January 2020

Research
Institute
Rethinking retirement

Thought leadership from Credit Suisse and the world’s foremost experts
Editorial

Retirement has become an integral part of our Current data on effective retirement ages and
life biography: after education and years of labor force participation of older people show
work comes well-deserved rest. Many people that a shift toward a later exit from the labor
tend to take this rigid three-stage structure of market is actually already taking place at least
life for granted, as if it had been in the nature to some extent in most developed economies.
of every human being for a long time. What is However, there are still obstacles due to the
often forgotten, however, is that the concept of structure of retirement systems or the mentality
retirement as a formally defined end of working of employers and employees. Interestingly, in
life only came into being in the 19th century, developing countries, where the three-stage
when the first forms of financial support for the lifecycle has not been as predominant, attitudes
elderly, funded by the state, were introduced. toward work beyond retirement age are often
Until then, lifelong work had been a reality for much more open than in the developed world,
many generations. not only due to financial needs when pension
coverage is low, but because people in these
Today, increased life expectancies mean that we countries have been less accustomed to retire-
can remain active for longer and that the rising ment as a work-free stage of life.
imbalance between retirement and working life
will be a problem for an increasing number of To maximize the advantages of a longer life,
people and economies in the long term. In turn, both education and traditional career paths need
the transition to more flexible working models to be reconsidered. Retirement systems need
means that rigid employment careers are no to be sustainable and respond to the needs of
longer necessarily the rule. In other words, 21st a changing society. To disarm the demographic
century lifespans and changes in how we learn “time bomb” and unlock the longevity dividend,
and work are creating the space for even more we need to rethink retirement.
life stages to emerge.
We hope that our findings will prove valuable and
I wish you a most insightful read.

Urs Rohner
Chairman of the Board of Directors
Credit Suisse Group

2
02 Editorial

04 Introduction

07 1. Aging societies and the retirement wave

13 2. The long way to sustainable retirement

provisions

24 Retirement income plans for the 21st century

27 3. The multidimensionality of age

31 Japan’s “adjustment approach” to the future of

retirement

33 4. Attitudes toward retirement

41 The hidden market advantage of being over 50

43 5. The changing face of retirement

55 Work and pensions in the 21st century

57 References

58 About the authors

59 Guest authors

60 General disclaimer / important information

Authors
Dr. Sara Carnazzi Weber
Dr. Jan Schüpbach
Emilie Gachet
Gabriel Staub
Pascal Zumbühl

Guest authors
Keith Ambachtsheer
Monika Bütler
Masa Higo
Andreas Rudolph

Contributors
Christa Jenni
Ross Hewitt

Credit Suisse Research Institute

[email protected]
credit-suisse.com/researchinstitute

Rethinking retirement 3
Introduction

The reality of aging societies Rethinking retirement

Rising life expectancies and falling fertility rates Our society needs to rethink retirement. We
have led to aging societies becoming a reality should reconsider the traditional concept of
in many countries across the globe. What has the three-stage lifecycle – education, working
so far primarily been an issue in developed life and retirement – and increasingly make
countries is also becoming a concern for the provision for new forms of work (e.g. part-time
developing world. Sooner or later, govern- or temporary employment) and further educa-
ments worldwide will have to address questions tion that can ease the transition into a longer
associated with aging societies: how to ensure working life. At first glance, the idea of a longer
financial security for a growing number of retirees working life may sound exhausting. However,
and how to establish a sustainable pension allowing for more flexibility can help workers to
system for future generations. Unfortunately, reconcile work with investments in relationships
policymakers are increasingly facing opposition and health.
to reforming pension systems.
Workers have the opportunity to shape their
Therefore, many countries have delayed the own working lives in accordance to their needs.
debate about the adjustments needed to solve Thus, allowing for more flexibility during an
this imminent crisis. However, the longer the extended working life can help an increasing
debate is delayed, the more difficult it will share of workers to unlock a longevity dividend
become to reverse the negative consequences or, more generally, to regard the additional
of postponement. Developing countries have years as a gift rather than a burden. At the
the opportunity to learn from the failures of same time, governments should provide support
developed countries, allowing them to “directly” for old-age workers who are unable to work for
implement meaningful measures that have longer.
proved to be successful. However, fast action
is also necessary in this part of the world as More flexible working models
population aging is unfolding at a much faster This transition will, however, be accompanied
pace than in developed countries. by new challenges, especially in conjunction
with employees opting for more flexible working
Age as a multidimensional indicator models. Some of these non-standard workers
To address the demographic challenge, a variety are exempt from enrolling in earnings-
of levers must be set in motion. Countries not related pension schemes that are mandatory
only need regulatory measures (e.g. an increase for full-time employees. Alongside frequent
of the normal retirement age), but also job changes and relatively short employment
a different understanding of age as a multi- tenures, non-standard workers run the risk of
dimensional indicator. Chronological age, for having lower old-age incomes. This suggests
instance, is the most widely discussed unit of that many pension systems are still too rigid
measurement when debating an increase in to respond to the needs of a changing society
normal retirement age. However, chronological age and will have to become more flexible to cover
fails to capture information about the well-being a wide range of different cases.
of an individual. Basing normal retirement age on
a universal and rigid threshold would therefore
not live up to the multidimensionality of age and
possibly cause inequality between healthy and
less-healthy workers.

4
The Credit Suisse Progress Barometer Working beyond retirement
Survey 2019/2020
In this context, younger cohorts generally expect
But how do people directly affected view these retirement provision to be less important as a
developments and what expectations do younger source of income than older generations and
generations have for retirement and life in old see income from work more and more as their
age? Based on the Credit Suisse Progress savings plan for the future. Overall, respondents
Barometer Survey 2019/2020, we have in developing countries wish to continue working
assessed the attitudes toward retirement of a after reaching normal retirement age more often
broad range of people in 16 countries worldwide. than their counterparts in developed countries.
The results may illustrate the need for people in
Overall, the survey results show growing developing countries to work beyond retirement
concern about the quality and sustainability of because existing pension schemes provide little
social security. Almost half of the respondents or no financial support at old age. At the same
in both developing and developed countries feel time, people in these countries have been less
insecure about whether they will have enough used to retirement as a work-free stage of life.
money to live comfortably throughout their
retirement years.

