Retirement age changes

[campbell]

Thought I'd split this theme off from my public pensions thread. I've been finding more items related to this in my pension searches.

UK:
http://blogs.thisismoney.co.uk/this_...sed-to-70.html

Pensions regulator David Norgrove has told the BBC, in an interview to be shown tonight, that he thinks the state pension age, soon to be 65 for both men and women, will eventually rise to 70.

It is already due to rise to 68 by 2046. Thus:
- a steady rise from 60 to 65 for women between now and 2020
- those born from 1960 to 1968 it will be 66
- those born from 1969 to 1977 it will be 67
- those born after 1978 retire at 68

I have written lots of posts on this blog over the years on the approaching demographic timebomb. It's now upon us and attracting headlines. A double-whammy of retiring baby boomers and exponential increases in longevity means Britain will not be able to afford the current system.

Norgrove is right to tackle this issue again. Lord Turner who conducted a review suggesting the 68 state pension age has since admitted he should have made it 70.

In reality, both fairness and economics dictate the state pension age should be linked to average life expectancy.

I have a longevity thread in the Life forum, but that's more generally about medical advances/longevity trends for whatever purposes -- impact on annuities and life insurance.

For this thread, I'm looking for stories related to private or public pensions changing the retirement ages.

[bdschobel]

Well, just for completeness, I'll summarize the changes in Social Security's normal (or "full") retirement age:

The NRA was age 65 from enactment of the Social Security program, in 1935, until 1983. (By the way, early retirement -- but not before age 62 -- became available for the first time in 1956 for women and 1961 for men.)

The 1983 legislation increased the NRA from 65 to 67, but deferred for 17 years and then very slowly. Workers born before 1938 (age 45 or older in 1983) were totally exempted from changes in the NRA (though they were subject to numerous other changes enacted into law then). For workers born in 1938 (and who would reach age 62 in 2000), the NRA was 65 years and 2 months, and it rose by 2 months for each year of birth, until reaching age 66 for workers born during 1943-54. It then resumed rising by 2 months per year of birth, until reaching age 67 for workers born in 1960 or later. And that's where it remains for now. Note that workers born in 1960 will reach age 67 in 2027.

The 1983 legislation did not raise the early-retirement age, which remains age 62.

Bruce

[campbell]

...and to follow up on that, the Academy recommended that the NRA continue to increase, but did not recommend any particular formula/rate of increase/etc.

http://actuary.org/pdf/socialsecurit...oard_aug08.pdf

The American Academy of Actuaries
believes that a financially sound Social
Security system must accommodate
future increases in longevity. The most
direct way to do that would be to extend
the currently scheduled increases
in Social Security’s retirement age.

And there was a Capitol Hill briefing and a news conference, involving Tom Terry and Bruce:
http://actuary.org/briefings/socsec_aug08.asp
http://actuary.org/briefings/socsec_sept08.asp

[Loner]

On the one hand, there should probably be a better relationship between the retirement age and life expectancy. On the other, there needs to be acknowledgement that there is a correlation between age and disability, and there should be something in place for the not insignificatn fraction of sixtysomethings who truly can't work, maybe some sort of expedited review process.

[bdschobel]

Social Security has a disability program, of course, and the eligibility rules become incrasingly liberal with advancing age. That program would help a lot.

Bruce

[Runner]

Originally Posted by bdschobel

Well, just for completeness, I'll summarize the changes in Social Security's normal (or "full") retirement age:

The NRA was age 65 from enactment of the Social Security program, in 1935, until 1983. (By the way, early retirement -- but not before age 62 -- became available for the first time in 1956 for women and 1961 for men.)

The 1983 legislation increased the NRA from 65 to 67, but deferred for 17 years and then very slowly. Workers born before 1938 (age 45 or older in 1983) were totally exempted from changes in the NRA (though they were subject to numerous other changes enacted into law then). For workers born in 1938 (and who would reach age 62 in 2000), the NRA was 65 years and 2 months, and it rose by 2 months for each year of birth, until reaching age 66 for workers born during 1943-54. It then resumed rising by 2 months per year of birth, until reaching age 67 for workers born in 1960 or later. And that's where it remains for now. Note that workers born in 1960 will reach age 67 in 2027.

