Retirement age shouldn’t be fixed
Why is retirement age-related and not health-related, or even wealth-related? It would make a lot more sense to me with forced retirement at age 65 now staring me squarely in the face. I am healthy, my brain works and I do not intend fading away bored stiff on a park bench.
In most cases in South Africa, on the wealth factor alone, it would make a lot more sense for those people who need to keep working for wealth reasons (or rather the lack of wealth) to be kept productive.
Only somewhere between six and 12 percent of employed people reach retirement financially secure.
I raise this issue against the background of an interesting presentation by Professor Nicholas Barr, of the London School of Economics, given at the recent annual convention of the Pension Lawyers Association in Cape Town.
Barr, who has been a long-time visitor to these shores and has been an important consultant to National Treasury in the reform of our retirement system, was discussing various issues of national (state) retirement systems.
However, some of the points he made applied equally to individuals. One of these points was about retirement age.
Referring to the problems of the affordability of pensions in Europe, Barr says there are only four solutions to make pensions affordable for a country. These are:
* Lower pensions;
* Retire later at the same monthly pension;
* Make higher contributions; and/or
* Increase the productivity and therefore the wealth of the country.
These, he says, are not political statements, but statements of logic.
Well, if you face a compulsory retirement age, be it 60 or 65, and you do not have sufficient money saved, you will have to accept a lower pension or get a retirement job, which may not be easy.
The problem, particularly in Europe, is that while the trend towards living longer has gone up, there has been a very unwise trend in the opposite direction of people retiring earlier on ever more generous pensions.
This structure had to crack, and governments across Europe are having to slowly push retirement ages higher to ensure people can contribute for longer while living for a shorter period in retirement.
Barr argues that as life expectancy increases, so should retirement age in tandem.
One of the arguments against later retirement, raised by angry youth in protests in Europe, has been that this will lessen their chances for employment and future promotion.
Barr debunks this, saying that keeping the experienced in their jobs for longer is more likely to spur productivity and therefore job creation than the other way around.
His most telling point is a graphic illustration (see link, below) of the working lives of British men. In 1950 they worked, on average, for 53.1 years of their lives and spent only 10.8 years in retirement.
By 2004 this had reduced to 47.6 working years with 20.1 years in retirement.
The Greek figures, I am told, look a lot worse.
Normally, better health because of better health care is cited as the main reason for extended longevity, but Barr believes that another major factor is that we no longer toil long hours in the fields. Employment is increasingly becoming non-physical.
Barr says mandatory full retirement made sense historically, because you needed strong and fit people sweating in the fields and factories, but this no longer applies. People mainly use their brains to make money now.
He says there should be increased choice about when to retire and whether partial or full retirement is desirable.
Currently, Barr says the age for retirement in the UK is 65 and it will rise to 66 in 2020 and then by one year for every 10 thereafter. In Norway it is 67.
But I prefer his date-choice idea. Many people in professions or who own their own businesses already have this choice and many exercise it. I know of many professional people well into their seventies who still go to work and do a fine job.
Barr, who is past his official retirement age, has himself chosen to continue to make his wise and important contributions to retirement structures around the world.
Many countries would have lesser retirement structures if it were not for his ongoing input.
Many people, like Barr, do not retire because they want to keep working, not because they need to keep working to supplement poor savings.
The problem, however, is that most South Africans need to keep working because they do not have sufficient money saved to retire financially secure; and the government social old age grant of R1 200 a month is for minimum survival.
This problem of people retiring too early is compounded by companies that seem to believe that retrenching staff by age is the best solution, because they are dumping highly paid workers. This is a cost-cutting mentality, instead of a revenue-generating approach.
Retrenchments should be based on getting rid of people who contribute the least to the bottom line, not their pay scale.
I am reminded of the poem “Do not go gentle into that good night” by Dylan Thomas, admonishing his ageing father to: “Rage, rage against the dying of the light”.
Even more so, the youthful sixty-somethings should be raging against being consigned to a scrap heap when they still have so much to contribute.