Employers urged to help educate older employees on pensions options

Pension reforms in European Union member states encourage later and more flexible retirement, and the combination of pensions with salary. Policy makers and the European Commission have also realised that increasing the participation rate of older workers is crucial in implementing these reforms and to finding real solutions to the demographic challenge.

In the context of think-tank The Geneva Association’s research programme on Pensions, Insurance and Employment (entitled The Four Pillars), we have studied extending working life as a complementary solution to the future financing of pensions.

Over the last two generations, a revolution has taken place in education and training in all developed countries, and, overall, young people have access to much longer studies and training, and to better qualifications. They enter the world of work later than ever in the past. Although it varies from country to country, the age of entry is often at 20 years or even later. This is in stark contrast to the age at which many employees leaving their job today started work, which was often between the ages of 14 and 17 years. This age of entry varies not only from one generation to the next but also within the space of a single generation and depends mainly on the educational level of the individuals concerned.

When pension systems require 40 or more contribution years, the age of entering work will of course be critical. It is precisely for this reason that many social scientists consider a single retirement age for all a socially unfair criteria. Moreover, tasks also differ greatly from one branch and from one category of worker to the next. The building industry, for instance, is an obvious example of a trade where most employees simply cannot work for forty years.

So should retirement age be based on the arduousness or inherent stress of a job? Yes, in principle, and it is precisely for this reason that different ages for retirement have already been put in place for workers such as firemen, military personnel and pilots. Nowadays, all countries have a number of specific retirement conditions for certain categories of worker.

Must the privileges and special concessions of the past be maintained when conditions have changed?

Almost certainly not. And yet the second halves of many careers need reassessment and extensive redesign to include functions which are less active and more sedentary in nature. Alternatively, for example, firemen or nurses who need to retire before their peers could be found part-time tasks in other fields. Education, cultural pursuits and training, for instance, offer numerous opportunities for second careers.

For example, hospital nurses from the age of 55 years often find it difficult to continue working full-time. Teachers find it difficult to teach after the age of 55 years. They often could reduce their working time and can be employed in another industry.

But can the arduousness of a job or function be actually measured? Measurement is certainly difficult to do especially when working conditions are changing constantly. One more obvious approach to the problem is to examine life and health expectancies. For these reasons, the notion of retirement age should be gradually replaced by the number of contribution years to pension schemes. It is essential that, in the future, pension plans be based on more objective and fairer criteria than hitherto. It has been suggested, incidentally, that, save for special cases where early exit is a compensation for certain recognised disadvantages, the situation of public sector workers should now be brought into line with those in the private sector. Most countries have already been able to meet these criteria. Others including the UK and France still suffer from disparities in the age and conditions of pensions.

If then, for sound economic and financial reasons, society expects employees to remain longer in the labour market, the need for a diversity for older workers must equally be accepted. If major resistance to the new measures is to be avoided, employers must ensure that the new policies pave the way for a wide range of end-of-career options and employees’ transition into retirement.