Rethinking retirement 5
6
1. Aging societies and
the retirement wave

People are getting older by the decade. Both developed and developing
countries will face the problems associated with an aging population.
While developed countries are seeing the impact first, the developing
world will go through this process at an even faster pace.

A changing demographic profile However, the regional distribution of demo-

graphic growth will shift in the coming decades.
The global population has seen staggering growth By 2050, more than half of the projected
over the past 200 years. In the early 19th century population growth will occur in nine countries,
the one billion mark was reached, and after of which more than half are located in Africa1.
that it took only around 120 years to reach two Meanwhile, Asia and especially Europe will
billion in the 1920s. By 1994, the global popu- make up an ever-smaller fraction of population
lation passed the six billion mark and, in 2019, it growth. By 2030, the contribution of the Old
totaled roughly 7.7 billion. In the coming years, Continent will likely turn negative (Figure 1).
the world’s population will further increase – even
though it will not see such rapid growth as in pre- Toward an aging world
vious decades (United Nations, 1999, 2019). The world is in the midst of a major demographic
transition. Not only is population growth slowing,
but the age structure is changing as well, with
the share of the elderly population rising and the
Figure 1: Increasing contribution of African countries
younger population shrinking. Scientific advances
to population growth
allowing for a better understanding of infectious
Contribution from decade to decade*, 1960–2050
diseases, improving standards of nutrition and
110% rising awareness of the benefits of a healthy
100% lifestyle have sparked the longevity revolution.
90%
80% As a result, average life expectancy has in-
70% creased globally by roughly 25 years since 1950,
60% from 47 to 72 years today. Improved distribution
50%
of modern medicine to developing countries and
40%
additional progress in the fields of nanotech-
30%
20%
nology (e.g. for the treatment of cancer) and
10% biotechnology (e.g. for a better understanding of
0% cancer and Alzheimer’s disease) are likely to be
-10% the source of further increases in life expectancy
1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 in the future. By 2050, these advances will lead
Africa Asia
Europe Latin America and the Caribbean
Northern America Oceania 1. Nigeria, the Democratic Republic of the Congo, Ethio-
pia, the United Republic of Tanzania and Egypt. The other
* 1960 shows the contribution to population growth since 1950, 1970 the contribution to growth
since 1960, etc. countries are India, which should see the highest expected
Source: United Nations, Credit Suisse population increase, Pakistan, Indonesia and the USA.

Rethinking retirement 7
to an estimated worldwide life expectancy of Figure 2: Strong decrease in fertility rates around the world
approximately 77 years – with women (79 years) Development of fertility rates, 1950–2050* in live births per woman
on average continuing to live longer than men
(75 years). 6

The increase in life expectancy has been

accompanied by falling fertility rates (Figure 4
2). Changes in social structures, easy access
to birth control as well as shifting attitudes of
women regarding partnership, education and
2
work have led to a gradual decline in birth rates.
Particularly in the developed countries, wom-
en have greater possibilities to pursue higher
0
education and careers, which translates into 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050
increased opportunity costs of having a child.
By contrast, people in developing countries still Africa Asia
Europe Latin America and the Caribbean
need to rely on their children for old-age care Northern America Oceania
since they cannot assume that the government
or existing pension schemes will support them * Fertility rates are shown for five-year periods. For example, the fertility rate shown for 1950
corresponds to the period 1950–1955.
financially. The fertility level in these countries
is still much higher than in the developed world,
but the downward trend in birth rates has taken
Figure 3: Developing regions aging at a faster pace
hold here as well.
Share of people aged 65+, developing regions** (2020–2090) versus
developed regions** in the past (1950–2020)
As a result of declining fertility rates and
increasing life expectancy, the proportion of 25%
retirees in the population has risen. Over the
past 70 years, countries in regions across the 20%
globe have seen an increasing share of people
aged 65 and older (65+), particularly in coun- 15%
tries belonging to developed regions. Here, the
share of 65+ has increased from 7.7% in 1950 10%
to over 19% today (Figure 3). This ratio will
continue to increase in the coming years and is
5%
estimated to reach roughly 27% by 2050.

In contrast, the ratio stood at 3.8% in developing 0%

1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020
regions in 1950 and is projected to increase to 2020 2025 2030 2035 2040 2045 2050 2055 2060 2065 2070 2075 2080 2085 2090
7.4% in 2020. This means that, in 2020, the
Developing regions (2020-2090) Developed regions (1950-2020)
share of people aged 65+ will lie just below
where the share of people aged 65+ stood in
developed regions in 1950. However, the com-
parison of the aging paths in Figure 3 shows Figure 4: More than half of the global 65+ population
that, over the next 70 years, developing regions now live in developing regions
will experience an even stronger increase in the Distribution of 65+ population, developing regions** and developed
share of people aged 65+ than that experienced regions**, 1980–2050
in developed regions between 1950 and 2020. 100%
As a consequence of the faster aging process 90%
in developing regions, the share of people aged 80%
65+ living in the developed world has continu- 70%
ously decreased in the past decades. In 1980,
60%
just under 50% of people aged 65+ lived in
developed regions. In 2020, this number is 50%
projected to decrease to roughly one third and, 40%
by 2050, to just over 20% (Figure 4). What 30%
has so far primarily been an issue in developed 20%
countries is thus increasingly becoming a global 10%
phenomenon.
0%
1980

1985

1990

1995

2000

2005

2010

2015

2020

2025

2030

2035

2040

2045

2050

Developing regions Developed regions

** According to the definition of the United Nations
Source Figures 2–4: United Nations, Credit Suisse

8
Figure 5: Eastern Asia is aging rapidly
Year in which the population of people aged 65+ will overtake the population of 10–25-year-olds*

Japan Northern Latin America and

Europe Africa
Germany America the Carribean

Switzerland
Eastern Asia
UK
Asia
South Korea
Oceania
Canada
Singapore
USA
China
Chile
Australia
Russia
Brazil
India
Indonesia
South Africa

