The Organisation for Economic Co-operation and Development (OECD) has published a report looking at the increased age at which men and women will be able to retire in future years.
The OECD concludes that although many developed countries are raising the state pension age, most are not doing so sufficiently and the OECD urges other countries to follow the lead of Denmark and Italy in “formally linking retirement ages to life expectancy.”
The OECD says that during the next 50 years life expectancy at birth is expected to increase by seven years in developed countries. However, half of the developed countries are not planning to increase their state pension age beyond 65. The OECD advises that they should do.
A further 14 developed countries (including the UK) plan to raise the state pension age to between 67 and 69. The OECD believes just six countries for men and ten countries for women are increasing the age at which people can draw state pensions at a rate that matches the increases in life expectancy.
OECD Secretary-General Angel Gurría said: “Bold action is required. Breaking down the barriers that stop older people from working beyond traditional retirement ages will be a necessity to ensure that our children and grand-children can enjoy an adequate pension at the end of their working life.”
However, the report goes on to say that individual countries need to get the balance right and that is may be unreasonable for some people to have to continue working beyond a certain age, which they may be required to do if state pension ages are automatically linked to life expectancy rates.
A report from accountants PricewaterhouseCoopers says that babies born this year may not get their pension until they reach 77 years of age.
The OECD report said: “However, at some point, again, increasing pension ages further must reach a limit where it is unreasonable to expect most people to be able to continue working.”
The OECD said that increase to the retirement age must be handled carefully to give people time to prepare.
The report warns that cuts in state pension payouts in the future are expected to be around 20 per cent less but should still reach around 50 per cent of net income in countries that have high state pensions. However, in countries such as Ireland and the USA which do not have generous state pensions and private pensions are voluntary, individuals can expect to see a big drop in income when they retire.
The OECD says these countries should consider schemes where employees are automatically enrolled. These schemes already exist in Italy and New Zealand and the UK is to roll out its NEST scheme in October 2012, an auto-enrolment scheme.
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