How Ageing Population Affects the Retirement Age Increase

Work is essential to support one’s life. In an ideal scenario, people will spend their productive years working and then retire at a certain age with their pension funds. However, with the number of older people projected to increase in the following years, people might need to work longer as the retirement age is set to increase in many countries.

Increasing Retirement Age

Retirement refers to the time when people withdraw from the workforce. Traditionally, the age is set at 65, though it varies across countries. Companies and governments usually use this age to determine workers’ eligibility to receive their pension funds.

Many countries have begun raising their retirement age. In March 2024, Singapore’s Ministry of Manpower announced a plan to increase the retirement and re-employment ages to 64 and 69 in 2026. The country has planned to gradually increase retirement and re-employment ages to 65 and 70 by 2030, starting in 2019. The first increase occurred in July 2022.

In France, the government signed a law increasing the retirement age from 62 to 64 in 2023. Meanwhile, although the plan has been in talks for quite some time, the pension reforms in China have been slow to progress. The OECD projected that the retirement age will reach an average of 66.3 years for men and 65.8 years for women in 23 of 38 OECD countries. 

Ageing Population & Pension Funds

The trend of age increase in retirement is mainly caused by the ageing population. According to the OECD, the share of the population aged 65 and over is projected to rise to 27% by 2050, up from 18% in 2022. At the same time, many countries also experience declining fertility rates. In other words, the proportion of older people in society will increase while the younger population slowly declines.

How does this affect pension funds? Within the ageing population, the number of people retiring from the workforce will likely outweigh the number of working people. This could create a burden for the pension systems, where the demands for pension benefits will be higher than the contributions from the working population. Thus, keeping older workers on the job a tad bit longer is seen as a plausible solution to keep the pension systems afloat, as it will delay retirement.

The responses to retirement age increases vary across countries. In Singapore, for instance, the decision received support from Singaporean senior workers. A survey shows that almost 88% of 1,471 respondents aged 50 and above support the retirement age increase to 63 and beyond, and around 80% support the re-employment age of 68 and higher.

However, many are opposed. The passing of the pension law in France ignited protests from citizens and unions due to a lack of parliamentary voting in the process. With older workers being able to stay on the job longer, many also voiced concerns over the increasing difficulties in job searching, especially in countries with high unemployment rates. 

Additionally, there are concerns over older workers’ health conditions, inflexible working hours, outdated skills, and lack of opportunities as they rejoin the workforce. Therefore, the plan to increase the retirement age must be supported by capacity building, safety and health regulations, proper incentives, and non-discriminatory policies.

Productivity & Workers’ Wellbeing

Decent work is an essential part of sustainable development. It is crucial to pay attention to workers’ wellbeing in the pursuit of increased productivity. This includes reasonable working hours and periods, equal employment opportunities, social protection, and chances to develop their skills and abilities. 

While the decision to raise the retirement age still generates debate, there is no denying that our population is slowly changing. Governments and businesses are responsible for creating an inclusive and just system that balances profit and workers’ wellbeing in the face of change. Ultimately, the pursuit of keeping the economy and productivity in check must not be done at the expense of people’s wellbeing.

Editor: Nazalea Kusuma

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