2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100

* Arrow: As of 2100, people aged 65+ will not have overtaken the population of 10–25-year-olds in Africa

Figure 6: Share of working-age population After Europe and Northern America, Eastern
Share of working age population (15–64-year-olds), Asia is one of the world’s fastest-aging regions.
index 1970 = 100 Population projections suggest that, by 2030,
the total number of people aged 65+ will surpass
130 the number of people between ten and 25 years
of age (Figure 5). Japan’s old-age population
125
(65+) already outweighs the younger generation
120 (10–25 years). South Korea and Singapore will
115 follow between 2021 and 2023, China by 2032.
110 China, in particular, is suffering from the effects
of its one-child policy. Although the government
105
officially ended this policy in 2015, changing
100 living conditions in cities and the sharp rise in
95 prices for housing and education make it difficult
90 for many couples to have more than one child.
1970 1980 1990 2000 2010 2020 2030
Africa Asia
Europe Latin America and the Caribbean Declining working-age population and the
Northern America Oceania
Eastern Asia
retirement wave of “boomers”

In addition to the increase in the older-age

Source Figures 5 and 6: United Nations, Credit Suisse population, demographic aging is also apparent
in a stagnating or even declining working-age
population. In Europe, the working-age pop-
ulation, currently defined as the number of
15–64-year-olds, peaked in 2010 and has been
rapidly shrinking since then (Figure 6). This
is also true for Eastern Asia and, at a slightly
lower pace, Northern America and Oceania. The
only continent where the working-age popula-
tion should continue to grow over the coming
decades is Africa.

Rethinking retirement 9
One aspect that already influences the develop- But, along with this occurrence, demographic
ment of the working population in certain coun- aging is now entering a decisive phase every-
tries is the retirement wave of the baby boomer where in developed countries. The combination of
generation. According to the most common significant age cohorts with rising life expectancy
definition, the baby boomers comprise the gener- on the one hand, and successor cohorts of much
ations born between the end of the World War II smaller size (due to lower birth rates) on the oth-
and the middle of the 1960s. This striking period er, is giving rise to clearly discernible imbalances
of particularly high birth rates left its mark on of an ever-increasing nature. Particularly affected
the age pyramid of several developed countries, by this development is the pension system, where
mostly the ones involved in the world conflict. In an increasing number of pensioners contrasts
Germany, due to the consequences of the war, with a continuously declining number of financial
this phenomenon only began in the mid-1950s, contributors. To compound matters, benefits have
lasting until the end of the 1960s. In Japan, birth to be paid out for a longer period of time. But the
rates rose in two waves, first between 1947 and labor market will also have to face the repercus-
1949 and later in the first half of the 1970s. sions of this wave of retirement. Without progress
In South Korea, the baby boom set in after the in productivity, this development will also have a
Korean War and lasted until 1963. negative impact on economic growth.

The baby boomers of the post-war era are now

retiring. Their transition from the world of work
to retirement began back in 2010 and will reach
its peak, on average, around 2030. Over these
two decades, roughly 370 million people in
the developed world will have reached normal
retirement age. Depending on the definition of
the baby-boom cohorts, the retirement wave
unfolds slightly differently from country to coun-
try, as illustrated in Figure 7.

Figure 7: Retirement wave

People reaching normal retirement age per 1,000 population; black line: value of 50 per 1,000 population

Germany France Switzerland UK USA Japan South Korea

2045-2050
2040-2045
2035-2040
2030-2035
2025-2030
2020-2025
2015-2020
2010-2015
2005-2010
2000-2005
1995-2000

0 20 40 60 80 0 20 40 60 80 0 20 40 60 80 0 20 40 60 80 0 20 40 60 80 0 20 40 60 80 0 20 40 60 80

Source: United Nations, Credit Suisse

10
Rethinking retirement 11
12
2. The long way to sustainable
retirement provisions

Pension systems are under pressure to provide retirees with financial

security in old age, while addressing the challenges of increasing life
expectancy and demographic change. In order to secure adequate
income for retirees while keeping public expenditure under control, a
mixture of measures is necessary.

Retirement systems: equal to the national average, for instance, will

Coping with an aging society receive a pension that would make up about
19% of the last earnings. In India, on the other
Most countries face aging populations, a low hand, the replacement rate is 95%. However,
interest rate environment and resulting challenges the coverage rate, i.e. persons above retirement
to ensure financial security in retirement. Clearly, age receiving a pension, indicates that receiving
every country has its own economic, social, a pension is much more likely for South Africans
cultural and political context. Table 1 provides a than for Indians. Notable differences also exist
rough insight into the considerable differences when it comes to public spending on old-age
between selected countries with regard to age pensions and survivors’ benefits: India and
structure, life expectancy, and key indicators Indonesia spend a mere 1% of gross domestic
of retirement provision. The comparison of the product (GDP), while Germany, Japan and
age structure and life expectancy today and in Switzerland spend 10%. In 2050, Brazil would
the future shows that the percentage of elderly have faced spending of an estimated 17% of
people will increase considerably in many coun- GDP. In light of the recently adopted reforms,
tries, along with a further rise in life expectancy. such as raising the normal retirement age to
And, although many countries plan to raise the 65, this figure will likely be lower in the future.
normal retirement age in the future, people will,
on average, spend an increasing part of their There is also considerable diversity between
lives in retirement – i.e. a large part of the life the systems that provide retirement income
expectancy gains will likely be spent in retire- around the world. This makes a comparison of
ment rather than working (Figure 1). systems of old-age financing and their perfor-
mance a difficult task. The Organisation for
Table 1 further provides data on the replace- Economic Co-operation and Development
ment rates from mandatory pensions for three (OECD) has undertaken an extensive
different income segments. This basic measure cross-country analysis on the features and
of retirement-income adequacy equals the ratio performance of pension systems. Figure 2
of the pension entitlement to lifetime gross provides an overview of national pension systems
average earnings. For full-career workers and, based on the OECD taxonomy consisting of
assuming that individual earnings grow in line two mandatory tiers. In addition, many coun-
with average earnings, the replacement rate tries have a third tier of voluntary personal or
reflects pension income in relation to the last employer-provided private schemes.
earnings. In 2018, a South African with earnings

