMENT

• Strengthening development efforts at the Swedish Work Environment Agency

• Resources for development and follow-up of “Systematic work environment management (SWEM)”

• Investment in research and evaluations• Training for “Safety representatives” and managers• Programs to disseminate knowledge about how

work places can be adapted to older workers• Resources for intervention studies

Pensionsåldersutredningen

BETTER CONDITIONS FOR TRAINING AND UPGRADING SKILLS

• Student loans 40 weeks also for persons aged 55-57• Special student grants 961 SEK / month for 40

weeks for persons aged 45-57• Better access to adult vocational training and adult

education• Customize courses to older workers demand• Resources to the Public Employment Services for

career advice to older worker• Increased opportunities for labor market training for

older worker

Pensionsåldersutredningen

GUARANTEE PENSIONERS TO ALSO BENEFIT FROM LONGER WORKING LIFE

• 30 % of all pensioner, 50 % of women, are caught in a poverty trap

• People with low income-related pensions can not improve their economic standard by working longer

• Incomes earned after 65 should not affect the guarantee pension or the housing benefit

• People with fewer than 40 years of residence must be able to “work to collect” more insurance years

Pensionsåldersutredningen

NEW RECOMMENDED RETIREMENT AGE LINKED TO AVERAGE LIFE EXPECTANCY

• A clear, non-choice alternative for the retirement of older people who wish to achieve an adequate pension level

• Calculated annually by the Swedish Pensions Agency, decided by the Government

• Applied 4 years after implementation, implemented 2015 and applied 2019

• All age limits in the pension system and other related insurance systems linked to recommended retirement age

Pensionsåldersutredningen

RECOMMENDED RETIREMENT AGE 2019 – 2035 Preliminary calculations

Calculated Implemented Rec retirement age2015 2019 662016 2020 662017 2021 662018 2022 672019 2023 672020 2024 672021 2025 672022 2026 672023 2027 67

2034 2038 682035 2039 68

Källa: Pensionsmyndigheten och utredningens beräkningar

Pensionsåldersutredningen

AGE LIMITS IN THE PUBLIC PENSIONS AND RELATED SYSTEMS WILL BE LINKED TO THE RECOMMENDED RETIREMENT AGE• The 61-year age limit for early retirement will be

raised to 62 years in 2015, and according to current forecasts, to 63 years in 2019

• The 65-year age limit for the guarantee pension, sickness compensation and other benefits will be raised to 66 years in 2019, according to current forecasts

• The age limit referred to in the Employment Protection Act will be raised from 67 to 69 in 2016

• The 55-year age limit for occupational and private pensions will be raised in 2017 to 62 years

Pensionsåldersutredningen

CHANGES IN RETIREMENT AGE INCREASES LABOR SUPPLY

• Research review of the effects of changes in retirement age in other countries (Gabriella Sjögren Lindquist)

• Reforms in Norway (1989-1998), Portugal (1993-1999), Australia (1995-2013), United States (2000 -), Switzerland (2000-2005) and Austria (2002-2017)

• The effective retirement age and withdrawal of pensions increased by 20 to 50% of a change in the retirement age

• Some spillover to other social insurance programs

Pensionsåldersutredningen

INCREASED LABOR SUPPLY REDUCES THE DEPENDENCY BURDEN

Alternative 1. Number of people in labor force increases as much as the population (15-64 year).Alternativ 2. Number of people in labor force decreases as much as the population in 1980-2010, 0.3 per cent per year.Source: Pensionsmyndigheten

0,2 = 20 % of older people work another year0,35 = 35 % of older people work another year0,5 = 50 % av of older people work another year

Pensionsåldersutredningen

  2015 2017 2019 2020Income 400 1 200 5 100 6 500Of which - increased age limits in pensions 400 1 200 2 600 3 600 - increased age limits for social contributions 0 0 2 500 2 900

Expenditures -300 -600 -1 800 -2 800Of which - working environment, training, information etc -200 -400 -400 -400 - social insurance etc -100 -200 -1 400 -2 400Net for public finances 100 600 3 300 3 700

IMPROVED PUBLIC FINANCESMedium scenario, labor supply increases 35 %. Phased in four years

Source: SCB, FASIT-beräkningar, Pensionsmyndigheten, Försäkringskassan och egna beräkningar

Pensionsåldersutredningen

EFFECTIVE RETIREMENT AGE IN INCOME STATISTICS. Cohorts 1938-41. Per cent

CENTRALGOVERNMENTOFFICIALS

LOCAL ANDREGIONALGOVERNMENT

PRIVATESECTORWORKERS

PRIVATESECTOROFFICIALS

WOMEN

Before 65 54 57 56 61

65 and later 46 43 44 39

MEN

Before 65 58 47 51 59

65 and later 42 53 49 41

A person is considered to have left the labor market the year when earned income is permanently lower than the pension base amount. Källa: SCB, LINDA