EUROPE - A new report has called for urgent shifts in the employment patterns of older workers if many developed economies are to avert the rising costs of early retirement.
According to research by the University of Iceland and Watson Wyatt, the global consulting firm, early retirement in OECD (Organisation for Economic Co-operation and Development) countries is still prevalent.
It estimates that in order to keep the output gap - the cost of early retirement as a percentage of Gross Domestic Product (GDP) - at the 2003 level of 7.3%, employment in the 55 to 64 age bracket would need to rise to roughly 56% from its current level of about 51%.
While this is not completely implausible it does point to the fact that even maintaining the current level of costs as a percentage of GDP is going to require significant shifts in the retirement behaviour of older workers, says the report.
The cost of early retirement in OECD countries rose rapidly in the 1970s and reached an output gap peak of 7.5% in the mid 1980s.
This figure reduced slightly during the 1990s, but the report estimates that it will increase substantially over the next few years - up to 9.1% by 2010 - unless retirement patterns change.
Mike Orszag, head of research at consultants Watson Wyatt and co-author of the report points out that this average of OECD countries hides significant national differences. Estimates for 2010 range from just 2.2% in Iceland to 19.4% in Hungary. The estimate for the UK is 10.1%.
Our analysis shows that even if labour force participation remains constant, the ageing of the population of OECD countries will result in a significantly higher burden from early retirement in the future, he said. To keep the costs of early retirement at current levels for men in 2010, for instance, male labour force participation rates would need to rise to 70% from 66% today.”
The full report entitled ‘The Early Retirement Burden’ is available at www.watsonwyatt.com.
Mark Evans has been appointed as a director at Independent Trustee Services (ITS) to lead trustee appointments in London.
The Pension Protection Fund (PPF) is consulting on changes to the actuarial assumptions it uses in valuations in a bid to better reflect the bulk annuity market, with schemes set to move into surplus on aggregate.
Private sector defined benefit (DB) schemes were 96.3% funded on a Pension Protection Fund (PPF) compensation basis at the end of July, according to the lifeboat fund's monthly index.
Conduent has completed the sale of its actuarial and human resource consulting business to private equity investor, H.I.G. Capital.