Pensions gap a global problem

RIA Novosti / Mikhail Beznosov
The retirement age across the world should be raised to 67 years otherwise the world could plunge into a global pension crisis.

Research by Moscow-based investment bank Renaissance Capital concludes this is the minimum retirement age that can be currently afforded, and there’s no guarantee this threshold will not have altered in the future.

The scale of the problem in different countries depends on the way retirement benefits are paid –it is either paid by national or by private pension funds. In countries where payments are made exclusively through the national fund such as Hungary are exceptionally vulnerable. There pensions make up about 9% of the country’s GDP. Italian pensions make up to 16 percent of the country’s GDP, with almost all of that covered by the government.

Another important issue is the ratio of working people and retirees. The number of people aged 20 to 64 is on the decrease while there’s an increase in the number of retired people over 65. Japan is the country where this ratio has grown to alarming proportions with pension benefits amounting to over 35% of total budgetary spending.

As the financial crisis deepened last year, the call to increase the retirement age became more vocal. The opposition to the proposal has also been strong, but decreasing, as debt-struck governments are introducing tough austerity measures.

The current age when men stop working in Russia is 60 while women can retire 5 years earlier. After they retire men usually live up to 14 years, while women enjoy about 20 years without work. Last year the proposal to increase the retirement age in Russia caused a lot of controversy among experts and government officials. Some were saying it would allow the country to raise benefits and stabilize the pension system. Others were saying the life span in Russia is not long enough and before making people work more, the government should do everything to encourages them to live longer.

In Germany, a retirement age of 67 but has "generally been accepted" and doesn't appear to be a problem given the country's relatively low jobless rate. In France, on the other hand, attempts to raise the retirement age have been met with fierce resistance. In 2010 the age was raised from 60 to 62 to reflect rising pension costs.

In the U.K. there is great dissatisfaction among public sector workers who are being asked to pay more to fund their retirements as policy makers trying to fix the problem of an ageing population and a shrinking tax base.

The authors of the Renaissance Capital report suggest the situation can be improved if more pensions are secured by pension funds, and not the governments. Thus they will not only ease the burden on the government, but also become a source of investment.