Rethinking retirement 13
Table 1: Retirement systems and demographic indicators – an overview
Various characteristics of demography and retirement in selected countries

Age structure & life expectancy Retirement age and duration

Population over age 65

(% of working-age

in retirement, men
Normal retirement
(at age 65), men
Life expectancy

Normal years
population)

age, men
2020 2060 2015–20 2060–65 2018 2062 2018 2060–65

Australia 28% 46% 20.0 23.8 65.0 67.0 20.0 21.8

Brazil 16% 50% 16.7 21.1 57.0 65.0 24.7 21.1

Canada 30% 49% 19.3 23.4 65.0 65.0 19.3 23.4

Chile 20% 55% 18.2 23.0 65.0 65.0 18.2 23.0

China 19% 58% 14.7 20.2 60.0 60.0 19.7 25.2

Germany 37% 60% 18.3 22.8 65.5 67.0 17.8 20.8

India 11% 29% 14.1 16.4 58.0 58.0 21.1 23.4

Indonesia 11% 31% 13.5 17.2 56.0 65.0 22.5 17.2

Japan 52% 83% 19.9 23.8 65.0 65.0 19.9 23.8

Korea 24% 90% 18.5 23.0 61.0 65.0 22.5 23.0

Russia 25% 47% 13.3 17.4 60.0 64.0 18.3 18.4

Singapore 16% 19.5 24.3 64.0 65.0 20.5 24.3

South Africa 10% 22% 11.5 12.9 60.0 60.0 16.5 17.9

Switzerland 31% 58% 19.9 23.9 65.0 65.0 19.9 23.9

UK 32% 52% 18.7 23.1 65.0 68.0 18.7 20.1

USA 28% 45% 18.4 23.1 66.0 67.0 17.4 21.1

OECD 31% 58% 18.1 22.5 64.2 66.1 18.9 21.4

Source: OECD, ILO, Mercer, Allianz, Credit Suisse

14
Table 1: Retirement systems and demographic indicators – an overview (continued)
Various characteristics of demography and retirement in selected countries

Replacement rates Coverage Financing Rankings

(in USD, basis for calculation

(% of all males and females)

(rank out of 54 countries)

Persons above retirement

(rank out of 37 countries)

Average worker earnings

Public pension spending

age receiving a pension
Individual with average

Global Pension Index

Individual with 150%
of replacement rate)

of average earnings

of average earnings
Individual with 50%

Sustainability Index
Melbourne Mercer

Allianz Pension
(% of GDP)
earnings
2018 2018 2018 2018 2016* 2015–16 2050 2019 2016

Australia 64,089 76% 41% 44% 71% 4% 4% 3 1

Brazil 7,370 100% 65% 65% 78% 9% 17% 23 50

Canada 41,327 58% 51% 40% 100% 6% 7% 9 15

Chile 15,078 45% 37% 38% 79% 5% 4% 10 10

China 12,464 99% 79% 74% 100% 4% 10% 30 53

Germany 59,664 56% 52% 51% 100% 10% 12% 13 25

India 1,549 95% 95% 95% 25% 1% 1% 32 48

Indonesia 2,234 58% 59% 59% 14% 1% 1% 27 39

Japan 46,990 46% 37% 33% 100% 10% 10% 31 46

Korea 43,766 61% 43% 33% 100% 3% 6% 29 33

Russia 7,500 72% 57% 52% 91% 9% 12% 27

Singapore 7 24

South Africa 9,061 35% 19% 13% 81% 2% 3% 26 43

Switzerland 92,964 54% 44% 32% 100% 10% 11% 12 13

UK 52,467 51% 28% 20% 100% 8% 8% 14 11

USA 54,951 61% 49% 43% 88% 5% 6% 16 9

OECD 41,479 68% 59% 55% 9% 9%

* except Australia, Japan, South Korea, Switzerland, UK, USA (2014)

Source: OECD, ILO, Mercer, Allianz, Credit Suisse

Rethinking retirement 15
Figure 1: In many countries, life-expectancy gains will be spent in retirement
Years spent in retirement, calculated as the difference based on life expectancy at age 65 and the normal retirement age
(for a man with a full career from age 22), 2018 and in the future (2060–2065)

30

25

20

15

10

Norway

Spain

Japan

Luxembourg
Russia

Finland
Portugal

Ireland

New Zealand
Denmark

Italy

Mexico

Germany

Iceland
Czech Republic

Switzerland
Australia

India
USA

Canada

Greece
Brazil

Slovakia
Poland

France

South Korea

Sweden
Netherlands

Hungary

Belgium
South Africa

UK

Turkey
Indonesia

Austria

Chile

China
Years in retirement (today) Years in retirement (future)

Source: OECD, Credit Suisse

First-tier programs countries continuing to run public pay-as-

Programs in the first tier offer a first layer of you-go schemes. Another ten countries have
social protection in old age and usually aim to replaced them due to financial sustainability
guarantee a defined minimum standard of living issues. Mandatory or quasi-mandatory private
after retirement. Some countries provide benefits defined benefit schemes are in place in Iceland,
based upon residency alone or based on the the Netherlands and Switzerland. Second, in
number of years of residency. In so-called basic points schemes, workers receive earnings-related
programs, the benefit level may be independent pension points that are converted into regular
of the earnings level during working life. In pension payments at retirement. Third, in funded
targeted programs, benefits are determined defined contribution (FDC) plans, contributions
based upon income from other sources or and investment returns flow into an individual
even the value of assets. Yet, in the majority of account. Fourth, in notional defined contribu-
countries, first-tier benefits are only available to tion (NDC) schemes, a notional rate of return
those who contributed during their working life. is applied to contributions. The rate is notional
In basic programs, benefits are again indepen- because, in reality, existing funds finance the
dent of the earnings level. More common are pensions of current retirees. At retirement, the
minimum pensions, however, which calculate notional capital calculated in the books of the
year-by-year entitlements based on earnings, or managing institution is converted into a monthly
which define a lower bound for total lifetime en- pension taking into account life expectancy and
titlements for those who contribute for a certain expected future returns.
number of years.
Despite the complexity of comparing pension
Second-tier programs systems, there have been considerable efforts
The second tier encompasses mandatory to benchmark their performance. The Melbourne
earnings-related components that aim to further Mercer Global Pension Index (Mercer, 2019), for
improve the standard of living in retirement. All instance, assesses retirement income systems
OECD countries except Ireland, New Zealand, in a wide range of countries based on more
and in the future the United Kingdom have such than 40 indicators. The overall index is based
public or private pension schemes. The OECD upon three sub-indices. The first, “adequacy,”
differentiates between four types of schemes. measures the benefits currently being provid-
First, in defined benefit (DB) schemes, benefits ed along with some important features of the
depend on the number of years of contribu- pension system. The second, “sustainability,”
tions. Accrual rates and individual pensionable evaluates the likelihood that the current system
earnings are the most common, with 17 OECD will be able to provide benefits in the future. The

