Currently showing: Funding longer lives > Pension/retirement

26 Nov 13 17:48

Europe faces significant labour market gaps as a result of demographic change. In the UK alone there are 13.5 million job vacancies, which need to be filled over the next ten years. But only seven million young people are projected to leave school and college over that time.

Despite a growth in the number of older workers since the 1990s, the EU is still failing to meet its target set in 2001 to achieve 50% employment rate of older workers by 2010. Over the period 2002-2008, the average age of labour market withdrawal among the EU-28 had only increased by an estimated 1.3 years, from 60.1 to 61.4.

And whilst the employment levels of older workers has increased over the past decade by 10% there is significant variation across Europe. Just 13% of Hungarians aged 60-64 were in work in 2010 compared to over 60% of Swedes.

Our recent report, Working Longer, An EU perspective highlights interesting initiatives seeking to promote extended working lives from across Europe. For example.
*Changes since 2006 in Sweden offer more favourable treatment for work related income than pension income.
*Reforms in Croatia have meant that those who retire early are now subject to between a 0.15% and 0.34% loss every month in the value of their pension. In contrast, people who delay retirement are entitled to a 0.15% monthly increase in the value of their pension.
*France has introduced a gradual retirement scheme, which allows workers to reduce their working hours on reaching 60 (62 in 2017) and receive a proportion of their pension in return.
*A Portuguese New Opportunities Initiative gives preferential access for older people to lifelong learning.
*The Finnish government has invested in the KESTO-program built up a database for research on extending working life.

Not all of these initiatives will work in every country and our analysis suggests a need for greater understanding of “what works”. Government initiatives to support older workers are often poorly evaluated for effectiveness. As a result it is difficult to “learn from the best”.

Older people have not been exempt from the impact of the recession. Governments have removed incentives to early retirement within pension schemes which has resulted in greater numbers being active in the labour market, but unemployed. Across Europe, a relatively high proportion of unemployed 55-64 year olds have not worked for 12 months or more.

In every EU Member State, the life expectancy of women is higher than that of men, by 5.9 years on average. Yet despite living longer across the EU, women participate less in the labour market and retire earlier.

Our report highlighted the need to do more to up-skill the older workforce across Europe. The current cohort of older workers in Europe have low levels of education and qualifications compared to younger groups.

It’s not just having a skilled workforce which is an issue. European policymakers must focus energies on creating the sort of jobs which European citizens want to do. There has been inadequate focus on the extent to which Europe’s economy has been creating the right sort of jobs to meet the needs and wishes of the supply of older workers.

One of the biggest challenges facing the working longer agenda is poor health of older workers. However, our analysis found relatively few initiatives by governments or employers to explicitly improve the health of older workers.

The EU has led the way in delivering legislation to tackle age discrimination in the workforce. But we must ensure the legislation is properly implemented. We must also monitor whether the legislation has tackled negative attitudes towards older workers.

On the one hand, the message is positive, participation in the labour force by older workers is up. But it is only moving up slowly. Those EU economies which take steps now to maximise the potential of older workers, are likely to see significant economic return on their investment.

David Sinclair

Working Longer: An EU perspective, supported by Prudential, explores how the EU and its 28 members have responded to the working longer agenda. It is available on the ILC-UK website at

International Longevity Centre - UK

The International Longevity Centre-UK is the leading think tank on longevity and demographic change.

Category: Funding longer lives: Pension/retirement

Location: Europe


Matt Singleton - 26 Nov 2013, 9:11 p.m.

Thanks for this insight. The following report by Eurofound provides some great case studies of European employers who encourage older workers - The big challenge will be making longer working lives become the perceived 'achievement', which perhaps is the current perception of an early retirement in many countries.

IPM63 - 28 Nov 2013, 1:40 p.m.

Thought provoking.... are you predicting the end of unemployment or an increasing number of underskilled people being left behind?

Richard Montgomery - 29 Nov 2013, 4:33 p.m.

Dave, thanks for this article and the links provided. Also, Matt's link provided additional interesting insights. IPM63 poses a really interesting question.

I think that one element that is missing in discussion concerns the macro-economic impact (IPM63 alluded to it). If we applied the same assessment of human life-span and ability to work that Bismarck used when setting the age 65 retirement age, we should be looking at pushing retirement age up considerably (85 seems about right to me). If we achieved this across the board then (after whatever adjustment crises ensued) there should be two significant impacts. Firstly a lot more people would be working productively therefore total output should increase. Secondly, since people who currently have the largest pension assets would be deferring retirement by 20 years their investment risk profile changes (appetite increases) and therefore there should be greater investment in entrepreneurial activities (thereby also increasing gross output.

The virtuous outcome, if it can be achieved, is a substantial increase in employment opportunities across all ages. By contrast, the double whammy in the current environment is that people are retiring when they have far too much life (including productive life) left in them, and that they are relying on a bloated pot of under-performing investments to finance them through this retirement. Excess funds pursuing too few low risk investment opportunities means very low real returns.

Rolf - 5 Dec 2013, 1:52 p.m.

An interesting debate. But as I already mentioned earlier on this platform, much of this not only relates to the horizontal time axis - working longer. What I mean is that the work environment is generally changing, with the end of industrial manufacturing jobs (up to a point, as with agricultural jobs). So there is a vertical axis as well - how much will be work at any given point in time: 100 %, 50 % or less. The model of work today is that of the industrial age: you went to school (or not), started working on the shop floor at 15 (or less) and then worked 100 % up to 65 or whatever the retirement age was. I am convinced, with the shift towards more and more a service economy (while the production of material goods increasingly relegated to robots and other machines), periods of 100 % employment will change with a lower rate of employment (and more spare time, education time, child-raising time). So you may work well beyond 65....but not necessarily full-time. And you will no longer have just one job during your entire working life. You will have different jobs, sometimes sequentially, sometimes parallel. Actually, this is how the work lives of most people were before industrialisation...

David Sinclair - 11 Dec 2013, 12:26 p.m.

I think the problem is that we are may not end up creating the jobs which older (or many younger) people want. We already have double the rates of vacancy in social care than in other sectors for example. We may need to create more jobs which the labour force wants to do. Or do we start to force (or pay more) people working in care/agriculture and other sectors where there is a gap between demand and supply of workers.

David Sinclair - 11 Dec 2013, 12:29 p.m.

Very much agree. But how do we change a model of work which has lasted a long time. Too many workplaces remains designed around a workhouse model. We will need insurance solutions too. How do we manage working with more gaps/more learning/more reskilling. At the moment, few can afford to cut down hours to reskill for example?

Rolf - 13 Dec 2013, 2:29 p.m.

<p>Transitions are of course always tricky. And those in the midst of these transitions often feel like the guinea pigs of a great, cruel social experiment. Last time we had this big time in Europe - 19th century with industrialisation - it destroyed rural communities for the benefit of industrial jobs. Same is now happening in the so-called emerging markets - China and India: just read this week that the contribution of agriculture to India's GDP has shrunken to 18 percent. And India was always, in a way, the quintessential "rural" country in Asia. But back to your point: if you work longer, but less intense, you may actually not have that many more gaps than you have now. Yet, there is, as you seem to allude to, a big problem - agreed: maybe well-educated and well-paid service sector people can afford such modular work and life styles. But what about those who do not have these privileges? Those who - actually - toiled in these industrial jobs which have now become redundant? I don't have any ready solutions. Maybe we have to think about two separate models of how to organise your work life - one for those who can afford and those who cannot. And where in all this insurance will find its spot.</p>

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