Retire in France at 62? In Turkey, It’s 45

29-Oct-2010

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by Andrea Coombes, Market Watch

In France, workers took to the streets in angry protest when lawmakers first proposed hiking that country’s retirement age for full pension benefits to 62, from 60, but in many other countries, workers would welcome an age-62 rule. Except Turkey.

In Turkey, the retirement age now is essentially 45 for men and 41 for women, according to a report in October by the Organization for Economic Cooperation and Development, a research and policy group with 33 member countries.

Turkey abolished its standard retirement age in 1969; ever since, a worker’s years in the labor market determine when he or she can claim benefits. Pension rules are complex, but essentially about 25 years of service are required in Turkey. Assume that people start working at age 20, as the OECD did for its report, and you get people retiring in their mid-40s with a full pension.

Of the 30 countries the OECD studied, Turkey has the lowest age for receiving full retirement benefits. Greece came in second, with a retirement age of 57 for men and women. The Slovak Republic? 57 for women, but 62 for men.

Workers in the U.S., Iceland and Norway: dream on. Those are the only countries on the list with a full retirement age right now that tops 65 for men and women — Iceland and Norway are already at 67 for men and women, and the U.S. is moving in that direction (see table at the end of this story).

But men in 20, and women in 16, of the 30 countries studied face higher retirement ages than the age 62 that France’s parliament appeared ready to approve Wednesday.

Countries reduced pension ages not long ago

Retirement ages are marching higher as more countries face the fact that, with average lifespans getting longer and government budgets getting tighter, generous pensions may be unsustainable. By 2050, the average retirement age in the 30 countries studied rises to about 65 for men and women, up from an average of 63 for men and 61.9 for women this year.

Here’s a main reason why: From 1960 to 2000, the average life expectancy for a 65-year-old man in an OECD country grew by 4 years, and women gained more than 5 years. From 2010 to 2050, 65-year-old men are expected to gain another 3 years, for an average lifespan of about 85 years, and women that age are expected to gain 3.6 years, for an average lifespan of almost 90 years. Read the full report on the OECD website.

But raising retirement ages is a relatively new trend. Between 1950 and 2010, 10 countries cut the retirement age for men and 13 did so for women, the report said.

“The average pension age in 30 OECD countries fell from 64.3 years in 1949 to a nadir of 62.5 years in 1993 for men, a drop of nearly two years,” the report said. “For women, the fall over the same period was also just below two years, from 62.9 to 61.1 years in 1993.”

The average retirement age in OECD countries is still lower than it was in 1950; for men it won’t reach its 1950 level until 2040, while women will reach the 1950 level by 2020.

Despite women’s longer average lifespan, many countries offer them a younger retirement age. For instance, in the United Kingdom, women’s pension age is 60, compared with men’s 65. In the Czech Republic, women can retire at about age 59, versus men’s 61.

About half of the countries studied had different ages for women and men at some point, but 12 of those 15 countries have made moves to make their retirement age the same for both sexes, the report said.

Rules in flux, and complicated

As in many countries, Turkey’s law is changing: by 2050, men will have to wait until about age 62 to retire with full benefits; for women it’s about 61.

And keep in mind that pension rules are complex. Many countries have a range of ages, and the details vary widely. The OECD’s figures reflect the age at which a person can retire and receive full benefits — not reduced for claiming early — assuming that person started working at age 20.

“The number we have tried to get is as broadly comparable [across countries] as we can, when you get full benefits, provided you are a full-career worker who starts at age 20,” said Edward Whitehouse, the Paris-based head of pensions in the OECD’s Social Policy Division, in a telephone interview.

Squeezing that sample worker into various countries’ pension formulas can lead to some slightly odd results. For instance, France’s pension rules include a years-of-service rule. Currently (before the age-62 rule goes into effect), a 60-year-old can retire without a reduction in pension benefits if he worked a full 40-1/2 years; that rises to 41 years in 2012.

“For France, the reason we came up with 61 is that actually, although the pension age is broadly 60, our worker is a full-career worker from age 20,” Whitehouse said. That worker “wouldn’t be able to retire with a full pension until age 61, because of the 41-years rule.”

Another example: Belgium’s retirement age is 65, “but actuarially un-reduced benefits are available from age 60 with 35 years’ contributions,” the OECD report said.

Another complication: Some countries have more than one pension plan — Sweden has four. The study generally focuses on the most widely available age-based plan.

Retirement ages, by country and year

1971 1971 2010 2010 2050 2050
Women Men Women Men Women Men
Australia 60 65 62 65 67 67
Austria 60 65 60 65 65 65
Belgium 60 60 60 60 60 60
Canada 68 68 65 65 65 65
Czech Republic 55 60 58.7 61 65 65
Denmark 62 67 65 65 67 67
Finland 65 65 65 65 65 65
France 65 65 60.5 60.5 61 61
Germany 60 63 65 65 65 65
Greece 57 57 57 57 60 60
Hungary 55 60 59 60 65 65
Iceland 67 67 67 67 67 67
Ireland 70 70 65 65 65 65
Italy 55 60 59 59 65 65
Japan 60 65 65 65 65 65
Korea N/A N/A 60 60 65 65
Luxembourg 65 65 60 60 60 60
Mexico 65 65 65 65 65 65
Netherlands 65 65 65 65 65 65
New Zealand 60 60 65 65 65 65
Norway 70 70 67 67 67 67
Poland 60 60 60 65 60 65
Portugal 65 65 65 65 65 65
Slovak Republic 55 60 57 62 62 62
Spain 65 65 65 65 65 65
Sweden 67 67 65 65 65 65
Switzerland 60 65 63 65 64 65
Turkey 60 60 41 44.9 60.8 62.3
United Kingdom 60 65 60 65 68 68
United States 65 65 66 66 67 67
Average 62.1 63.9 61.9 63 64.4 64.6

Source: OECD (Note: data predates France’s age-62 rule)

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