Pensioners / Pension-benefit, work after 70 – What changes in age limits

“If for today’s workers over 50 the pensionable earnings they will receive at the far end of their working life and over the age of 70 will not be enough to survive, for the younger generations, the Millennials and Generation Z, it is very likely there won’t even be any pensions’… This grave possibility was recently bluntly described by BlackRock CEO Larry Fink, warning of an impending pension crisis in the United States that will flash across the Atlantic, ending even and in the remnants of the social state that are left (AUGI. 31.3.2024).

In the end, the scenario is probably not so extreme that the younger generations, when the time comes for retirement, will be limited to a type of allowance that, in the best case scenario, will be granted in some European countries by state calculations. Because there may not even be this allowance instead of the drastically reduced pension that today’s 50-year-olds will receive in their old age. And the reason is none other than the gradual withdrawal of the state from the insurance system and the funding of pensions that has started since 2000 and will culminate in the coming years.

The reduction of pensions

This tragic scenario is largely confirmed by an actuarial study by the National Actuarial Authority that was used for the European Commission’s report on demographics and its fiscal consequences for the EU economies. According to the report, young people born in the midst of the economic crisis (2008 and after) will have to complete at least 39 years of working life to get a pension of around 800 euros. In fact, as insurance analysts predict, those who retire near 2070 and at the age of 72.5 years (due to the increase in life expectancy) will continue to work into their old age, as they will not be able to survive on such low retirement incomes.

For Greece, these ominous developments become even worse for two reasons:

* Firstly, because by memorandum of law it is one of the few countries that have already linked the course of the general retirement age limits to the course of life expectancy, with the condition that they be reviewed every three years.

* Secondly, because in the following years the replacement rate decreases significantly. That is, while in 2022 the replacement rate of pensions is at 76% of income from work (salary), it will be limited to 65% in 2040 and will reach 53% in 2070. To understand practically what the reduction of rates means replacement, if an employee has a salary of 1,000 to 1,200 euros in his last five working years, the pension he will receive will be 500-600 euros.

In addition, with the extension of the working life of young workers and the drastic limitation of early retirements, the net pension expenditure, from 12.6% of GDP, is estimated to reach 10.6% of GDP in 2070. In other words, the insurance is sustainable based on the numbers and the commitments the country has made, yet tomorrow’s retirees will be essentially penniless!

The increase in age limits

The general age limit, from 67 years in 2022, will reach 68.5 years in 2030 and 72.5 years in 2070. Which means that today’s teenagers will be forced to stay in the labor market for many more years. As the EU report shows, in 2022 the average retirement age was 63.8 years. In 2040 it will be 66.4 and in 2070 67.9. Accordingly, while in 2022 someone who retired should have paid contributions for an average of 31.9 years, in 2040, due to the consequences of the financial crisis and high unemployment, the average contribution will fall to 31.5 years, but to increase to 38.4 years in 2070. As for the amount he will receive, it will be significantly reduced.

Also, in its report on the pension systems of its member countries, the OECD, referring to Greece, estimates that perhaps by 2050, due to an improvement in life expectancy, the age limit should be increased by 2.8 years. We note that Greece has the highest retirement age together with France (67 and 62 years after the Macron reform) and Italy (67 and 64 years).

Increase in life expectancy, decrease in population and labor force

The most important elements from the projections of the National Actuarial Authority are as follows:

* The population of our country is decreasing, from 10,438 million in 2022, to 7,777 million in 2070.

* The elderly dependency ratio increases, from 39 in 2022, to 74.4 in 2050 and then decreases to 66 in 2070.

* Life expectancy at birth for men increases from 78.8 in 2022 to 86.5 in 2070 and for women from 84.2 in 2022 to 90.4 in 2070.

* Life expectancy at 65 for men goes from 18.7 in the base year to 23.9 at the end of the projection period, while for women it goes from 21.7 to 26.7. It should be noted here that the evolution of life expectancy at 65 is an important factor in projection, as statutory retirement ages are automatically linked to this factor.

* Net immigration on the population decreases, from 0.2% in 2022, to 0% in 2030, reaches 0.1% in 2040 and stabilizes at 0.2% in 2060.

* Labor force participation is projected to increase for workers aged 20-64, from 75.4% in 2022, to 79.9% in 2070 and for workers aged 20-74, from 64.7% in 2022 , to 69.7% at the end of the run.

* Labor force participation is projected to increase for workers aged 55-64, from 57.4% in 2022, to 78.2% in 2070 and also for workers aged 65-74, from 9.3% in 2022 , to 24.3% in 2070.

* The employment rate of workers aged 65-74 increases, from 8.6% in 2022, to 23.3% in 2070, which affects projection results.

* Due to pension reforms, the average payback period, i.e. the length of time someone will have to pay contributions, will reach 38.4 years (38.5 for men and 38.3 for women) by 2070.

* The proportion of adult life spent in retirement remains stable for both men and women at 30% over the projection period.

* The total expenditure on main benefits-pensions is 12.6% of GDP in 2022. Gross public pension expenditure amounted to 14.5% of GDP in 2022, while the corresponding figure for 2070 reaches 12%. This represents an overall reduction of 2.5 percentage points of GDP over the projection period 2022-2070. The maximum value of 14.5% of GDP is met in 2022.

* Expenditure on the new supplementary TEKA gradually reaches 0.2% of GDP in 2070. Overall gross pension expenditure reached 14.5% of GDP in 2022, while the corresponding figure for 2070 reaches 12.2%. This represents an overall reduction of 2.3 percentage points of GDP over the 2022-2070 projection period. The peak value of 14.5% of GDP appeared in 2022.

* The net pension expenditure was in 2022 at 12.6% of GDP and is estimated to reach 10.6% of GDP in 2070. Net total pension expenditure in 2070 (including TEKA expenditure) reaches 10.6% of GDP.

* Total pension contributions (including employers’ and employees’ as well as contributions to TEKA) decrease, from 12.5% ​​of GDP in 2020, to 11.7% of GDP in 2070.