16
Figure 2: Taxonomy of selected national pension systems
Overview of latest legislation (applying to future retirees entering the labor market in 2018 at age 22)*

SEC
TIER OND

FIR
S
TIE T
R

* DB = Defined benefit, FDC = Funded defined contribution, NDC = Notional defined contribution; ARG: Argentina, AUS: Australia, AUT: Austria, BEL: Belgium, BRA: Brazil,
CAN: Canada, CHE: Switzerland, CHL: Chile, CHN: China, CZE: Czech Republic, DEU: Germany, DNK: Denmark, ESP: Spain, EST: Estonia, FIN: Finland, FRA: France,
GBR: United Kingdom, GRC: Greece, HUN: Hungary, IDN: Indonesia, IND: India, IRL: Ireland, ISL: Iceland, ISR: Israel, ITA: Italy, JPN: Japan, KOR: South Korea, LTU:
Lithuania, LUX: Luxemburg, LVA: Latvia, MEX: Mexico, NLD: Netherlands, NOR: Norway, NZL: New Zealand, POL: Poland, PRT: Portugal, RUS: Russia, SAU: Saudi Arabia,
SVK: Slovakia, SVN: Slovenia, SWE: Sweden, TUR: Turkey, USA: United States, ZAF: South Africa.
Source: OECD, Credit Suisse

Rethinking retirement 17
third sub-index, “integrity,” encompasses items life expectancy, demographic ratios or funding
that influence the overall governance and oper- balances. Today, half of the OECD countries
ation of the system and thereby affects the level have at least some automatic adjustment
of confidence that citizens have in their country’s mechanisms. Funded defined contributions
system. have a built-in automatic adjustment of pension
benefits to life expectancy, as monthly benefits
In 2019, the Netherlands and Denmark are usually annuitized based on life expectancy.
headed the rankings with scores above 80, Similarly, although notional defined contribution
which represent a grade A rating (Figure 3). schemes are pay-as-you-go, pension entitle-
These systems reach high scores on all three ments are calculated similar to funded defined
sub-indices. What stands out are the rather low contribution plans and take into account life
sustainability scores of many countries, i.e. the expectancy.
long-term sustainability of current retirement
income systems is frequently called into ques- Some countries with defined benefit systems
tion. For instance, countries such as Ireland, have also introduced sustainability factors
Germany, France, Brazil, Spain, Austria and in their defined benefit schemes. In Finland,
Italy also exhibit a considerable gap between pension benefits are linked to life expectancy;
the adequacy of current retirement income and in Japan, they are also linked to the number of
the sustainability of the system for the coming contributors. Spain planned to introduce such
generations of retirees. a mechanism in 2019, but has suspended this
until 2023. While such automatic adjustments
improve the sustainability of systems, pension
Pension reforms – a necessity, but facing adequacy could nevertheless suffer as the level
increasing opposition of benefits could fall considerably if retirement
ages or contributions do not adjust at the same
Given the long-known financial sustainability time.
issues, many countries have taken steps to
improve their pension systems1. Among the Concerning retirement ages, some countries
broad reform trends in the past decades is a have a set schedule to increase normal retire-
move from defined benefits to defined contri- ment age. In Denmark, Estonia, Italy (suspended
bution systems. In the past, pension systems until 2026) and the Netherlands, the link is
were often pay-as-you-go defined benefit one-to-one, i.e. a one-year increase in life
schemes, where pension benefits depended expectancy leads to a one-year increase in the
on the number of years of contributions, rates retirement age, implying that all life expectancy
at which pension entitlements accrue (accrual gains will be spent working. Finland and Portugal
rates) and a measure of individual earnings increase the retirement age by two-thirds of life
(reference wage). expectancy gains.

Over the last few decades, these defined benefit The OECD has estimated that pension replace-
schemes have been increasingly replaced or ment rates have been roughly stable over the
complemented by funded defined contribution past few decades, falling by only one percent-
plans or notional defined contribution schemes. age point on average. However, the coming
This follows the trend toward further individual- generations may face considerable changes.
izing pension benefits, increasing links between While future retirees’ replacement rates will
individual lifetime contributions and benefits, remain stable in 10% and even rise in 30% of
and setting incentives to work longer. Some OECD countries, they are expected to fall in the
countries have also tightened the link between remaining 60% of OECD countries. The largest
earnings and benefits within their pay-as-you- drops of more than 30 percentage points (in
go defined benefit schemes, for instance with comparison with the cohort retiring today)
a points system where benefits are proportional should take place in countries that started from
to lifetime contributions. Most OECD countries relatively high pension levels, such as Mexico,
now also take lifetime earnings into account Poland and Sweden. In Chile, Greece, Spain
when calculating pensions benefits rather than and Switzerland, baseline replacement rates are
merely the last few – and often best – years of projected to fall by more than 15 percentage
earnings. points.

