A] Prelude
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B] The Issue
Pension systems, designed when populations were younger and life expectancy shorter, are now under immense pressure. To mitigate the impact of an ageing population, governments around the world are starting to implement a raft of measures. While there is no one-size-fits-all solution, nations are amending pension laws and updating regulations to adapt to the changing demographics. Let’s delve into the details together to examine how countries are reacting to demographic shifts across countires.
C] Argentina
In Argentina, the main pension system is the Argentine Integrated Pension System (SIPA), which is public and pay-as-you-go. However, there are 177 other systems that have special funds or special conditions.
In the SIPA system, a minimum age of 60 is required for women and 65 for men. In other systems, the age is usually lower. On average, the retirement age is 63 but there is considerable variation, since 24% of men and 1% of women retire before reaching the minimum age, due in part to early retirement schemes for certain categories of workers. The pension system presents considerable inequality regarding retirement benefits.
The main problem lies in the 30 years of contributions required to access a pension, which penalises those who do not reach this requirement. Due to issues of institutional design of the system and, above all, to broader social inequalities, this problem disproportionately affects women.
One proposed strategy to address this is to develop a system with a non-contributory pillar that guarantees a coverage floor and a contributory pillar that reflects the contributions made throughout the working life of the beneficiaries. The law in Argentina stipulates that companies cannot force their employees to retire until they are 70 years old. This law was intended to encourage employees to delay retirement.
D] Belgium
Belgium has taken a number of steps recently to address demographic shifts. It has increased the normal state pension age from the current age of 65 to 66 (as of 1 January 2025) and 67 (as of 1 January 2030). The criteria for taking the state pension early (age and career requirements) have also gradually become stricter in recent years.
A ‘pension bonus’ system was recently introduced which grants an additional net amount on top of the state pension for those who continue to work beyond the age at which they can take early retirement.
Whereas it used to be possible to take up occupational pensions before the state pension retirement age, the law on occupational pensions was changed to link the due date for the occupational pension to the state pension. In other words, the occupational pension is paid automatically when you take up your state pension. Occupational pensions thus will normally also be paid at 66 as of 2025 and 67 as of 2030.
E] Denmark
The pension system in Denmark is generally considered to be one of the most sustainable in the world. One of the reasons is that in 2006, a cross-party political agreement was made to continuously review and increase the retirement age based on life expectancy.
The retirement age is reviewed every five years, and overall there seems to be a common understanding between members of the Danish Parliament about the benefits of this system. However, as the retirement age has increased with every review since 2006, and as the younger generations currently face a retirement age of over 70, public debate about whether we have reached the limit has intensified.
One of the questions on people’s minds is about whether a distinction should be made between manual labour and office work with regard to the retirement age. This debate has led to the introduction of two special schemes providing access to early retirement subject to certain conditions. One of the schemes deals with deteriorating health and the other, seniority in the labour market.
Public debate on the sustainability of these early retirement schemes (given that the takers for them are increasing rapidly), in combination with an ongoing debate about the decreasing numbers in the workplace, has led to continued political focus on retirement. However, so far, the various initiatives being mooted are minor compared to the 2006 reform. They include tax benefits for retired employees working part-time in certain sectors (e.g. healthcare) and various schemes aimed at retaining elderly employees in some sectors of the labour market, such as additional days off.
F] Greece
In response to the challenges posed by an ageing population, Greece has implemented a series of pension reforms since Greece’s 2014 financial crisis. These include reductions in pension benefits, an increase in the retirement age, and a focus on supplementary pensions and social solidarity benefits.
The Government recently presented the National Action Plan for Demography, focusing on five main pillars: supporting families, strengthening the workforce, managing longevity/ageing, improving quality of life and promoting growth.
To stimulate the social security system, the government has recently taken the step of abolishing the pension deduction for working pensioners. This is designed to encourage continued work. Meanwhile, a new ‘special’ residence permit has been introduced to attract new migrant workers, with the aim of boosting social security inflows.
G] Netherlands
The challenges that come with an aging workforce and increasing longevity have been on the political agenda for many years in the Netherlands and have led to several changes in Dutch law.
The Dutch state pension age has been increased gradually from age 65 in 2013 to age 67 in 2024 – and the pension age is linked to life expectancy: for every 4.5 months increase in average life expectancy, the state pension age automatically rises by three months. The government announces the new state pension ages five years in advance, based on how life expectancy evolves.
It was announced in 2023 that the state pension date will rise to age 67 and three months in 2028 and will remain at that level in 2029. Due to the increase of the state pension age, temporary measures were introduced in 2021 to enable employees with physically demanding jobs to retire up to three years before the state pension date, although that arrangement is set to end in 2025.
This has caused the unions to demand the government to introduce a more permanent solution for this group of workers. Employer associations, by contrast, are in favour of solutions for those employees who do not reach the pension date in good health, but they wish to prevent the renewal of the early retirement schemes.
With regard to private sector pensions, early retirement schemes, which once were common, have been limited since 2006. In addition, recent revisions to pension legislation have led to a shift from defined benefit to defined contribution schemes, with variable pension benefits. An employment contract in the Netherlands can automatically expire when the employee reaches the state pension age and the private pension age can be brought forward or postponed to bring this in line with the state pension date.
H] United Kingdom
The state pension was reformed in 2016 with the aim of simplifying the system. Changes have also been made to equalise retirement ages for men and women. The Government continues to review the state pension age regularly, taking into account average life expectancy, among other factors.
The state pension age will rise from 66 to 67 by the end of 2028. The Government recently announced various proposed reforms to private sector pensions that are aimed in part at increasing the level of private pension wealth among individuals to help support them over retirement. In addition, the Government is considering changes to minimum ‘automatic enrolment’ requirements to increase private pension saving.
Proposed changes include reducing the eligible age for employees to be automatically enrolled into a pension scheme from 22 to 18 and widening the band of ‘qualifying earnings’ on which employee and employer pension contributions are paid. The Government also introduced tax changes in 2023 and 2024 with the intention of encouraging older employees to return to work or stay in work for longer. The changes were particularly aimed at keeping NHS doctors in the workforce.
While in general, individual engagement with pensions is relatively low, there is increasing focus in the pensions industry and in government on individuals understanding pensions and how pension saving will impact their quality of life in retirement. This is an increasingly important issue as fewer retirees have valuable ‘defined benefit’ pension income in retirement.
I] Finally: Takeaway for Employers
Employees need to stay up to date about the priorities of the next generation, without losing focus on business needs. High turnover of staff is becoming a serious issue in terms of HR strategy, owing to the demographic crisis and a highly competitive labour market. Therefore, focussing on ESG, pay transparency and gender equality – to name but some of the features that are highly prized by Gen Z – will be crucial, and will give those employers that do so a competitive edge.