The aging of society and the increase in life expectancy around the world call for the stability of national social protection systems. In many places, including Latvia, the retirement age of the population is being increased in order to reduce the burden on the working age population. What tendencies are observed in the world and what standard of living is expected for future Latvian pensioners only with a state pension?
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Organization for Economic Co-operation and Development (OECD) shows that in 2018, the average retirement age in the Member States reached 63.5 years for women and 64.2 years for men. The retirement age in Latvia has also been gradually increased since 2014. Today they are 64 years old, but already in 2025 they will be 65 years old.
Similar to Latvia, in the European Union (EU) in 2019, on average, every fifth European citizen is over 65 years of age. The share of older people is also expected to increase in the coming decades, while the working age population will decline. Thus, in the near future, there will be more and more seniors, creating an additional burden for people of working age, who will have to cover social expenses in order to provide the services needed by an aging society.
Europeans tend to raise the retirement age even further
In Denmark, where one of the most efficient pension systems in the world, the retirement age will be raised to 67 next year. The Netherlands, which is considered to be the most favorable country for pensioners, will do the same in 2024. After a few years, the retirement age of 67 will also be set in Germany and Spain. The highest retirement age in Europe is in Iceland, where it is already 67 years old. Against the background of European countries, the exception is Norway, where until recently the retirement age was 67, but after the reform of the pension system, the country’s population can retire from the age of 62. Several countries in the world, including our neighbor Estonia, will set the retirement age according to life expectancy, which, as it gradually increases, can also be expected to increase.
Outside Europe, the retirement age is lower
The lowest retirement age in the world is currently in the United Arab Emirates, allowing nationals to retire from the age of 49. Emigrants, on the other hand, can receive a pension from the age of 60. The retirement age is also slightly lower in most Asian and African countries. In Egypt, Cameroon, India and Sri Lanka, the retirement age is 60, while in Iran and Vietnam the retirement age for women is even lower at 55.
Countries with high levels of economic development and longer life expectancy also have higher retirement ages. In Australia, for example, it is already 66 years old and will be raised to 67 in 2023. In turn, the US pension system is similar to Norway – a certain amount can be received from the age of 62, however, people over the age of 66 can apply for the full amount of the pension.
Two countries outside Europe that can be considered exceptions are South Korea and Libya. In South Korea, the retirement age is 60, while in reality the population leaves the labor market alone at an average age of 72. The reason is not only long life expectancy, but also one of the highest levels of poverty among the elderly among OECD countries. For this reason, citizens have to work extra after reaching retirement age. Libya, on the other hand, has a life expectancy of more than 72 years and has the highest retirement age in the world at 70 years.
A long time is expected to retire
“Eurostat“Data from 2020 show that the average life expectancy of men in Latvia is currently 70.9 years, but that of women more than ten years, reaching 80.1 years. This means that men who have reached the age of 65 still live on average about six years. and women for 15. As the retirement age increases in the future, more and more time must be spent in retirement.
In order to live these years in a quality and comfortable way, it is not possible to rely solely on savings in the 1st and 2nd pension levels, because Bank of Latvia it is estimated that this savings provide a maximum of 40% of the current standard of living. Under the current pension system, the best way to take care of one’s well-being in old age is to build up a savings pillar 3 as a voluntary contribution, giving them as much money as they can afford at a given stage of life.
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