Is it time to end the retirement age? And what about the players in the concert economy?
Lead author of the Mercer CFA Institute Global Pension Index says it’s time to overhaul the retirement savings system because it no longer works for many. Photo: Getty
- As more and more people live longer, retiring at age 60 or 65 means that some are running out of retirement cash.
- But working a little longer and abolishing the retirement age could solve this problem.
- Lead author of the Mercer CFA Institute Global Pension Index says it’s time to overhaul the retirement savings system because it doesn’t work for many anymore.
Lead author of the Mercer CFA Institute Global Pension Index says it’s probably time to rethink the concept of retirement age.
While the retreat is often sold using photos of people sailing their yachts on pristine ocean waters, the reality is that more and more people, especially in developing countries, are struggling to join the two. tips in retirement. In South Africa, less than one in ten people with a formal job save enough for a comfortable retirement.
David Knox, lead author of the Mercer CFA Institute Global Pension Index, believes the rigid system of assuming people will work and save for retirement uninterrupted for 40 years clearly does not work for everyone.
In Australia, where Knox is based, there is no official retirement age.
“We have an official state retirement age, so if you are poor you can get a pension from a certain age. But there is no retirement age,” he said at Allan Gray’s inaugural pension benefits conference Thursday.
Of course, you have to “gradually retire” to make room for young people to access these jobs, Knox said. But he said if the government wants to encourage people to work beyond the age of 60 to support themselves instead of depending on the state if they can’t, he said they should think about “completely abolish the retirement age”.
“We’re not suggesting that people have to work so necessarily between 60 and 65. But if you work a little longer, not only can you save a little more, but you shorten your retirement years,” Knox added. .
Bringing the odd-job economy under the retirement net
The other reason Knox thinks the world needs to overhaul the retirement system is that an increasing number of people are not working full time, as was the case when the idea of retirement savings was first introduced. conceptualized for the first time.
The growing number of people participating in the odd-job economy do not benefit from membership in a pension fund as do full-time employees. The current system also leaves the self-employed to their own devices when it comes to choosing whether or not to purchase retirement pensions. The argument has always been that entrepreneurs create businesses that they will someday sell and live off of their golden years.
“Well, I’m sorry, but most freelancers can’t do that… I think we need a system that captures everyone who works. And the obvious way to do it, I think, is through the tax system. Knox said.
He said if a person has an income that is taxed then the government already has a framework to include it in some form of retirement contribution. He said several Scandinavian countries have found a way around this system. They ask anyone with fluctuating incomes to estimate what they will earn in a year and then set a pension contribution rate based on that. If a person earned less than they estimated, they get a credit for their pension contributions for the following year.
Knox said that while it’s not a perfect system due to the moving target, it’s still better than leaving a large chunk of the workforce out of the retirement system knowing that they will become the problem of the ‘State or someone else.
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