Furthermore, a clear trend is the implemen- Despite the urgency for further pension re-
tation of automatic adjustment mechanisms forms, reform momentum has diminished
where pension system parameters are automat- among OECD countries in the last few years.
ically adjusted to changing indicators such as While countries took measures after the global
and European financial crises to improve the
1. For details on recent pension reform trends, see OECD financial sustainability of their pension systems,
(2019b), Chapter 1. there is now an increasing risk that some of

18
 them may backtrack on adopted reforms. In For instance, relying purely on higher contribu-
view of the recent economic upswing, political tions would lead to lower net wages, poten-
support for measures to improve short-term tially adding to higher wage costs and thereby
financial balances seem to have weakened in reducing employment. Moreover, as average
some countries. Nevertheless, the necessity to life expectancy is expected to continue rising,
adapt pension systems to demographic change the contributions in favor of pension provision
remains. Furthermore, from a welfare point of would have to increase constantly if the retire-
view, reforms would be better undertaken in a ment age were to remain unchanged. For this
recovery phase than in a recession. reason, despite strong opposition, the most
expedient approach to increase the sustain-
In general, the following four options can make ability of pension provision should be imple-
pension systems more sustainable. First, people mented – a gradual increase in retirement age.
could be encouraged or forced to save more
for retirement during their working life. Second, This would simultaneously extend the savings
additional funds could be mobilized by increasing phase and shorten the average pension-payment
taxes. However, given already high taxation in period. In principle, people may be willing to raise
many OECD countries, this approach is unlikely the retirement age, not only because of sheer
to provide a solution, especially if negative work necessity, but also because “old” age today is
incentives from higher taxation or tax avoidance not what it used to be. That said, with older
are considered. Third, raising the retirement age generations exerting strong political influence in
would be an obvious approach to reducing fund- aging societies, organizing opposition to pension
ing gaps, and could be complemented by incen- reforms has in fact become easier.
tives to encourage people to work longer. Fourth,
people might accept lower pensions in the future
in order to guarantee long-term sustainability of
the system. Typically, a combination of measures
will be required to ensure that future pensioners
continue to enjoy the standard of living they are
accustomed to.

Figure 3: Gaps between adequacy of benefits provided today and their sustainability are common
Melbourne Mercer Global Pension Index 2019

Grade 100

90
A
B+ 80

B 70
C+
60
C
50
D
40

30
E
20

10

0
Spain

Japan
Norway
Singapore

Average
Finland

New Zealand

Ireland

Colombia
Switzerland

Saudi Arabia
Germany

Malaysia

Italy

India
Mexico
Denmark
Australia

Canada

Argentina
Hong Kong SAR

USA
France

Peru

Poland
Sweden

Brazil

South Korea

Philippines
Turkey
Netherlands

Chile

UK

Austria
South Africa

China

Thailand
Indonesia

Overall Index Value Adequacy Sustainability Integrity

Source: Mercer, Credit Suisse

Rethinking retirement 19
20
Figure 4: Selected pension systems in Europe

1 UK 2 Denmark
ȹ Single-tier state pension system ȹ Universal means-tested basic pension system financed by tax revenues
ȹ Income-tested pension credit ȹ Mandatory occupational pension schemes, where pension is paid out as

ȹ Voluntary occupational and personal pension systems, where employers lump sum or in the form of annuity
are required to enroll employees; then employees can choose to opt out ȹ Fully funded defined contribution system

3 Netherlands
ȹ Flat-rate public pension financed via payroll taxes
ȹ Quasi-mandatory earnings-related occupational pension system based

on collective agreements between employer and employees

ȹ Voluntary individual saving schemes

1 2
GBR
3 DNK
NLD
5
DEU

4
FRA 6
CHE
7
ITA

4 France 5 Germany
ȹ Mandatory earnings-related public pension with a minimum contributory ȹ Means-tested safety net for low-income pensioners

pension ȹ Earnings-related pay-as-you-go system based on the number of

ȹ Mandatory occupational pension schemes based on a points system pension points earned during an individual career
ȹ Voluntary occupational pension plans ȹ Voluntary private pension plans

6 Switzerland 7 Italy
ȹ Earnings-related public pension with a minimum pension ȹ Minimum means-tested social insurance benefits
ȹ Mandatory occupational pension insurance system where employee and ȹ Notional defined contribution scheme for workers

employer contribution rates increase with age ȹ Voluntary occupational pension schemes

ȹ Most employees receive further over-obligatory benefits

ȹ Voluntary private pension plans

* CHE: Switzerland, DEU: Germany, DNK: Denmark, FRA: France, GBR: United Kingdom, ITA: Italy, NLD: Netherlands
Source: Mercer, OECD, Pension Funds Online, World Bank

Rethinking retirement 21
Figure 5: Selected pension systems in the Americas, South Africa, Russia and Asia Pacific

1 Canada 2 USA
ȹ Means-tested universal flat-rate pension financed by tax revenues ȹ Means-tested top-up benefit
ȹ Earnings-related pension based on revalued lifetime earnings ȹ Public social security system providing pension benefits (progressive

ȹ Voluntary occupational pension schemes and individual retirement benefit formula based on lifetime earnings, adjusted to a current dollar
savings plans basis)

1
Canada

2
USA

3
3 Brazil
Brazil
ȹ Mandatory pay-as-you-go system financed

through payroll taxes shared by employer and

5
employee, revenues from sales taxes and federal
transfers
ȹ Voluntary occupational and personal pension plans

South Africa
4
4 Chile
Chile
ȹ Means-tested social assistance

ȹ Privately managed system in the form of a defined

5 South Africa
contribution based on employee contributions with ȹ Means-tested public pension
individual accounts ȹ Voluntary occupational schemes encouraged by tax
ȹ Employer-sponsored plans
deductions

Source: Mercer, OECD, Pension Funds Online, World Bank

22
 6 Russia
ȹ Old-age insurance pension under statutory compulsory pension
insurance scheme
ȹ Statutory social pensions

