Retirement is becoming more and more of a pipe dream for many 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. However, not every country has been proactive enough to provide its inhabitants with an adequate retirement income. Here’s a look at retirement rules and benefits available to citizens around the globe.
- Changes in the global economy, paired with longer life expectancies, are forcing many individuals around the world to continue to work far past the age they imagined because of a lack of sufficient savings.
- Depending on the country you live in, there are many different retirement rules and benefits available to citizens; the U.K., Singapore, Malaysia, the U.S., Australia, and Canada all have very different approaches to ensuring that their citizens have adequate retirement income.
- While some countries, such as the U.K., have mandatory retirement ages, other countries, such as Singapore, offer programs for re-employing retired workers as a means of providing its older citizens with more employment opportunities.
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. It has also increased the State Pension age, which used to be 60 for women and 65 for men, on a sliding scale that started in 2011. It becomes 66 for both men and women, as of October 2020, and it will increase 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 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 2018, a survey by HSBC Bank called "The Future of Retirement: Bridging the gap," asked working-age women with a spouse or a partner if they had contributed less to retirement than their partners. At that time, 35% of respondents in the U.K. said "yes." This was compared to 9% of men in the U.K.
Out of the 16 countries surveyed (U.K., Australia, Argentina, Mexico, Canada, U.S., U.A.E., Malaysia, Hong Kong, Singapore, India, France, Turkey, Taiwan, China, and Indonesia), the U.K. reported the highest number of women who had contributed less to their retirement than their partner.
Australia came in second, with 29% of women reporting that they had contributed less to their retirement than their partners (as compared to 10% of men).
In 2013, the same survey by HSBC Bank revealed that the U.K. was the worst in the world at saving for retirement. The average retirement savings amount in the U.K. was £73,000 (about $95,545.98 in U.S. dollars) for men and £53,000 (about $69,369.00 in U.S. dollars) for women. However, those who had financial plans and had received professional advice (about 40% of U.K. households at that time) averaged a savings of £123,000 (about $160,988.43 in U.S. dollars).
People in the U.K. are also 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.
In Singapore, there is a statutory minimum retirement age, which is currently set at age 62. This means that an employer can require an employee to retire upon reaching that age and prohibits any employers from terminating an employee on the grounds of age prior to reaching age 62.
At the same time, Singapore also maintains a re-employment program, per the Retirement and Re-Employment Act. This act is intended to provide older workers with employment opportunities. Employers may be required to "re-employ" a retired worker up to the "re-employment" age, which is currently set at 67 years of age. In order to be eligible for re-employment, an employee must meet certain criteria:
- A Singapore citizen or permanent resident
- Worked for their employer for at least three years prior to reaching the minimum retirement age
- Satisfactory work performance as assessed by the employer
- Medically fit to keep working
Under the Retirement and Re-Employment Act, the employee must be "re-employed" for at least one year (and the employment being renewable each year up to the "re-employment age").
Employees are not required to be "re-employed" if they choose not to be. However, an employer that is not able to provide a re-employment opportunity to one of their employees must make an Employment Assistance Payment (EAP) to the employee. This payment is generally 3.5 months' salary.
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 four CPF accounts. Savings in the Ordinary Account can only be used for specific expenditures such as investment, education, CPF insurance, or to purchase a home.
The Special Account is earmarked for a person’s elderly years and investments in retirement-related financial products. The Medisave Account can be used for medical expenses, such as hospitalization costs and approved medical insurance. Finally, the Retirement Account is automatically created when an employee turns 55 years old.
The government encourages retirees to supplement their CPF with personal savings. A 2017 government report stated the average balance for all CPF members was $87,400 in 2016.
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, though 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 in 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 66 to 67, depending on their year of birth. Early retirement begins at 62 when people can begin receiving a fraction of their full retirement payout.
The Retirement Confidence Survey (RCS) for 2020 finds only 27% of retirees very confident in their ability to live comfortably throughout retirement, and this is following record lows from 2009 to 2013. Unfortunately, 32% 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. According to a 2019 report by Northwestern Mutual’s 2019 Planning and Progress Study, 15% of the 2,003 adults surveyed have saved not one single dollar for retirement.
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 66 and meet the 10-year qualifying Australian residence requirements.
Income, assets, and other circumstances affect how much pension an Australian worker will get. As of October 2020, the qualifying age for Age Pension is 66 years. It will 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 9.5% of their salaries every year into a private/public 401(k) called a superannuation account. This amount will be raised to 12% between 2021 and 2025.
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 $39,333 in U.S. dollars), with average male superannuation balances at $113,200 AUD (about 81,700.97 in U.S. dollars).
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. However, in 2019, the government of Canada restored the age of eligibility for OAS and GIS benefits from 67 back to 65 to help ensure future vulnerable seniors do not face higher risks of living in poverty. Eligibility will remain at age 65 as part of an effort to guarantee that seniors do not have to wait two additional years to collect their OAS and GIS benefits.
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, nontaxable benefit from the Guaranteed Income Supplement. The average Old Age Security payout is $600.85 a month. Seniors who make less than $123,386 (individual income) annually are eligible for the maximum payout of $600.25 a month. Those individuals earning more than $123,386 cannot draw a pension from OAS (figures reflect the amounts made for December 2018).
On average, in 2018 Canada’s seniors got $947 a month from the GIS. In September 2020, the maximum payout from the GIS was $916.38. According to a 2018 CIBC poll, 32% of Canadians between the ages of 45 and 64 have nothing saved for retirement.
The average amount that Canadians had saved for retirement was only $184,000, while 30% of respondents said they have no retirement savings and 19% have saved less than $50,000.
The biggest reason Canadians noted for not contributing is that they simply can’t afford it. 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.