Economic Survey bats for higher retirement age; women to benefit

One of the reasons behind a proposal to increase retirement age is an increasing pressure on pension funding. - The Federal
One of the reasons behind a proposal to increase retirement age is an increasing pressure on pension funding.

Given that life expectancy for both males and females in India is likely to continue rising, the Economic Survey 2019 has pitched the government to consider increasing the retirement age.

Currently, the retirement age for central government employees is 60 years in India.

One of the reasons behind such a proposal is an increasing pressure on pension funding. “This will be key to the viability of pension systems and would also help increase female labour force participation in the older age-groups,” the Economic Survey noted.

In 2017-18, the government spent ₹1.45 lakh crore on pension. The government’s spend on pension was expected to exceed the expenditure on salaries (₹1.58 lakh crore) by nearly ₹10,000 crore in 2018-19, as per the Medium Term Expenditure Framework, tabled in the Lok Sabha in August last year.

According to the Finance Ministry, the trend will continue for two more years till March 2021.

Also read: Economic Survey: Finmin says slowdown in growth only ‘slight moderation’

Since an increase in the retirement age is perhaps inevitable, the survey has recommended that the change should be signalled at least 10 years before the anticipated shift. This would help the workforce plan in advance for pensions and other retirement provisions.

India is not the first country to put forth this proposal. Countries such as Germany and France have increased their retirement age. The US is planning to increase the pension benefit age to 67 years for those born in 1960 or later from the existing 66 years and 2 months for people born in 1955. Some countries such as Australia and the UK, where the retirement age for women was lower than men, have changed the rules to bring them at par.

“Many countries such as Germany, the UK, and the US have signalled that they will keep increasing the retirement age according to a pre-set timeline,” the Survey said. Similarly, Japan and China are planning to increase the retirement age to 70 and 65 years, respectively.

Also read: India’s economic survey and the quest for a $5 trillion economy

Retirement age reforms that are being implemented or are under consideration in major economies include:

Germany: Retirement age to increase gradually to 66 years by 2023 and to 67 years by 2029.

US: Pension benefit age to rise gradually to reach 67 years for those born in 1960 or later.

UK: State pension age to increase for both men and women to 66 years by October 2020, and further to 67 years between 2026-28 and to 68 years between 2044-46.

Australia: Pensionable age scheduled to increase gradually to 67 years by 2023.

China: Under consideration to raise the retirement age for women by 1 year every three years and for men by 1 year every six years so that by 2045, the retirement age for both men and women would be 65 years.

Also read: Union Budget: Key takeaways from Economic Survey 2019