ȹ Voluntary privately funded pension plans managed by non-state

pension funds

7 China
ȹ Basic pension based on indexed individual wage and province-

wide individual earnings

ȹ Mandatory employee contributions that are either funded

6
individual account systems or notional account systems

Russia 8 Japan
ȹ Flat-rate basic pension

ȹ Earnings-related pension

ȹ Voluntary supplementary pension plans

8 9 South Korea

Japan Public earnings-related pension scheme with a progressive

7
ȹ

formula

9
ȹ Tax-favored private pension plans

China
South Korea
10 India
ȹ Earnings-related employee pension scheme

ȹ Mandatory defined contribution employee provident fund

10
ȹ Complementary employer-managed pension schemes (mostly

11
defined contribution)

India
Singapore 11 Singapore
Mandatorily defined contribution system based on individual

12
ȹ

accounts
ȹ Non-contributory pension scheme for government employees

Indonesia
and provident fund scheme for certain armed forces personnel

13 12 Indonesia

Australia ȹ Earnings-related social insurance scheme

ȹ Mandatory defined contribution plans for workers in the private

sector
ȹ Voluntary defined contribution plans for other workers

ȹ Defined benefit scheme funded through employer and

employee contribution

13 Australia
ȹ Means-tested age pension funded through general taxation

revenue
ȹ Mandatory employer contributions to employee’s private

pension plans; mainly defined contribution plans

ȹ Voluntary contributions from employers, employees or the self-

employed, which are encouraged through taxation concessions

Rethinking retirement 23
Retirement income plans for the 21st century
Keith Ambachtsheer
International Centre for Pension Management (ICPM) at the University of Toronto, Canada

Beyond defined benefits and selling. If sellers know more about what they
defined contributions are selling than the buyers know about what
they are buying, then buyers will pay too much
The triple threat of rising longevity, falling birth for too little value. The market for investment
rates and historically low interest rates is forcing management services is the largest “asymmetric
policymakers around the world to have a close information” market in the world. Thus retirement
look at their countries’ retirement income savers will generally pay fees that are too high
systems. Are they “fit for purpose”? If not, why for the value they receive from investment man-
not? What can be done to improve them? This agers, unless their savings are managed through
article addresses these questions. fiduciary structures that level the informational
playing field.

Micro perspectives Prof. Daniel Kahneman and his collaborators

showed that people also exhibit logic and
The evolution of retirement income system (RIS) behavioral shortcomings leading to inconsistent
design at the micro level is best understood investment decisions based on the prospects of
through the work of four Nobel Laureates. relative and absolute financial gains and losses.
Through Modern Portfolio Theory, Prof. Harry This has led RIS designers to construct nudges
Markowitz led us to rethink how to construct and decision defaults to help guide workers
investment portfolios. If we can estimate the and retirees toward decisions that are “right” for
prospective return characteristics (i.e. expecta- them.
tions, variances and co-variances) of individual
securities, then we can construct “efficient”
portfolios offering a “frontier” of the best risk/ Macro perspectives
reward opportunities. If we can also specify our
tolerance for risk-taking, then we can identify the Switching now from a micro to a macro perspec-
“efficient” portfolio that best meets our needs. tive on RIS design, 1994 saw a big breakthrough
with the World Bank’s report “Averting the
Prof. Robert Merton argued that this “optimi- Old-Age Crisis.” Its key message was that there
zation” philosophy should be stretched through is no single best “micro” solution to RIS design.
people’s lifetimes. If people wanted to maintain Instead, we should be thinking of the respective
their standard of living after they stopped working, roles of government, employers and individuals
how much would they need to save during their (or families) in creating sustainable lifetime post-
working lives? This depends on the investment work income streams. This will require integrative
return their savings earn, how long they work, 3-pillar-system thinking:
how long they live after retiring, and how their ȹ Pillar 1: A universal base pension provided by
tolerance for risk-bearing and their consumption the state funded on a pay-as-you-go basis.
patterns change as they age. Depending on how ȹ Pillar 2: A prefunded employment-based
these four questions are answered, the required pension sponsored by the employer.
working-life savings rate can be anywhere between ȹ Pillar 3: Individual retirement savings
5% and 40% of pay. programs provided by the financial services
industry.
Prof. George Akerlof pointed out that micro-
economic theory assumes that buyers and sellers
in any market had “symmetric information” about
the product or service they were buying and

24
 With the passage of 25 years since the report Netherlands, Denmark, Finland, Australia).
was published, this is a good time to ask how the The UK, Canada and the USA have begun to
3-pillar macro RIS model is doing: use auto-enrolment to join this elite group.
ȹ Pillar 1: The main issue here is sustainability, Designing effective decumulation “back-ends”
with demographics being destiny. Countries for DC arrangements is becoming a priority,
that have made adjustments as their especially in Australia with the maturing of its
populations continue to grow older (e.g. almost 30-year-old “super system.” The elephant
through raising the retirement age, changing in the decumulation room is longevity risk, i.e.
contribution rates and/or benefits) continue to the risk of outliving one’s retirement savings.
have sustainable Pillar 1 systems. Countries Conceptually, the solution is simple: the provi-
that have not made those adjustments face sion of longevity insurance through longevity risk
increasing difficulties. pooling. Practically, however, the devil has been
ȹ Pillar 2: Traditional DB plans are becoming an in the details of making this work in practice.
extinct species (i.e. too expensive and risky Workable solutions are slowly emerging.
for most employers). New, more sustainable
versions are replacing them (e.g. shared-risk,
target benefit, collective DC). Participation is In conclusion
expanding through auto-enrolment regimes
and innovative distribution strategies. There Academia has provided solid theoretical frame-
is also growing innovation in the design and works and research findings to guide the design
management of pension delivery organizations. of 21st century retirement income plans around
ȹ Pillar 3: The Akerlof and Kahneman the world. We have created lively international
predictions are playing out in practice, with expert networks to facilitate the discovery and
many individuals implementing retirement spread of best implementation practices. Now
finance and investment decisions poorly. the hard work begins; namely dealing with the
These problems can only be solved by moving devils in the implementation details.
these people into Pillar 2 arrangements
with strong fiduciary umbrellas, effective
lifecycle designs and strong implementation
infrastructures.

In short, much of the world needs material work-

force coverage expansion into effective Pillar 2
retirement finance and investment arrangements.