The 1983 legislation did not raise the early-retirement age, which remains age 62.

Bruce

Since this thread is supposed to be about retirement ages, I would argue that the 1983 legislation did not change retirement ages. It changed SSNRA, which affects the benefit amount, but the retirement age is still between 62 and 70 and is up to the individual. The 1983 legislation was a benefit cut and nothing more.

[campbell]

It would be interesting if the age of first eligibility for old age benefits was pushed up.

I'm thinking that may be a no-go, but who knows?

[Runner]

Originally Posted by campbell

It would be interesting if the age of first eligibility for old age benefits was pushed up.

I'm thinking that may be a no-go, but who knows?

It could be pushed up, or the reduction factor could be made closer to actuarial equivalence. I think it has been mentioned that people generally commence benefits at first eligibility, so that is the only age that matters. SSNRA is just one component of the benefit formula.

[bdschobel]

The early-retirement reduction factors are pretty close to "actuarial" right now. Ceratinly they aren't so far off as to distort workers' behavior.

Bruce

[campbell]

Pulling out stories that I originally linked in my public pensions thread:
http://www.scottishlife.co.uk/scotli...Jul09Page6.asp

.

It’s not often that Prime Ministers talk about pensions. But yesterday, in something of a surprise announcement the Department for Work and Pensions said that the review of the so-called ‘Default Retirement Age’ of 65 was being hurried forward from 2011 to next year. “Why?” is what I’d guess was on everyone’s lips when they heard about it yesterday and you may have noticed it was all over the TV news last night and has been in most of the papers today.

It’s all to do with this strange situation we’ve found ourselves in lately since our ‘official’ response to recent European anti-ageism laws was to introduce an arbitrary age, age 65, as the point in an employee’s life when an employer could force them to retire. To me that’s always had “What!?” written all over it, so I was as surprised as anyone when this announcement came out of the blue yesterday; but pleased too. After all the confusion of the last few years the clever money now seems to be on the Default Retirement Age getting the bullet sooner rather than later.

http://goliveinternet.economist.com/.../days/view/336

I will excerpt an opposing view here:

Reaching 65
This house believes that retirement in its current form should be abolished.

....


The policy goal is still to provide hard-working families with the opportunity to retire in dignity. Retirement ages should remain in the mid-60s for economic and demographic reasons. And public policy therefore needs to ensure that sufficient retirement income will be available at that age.

Retirement is not entirely an artifact of social norms. Most industrialised economies set the normal retirement age somewhere between 65 years and 67 years. That tends to be the time that older workers' productivity drops off and their functional limitations start to increase.

Public US retirement systems offer incentives for public workers to retire after two or three decades on the job. Police officers and firefighters can no longer serve their communities to the same degree as they did before once they have chased bad guys and run into burning buildings for 25 years. Teachers' productivity also tends to drop off after about three decades. Handling hordes of unruly children eventually takes a toll. Communities and economies will be better off when older workers are allowed to withdraw into a decent retirement rather than having to stay on the job.

The private sector is not any different, since people start to experience functional limitations that impede their job performance. Examples are carpal tunnel syndrome for computer programmers, bad knees for waiters and nurses, heart diseases for flight attendants and pilots, lung diseases for aircraft mechanics, and chronic back and joint pain for construction workers. Deteriorating health after three or four decades is a fact of life that has not gone away just because there are fewer manufacturing jobs. In fact, the data show that improvements in the health status of older workers have been very elusive since the early 1990s.

Retirement systems are meant to help workers build their finances so that they can retire in their mid-60s. This goal, although still valid, has not always been met. Public retirement systems such as Social Security in the United States have done the best job they can to meet these financial goals. Social Security, for instance, can pay all its promised benefits through 2039, even if nothing changes.

But public-sector pensions will have to change to account for demographic and economic changes that have reduced these retirement systems' insurance value. The most relevant trends that have changed the economics of public pensions are rising income inequality, faster improvements in life expectancy for the rich than for the poor, and higher labour force participation rates among women. Lower-income retirees receive less from the system than in the past, while higher-income ones often receive more than they did in the past. The way revenues are collected and benefits are calculated thus needs to be changed to improve the insurance value of public pensions.

More at the links.