Retirement is becoming more and more of a pipe dream for workers. A troubled global economy paired with longer life expectancies is forcing many to continue to work far past the age they imagined because of a lack of sufficient savings. This shortfall has spurred many governments to increase the age when citizens can receive money from social security plans in an effort to minimize the number of people in the system. But not every country has been proactive enough to provide their inhabitants with an adequate retirement income. Here’s a look at retirement rules and benefits available to citizens around the globe.
In 2011, the U.K. government ended fixed retirement in the country, which means that employers can no longer force staff to quit simply because they are 65 or older. Men born before Dec. 6, 1953, can begin drawing a state pension at age 65. Women born after April 5, 1950, but before Dec. 6, 1953, have a State Pension age is between 60 and 65. As the average life expectancy increases, the government has proposed increasing the pension age to 67 between 2026 and 2028. Workers in the U.K. can continue to work after they reach State Pension age and still receive their State Pension. They can also put off claiming their State Pension, which might make them eligible for extra State Pension funds or a lump-sum payment when they claim it.
In 2013, HSBC Bank issued a survey that revealed that the average retirement savings amount in the U.K. is £73,000 (about $122,000 USD) for men and £53,000 (about $88,425 USD) for women. However, those who have financial plans and have received professional advice (about 40% of U.K. households) averaged a savings of £123,000 (about $205,213 USD). People in the U.K. are choosing to retire later in life than in years past. According to the Office for National Statistics, the average retirement age for men rose from 63.8 years in 2004 to 64.6 years in 2010, and from 61.2 years to 62.3 years for women over the same period. The HSBC 2013 survey also revealed that only about 60% of respondents stated that their retirement savings were adequate, and that just over 80% of all retirement income came from a combination of government and corporate pensions.
Under the Retirement Age (RA) Act, the minimum age of retirement in Singapore is 62. An employer can mandate retirement on the basis of age the day before a staff member's 62nd birthday. Employers do not have to pay retirement benefits to an employee unless it is stated in the employment contract. There is also a provision in the RA Act that gives employers the option to reduce the wages and/or fringe benefits and bonuses of employees 60 and older by up to 10% when extending their employment beyond 60. To justify the reduction, an employer must prove changes in an employee's productivity, performance, duties and responsibilities.
The Singapore government implements a comprehensive social security savings plan called The Central Provident Fund (CFP). Under the plan, all working Singaporeans and their employers make monthly contributions into three CPF accounts. Savings in the Ordinary Account can only be used for specific expenditures such as investment, education, CPF insurance and/or to purchase a home. The Special Account is earmarked for a person's elderly years and investments in retirement-related financial products. Finally, the Medisave Account can be used for medical expenses, such as hospitalization costs and approved medical insurance. The government encourages retirees to supplement their CPF with personal savings. Analysts of the system say that most Singaporeans aged 65 and above have about $62,000 (about $49,000 USD), stashed away in their CPF accounts. The HSBC 2013 survey revealed that Singapore is one of the best prepared nations on earth for retirement, with a whopping 88% of respondents stating that they were able to save enough during their working years to retire comfortably.
This country in Southeast Asia enforces a compulsory retirement age of 60 for public sector employees. Early retirement is an option at age 40 after at least 10 years of government service. Public sector workers are provided with two types of retirement schemes, including the pension scheme, which entails a monthly fixed income, a service gratuity and free medical treatment at government hospitals. The Employees Provident Fund scheme provides for retirement through a mandatory savings account in which employees and employers make monthly contributions. The government has a mandatory retirement savings scheme for all Malaysians working in the private sector. The retirement age in the private sector is 60. The HSBC 2013 survey shows that just over three-quarters of respondents had saved enough for retirement, although nearly half of those who were not prepared did not realize that they were underfunded until after they had stopped working. The percentage of retirement income that comes from pensions is much lower in Malaysia than many other countries, with public and private pensions combining to comprise a mere 30% of all retirement income.
The age at which U.S. citizens are eligible for full retirement benefits ranges from 65 to 67, depending on their year of birth. Early retirement begins at 62; at this age people can begin receiving a fraction of their full retirement payout. The Employee Benefit Research Institute (EBRI) 2014 retirement confidence report states that the percentage of workers confident in their retirement savings finally increased this year, following record lows from 2009 to 2013. Unfortunately, 24% of respondents still described themselves as not at all confident in their savings. Notably, the least confident respondents tended not to have a specified retirement plan. The HSBC 2013 survey shows that a mere 55% of Americans were financially prepared for retirement, and about 40% of all retirement income comes from Social Security and corporate pensions.
Down under, the social security program is called Age Pension. The government describes Age Pension as "an adequate income in your retirement." To receive Age Pension you must be at least 65 and meet the 10-year qualifying Australian residence requirements. Income, assets and other circumstances affect how much pension an Australian worker will get. From July 1, 2017, the qualifying age for Age Pension will increase from 65 to 65.5 years. The qualifying age for Age Pension will then rise by six months every two years, reaching 67 by July 1, 2023. Australia has a relatively conservative and mandatory retirement saving system for its citizens, which requires them to put away 9% of their salaries every year into a private/public 401(k) called a superannuation account. In 2010, the University of Canberra's NATSEM unit found that women aged 55 to 64 years were estimated to have an average superannuation balance of about $54,500 AUD (about $48,887 USD), with average male superannuation balances at $113,200 AUD (about $101,540 USD). In 2010, former Australian Prime Minister Kevin Rudd announced that the savings requirement would be raised to 12% over the next decade. As of 2013, only about 60% of the Australian HSBC survey respondents said that they had adequate retirement savings; 43% of pension income comes from the state, with another 25% from personal pensions.
In the wake of its first budget deficit since the mid-1990s, the Canadian government announced the eligibility age for Old Age Security (OAS) and the Guaranteed Income Supplement (GIS) would gradually raise from 65 years of age to 67 by 2029. OAS is funded completely through government revenues as part of the country's public pension system. Canadian citizens or permanent residents 65 and older who have lived in the country for at least 10 years are eligible for OAS. Pension increases in accordance with the number of years a person has lived in Canada. Low-income Old Age Security recipients can also draw a monthly, non-taxable benefit from the Guaranteed Income Supplement. The average Old Age Security payout is $510.21 a month. Seniors who make less than $69,562 annually are eligible for the maximum payout of $540.12 a month. Those earning more than $112,772 cannot draw a pension from OAS.
To learn more about RRSPs, check out How are Registered Retirement Saving Plans (RRSPs) taxed?
On average, Canada's seniors get $492.26 a month from the GIS. The maximum payout is set at $732.36 a month for those who make less than $16,368. In 2010, Canada's personal retirement savings rate was at 5% of income – a far cry from the 20% of income that the average Canadian saved in 1982. Statistics Canada reports that in 2012, Canadians contributed to a registered retired savings plan (RRSP) for a total of $35.7 billion in contributions. And in 2014, the Bank of Montreal found that only 43% of the people they surveyed planned to make an RRSP contribution. The biggest reason Canadians noted for not contributing is that they simply can’t afford it. The HSBC 2013 survey shows that Canada is one of the least prepared nations in terms of retirement savings; fewer than 55% of respondents stated that they were financially prepared for retirement. The percentage of retirement income in Canada that comes from pensions is also one of the highest in the world, with three-quarters of all retirement income coming from either public or private pensions.
The Bottom Line
Retirement is handled differently, depending on where you live in the world, but it seems that most individuals and governments struggle with how to fund life after work. Your best bet is to take matters into your own hands; don’t count on government programs to sustain you through your retirement.