GLOBAL - After a decades-long shift toward early retirements, many OECD (Organisation for Economic Cooperation and Development) countries are now trying to reverse the trend.
Early retirement has become more widespread in OECD countries in recent decades, in part because the practice was encouraged by government policies.
However, in light of the challenges arising from ageing populations, many OECD countries have recently changed their policies with respect to early retirement, and are now aiming to increase labour participation of older workers.
A chapter in the latest OECD Economic Outlook reviews early retirement incentives for 15 OECD countries.
The new analysis includes the effects of recent pension reforms and also takes into account the effects of taxes on pension benefits.
A main finding is that ordinary public old-age pension systems now do not generally give strong incentives to retire before the statutory age. To some extent, this reflects policy measures to strengthen the link between the number of years of pension contributions and the eventual benefits paid to retirees. As a result, pension systems treat early retirement in a more actuarially neutral way.
Nonetheless, old-age pension systems still discourage working after the statutory age and the statutory pension age remains low in some countries.
Moreover, early withdrawal from the labour market often remains an option, through special early retirement schemes, unemployment-related transfer schemes, disability pensions and occupational pensions.
According to the OECD, while some of these schemes have also been tightened recently, they still provide important fiscal incentives to retire before the statutory retirement age.
Further reforms are needed to eliminate the distortions that encourage workers to withdraw early from the labour market.
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