According to a recent report, combining retirement and work is still rare in OECD countries. The desire to work in retirement has grown, but the countries have not been able to make use of the potential. OECD calls for more alternatives.
The OECD has published its extensive report Pensions at a Glance (PAG) of pensions in its member countries and the G20 countries. The report looks at pension systems through several indicators. They include comparisons of, among others, the level, structure and financing of pensions.
This year the report pays more detail to flexible retirement. According to a recent report, combining retirement and work is still rare in OECD countries. The desire to work in retirement has grown, but the countries have not been able to make use of the potential.
According to the OECD, it is possible to combine retirement and work in many countries, but more alternatives are needed. On the other hand, the labour markets also pose restrictions on continued working.
“The Finnish pension system is already reasonably flexible under OECD standards thanks to the flexible retirement age and the partial old-age pension. However, it is less common for Finnish elderly people to work part time when making international and Nordic comparisons,” explains Antti Mielonen, Senior Adviser at the Finnish Centre for Pensions.
Education level reflected in employment rates
The report pays special attention to making sure pensions are adequate. In this respect, the OECD finds the employment rates of the elderly to be crucial.
Although, generally speaking, the employment rates of the elderly have risen considerably since the 2000s, there are extensive gaps in them, in particular relative to educational level. The employment rates of highly educated 55-64-year-olds is 77 per cent on average in OECD countries. Of those with a low educational level, the employment rate is only 44 per cent.
Rising retirement age improves dependency ratio
The OECD finds raising the retirement age to be one considerable means to secure both the sustainability of pension systems and the adequacy of pensions. In recent years, many countries have decided to raise the retirement age. The average retirement age in the countries of comparison will rise by a few years to nearly 66 years over the next decades.
According to the report, raising the retirement age will improve the dependency ratio of pensions. For example, the future pension of a wage earner with an average wage will rise from 55.8 per cent measured in the last comparison to roughly 56.6 per cent. In countries in which the retirement age will remain unchanged, the pension levels will decline as the systems adjust to growing longevity.
“This has happened in Sweden and Norway, where the dependency ratio of a wage earner with an average wage will decrease slightly below that in Finland,” Mielonen says.
The average replacement rate of the OECD countries is 58.7 per cent when supplementary pensions are included in the comparison.