Expanding Pillar 2 coverage and

designing decumulation “back-ends”

The simplest way to achieve this expansion goal

is for governments to require employers to offer
a qualifying Pillar 2 plan to their employees.
Unsurprisingly, countries that achieve top scores
in the Melbourne-Mercer Global Pension Index
based on adequacy, sustainability and integrity
have had this requirement for decades (e.g.

Rethinking retirement 25
26
3. The multidimensionality
of age

We define our age by what it says on our identification card, a number

given to us based on how many years we have been on this planet. This
is a unit of measurement which is unaffected by the era we live in, a
number which does not reflect our subjective well-being.

Age is not what it used to be Advances in modern medicine, among other

things, have contributed to a rise in life expec-
Retirement is a relatively new idea. For a great tancy worldwide. Nowadays, an increasing share
part of human history, people worked until the of the population lives beyond the age of 70 to
day they died. The idea of retirement originally enjoy retirement, leading to an increasing number
stems from Otto von Bismarck, who, in 1881, of retirees who benefit from pension systems.
as minister president of Prussia, suggested However, the founding fathers of modern retire-
financial support for the elderly, funded by the ment probably did not anticipate that such large
state. The introduction of the pension systems numbers of retirees would one day draw financial
is the result of a prolonged political struggle by support from pension systems. Moreover, in the
the workers’ movement in Prussia. Bismarck decades following the launch of pension systems,
introduced social insurance because he wanted governments lowered the retirement age from 70
to promote the well-being of workers and, more to a level of somewhere in the mid-60s just as
importantly, because he wanted to ward off life expectancy was rising. At the same time, the
demands for more radical socialist alternatives. reality of aging has changed in terms of health
The idea caused a big stir, since, until that and abilities of the aged. Given these consider-
moment, people simply did not know the concept ations, declaring a certain retirement age and the
of retirement. The first step in the transition from associated retirement scheme as a “natural law”
a two-stage system – education and working life – and sticking to it for decades seems illogical.
to a three-stage system including retirement was
made (see Box on page 28 for further information
about this transition). Once established, this Chronological age and biological age
pension system provided financial support for
people who reached the age of 70. During a time Chronological age is determined by the calen-
where life expectancy at birth was approximate- dar date a person was born and is measured
ly 43 years (1895)1, achieving this retirement in days, months and years. Since chronological
age was rare. Hence, even with retirement and age has been the conventional measure of aging
pensions in place, most people in Prussia never for several centuries, it is comparable across
benefited from them. different points in time. However, certain diffi-
culties arise when using the chronological age
1. As a proxy, the life expectancy of Germany in 1895 as a measure of population aging. For instance,
was taken. The data stems from Our World in Data chronological age does not say anything about
(2019). a person’s well-being. Therefore, we need to

Rethinking retirement 27
distinguish between chronological and biological
age, which is a measure that links age more The origin of retirement
intrinsically to people’s well-being.
Lifelong work has been a reality for much of human history.
In order to address the disconnect between For many generations, people did not know anything other than
chronological and biological age, consider a working until the day they died. Work-free periods rarely existed
common problem in economics: the difference in most of human culture (one notable exception is the day of rest
between nominal and real prices. Take, for prescribed by religion). Instead, human life was characterized by
instance, a watermelon that cost USD 0.60 the values of work and duty. On the one hand, work guaranteed
in January 1950 and USD 5.98 in November a certain income, and, on the other hand, it gave people a social
2019. If you want to compare both prices accu- status because workers served the community. In the face of these
rately across time, you must adjust for inflation benefits, work-free periods were simply not compatible with the
during these 70 years. What you find is that understanding of work during that time. In fact, a person incapable
watermelons did indeed increase in (nominal) of working was often regarded as useless.
price, but when comparing the inflation-adjusted
(real) variables, the watermelon actually became Around the turn of the 20th century, the introduction of pension
cheaper. In particular, the inflation-adjusted price insurance became a necessity in industrializing countries because an
for watermelons in 1950 was equivalent to USD increasing number of people were earning their income exclusively
6.57 in today’s money. from paid work in factories and had no other means of income to rely
on (e.g. income from farm work). This development was accompanied
Similarly, chronological age is not a good measure by medical concerns about the performance of old-age workers in
when comparing ages across time. Age today industrial production: age was equated with decreasing efficiency,
is not what it used to be: If you compare a declining productivity and a lack of flexibility. Hence the loss of work
65-year-old man in 1950 with a 65-year-old man due to old age was synonymous with financial bottlenecks, unless
in 2020, it is likely that the latter has become enough money had been saved. Moreover, the change in social
biologically younger. The reason is that, owing to norms and obligations played a decisive role. The introduction of
a healthier lifestyle, a 65-year-old today is likely retirement and the pension granted to older people was based on the
to be in better physical and mental shape than a principle that a worker who devotes his/her entire life to labor for the
65-year-old 70 years ago. For instance, adjusting employer should be entitled to a reward when entering the last stage
for mortality rates shows that a 65-year-old in of life. This also meant a shift away from the reliance on relatives and
Switzerland today is comparable to a 51-year-old local communities at old age, toward collective solidarity, which was
in 1950 (see Box on page 30 for an explanation increasingly taken care of by the state.
of the mechanics behind the calculations). In
other words, 65 is the new 51 (see Figure 1). The division of life into three stages – education, working career and
The changes in mortality rates help adjust for the retirement – was established. Over time, retirement has evolved
“age inflation.” into an integral part of people’s lives. The absence of retirement is
hardly imaginable in developed countries today, but is still a reality
in many developing countries.

Figure 1: 65 is the new 51 in Switzerland

Chronological age (65) compared to biological age in Switzerland; biological ages adjusted for mortality rates of 1950–1955

70

65

60

55

50

45
1950
1952
1954
1956
1958
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020

Chronological age Biological age

Source: United Nations, Credit Suisse

28
 The shortcomings of mortality-adjusted These results from Switzerland provide inter-
measures esting insights about age. First, biological age
developments differ across age groups. Second,
When debating longer working lives, the crucial it seems that the older the people get, the higher
question is whether people are actually feeling the impact of changes in healthier lifestyles on
better in old age. In general, there are different biological age. These results from Switzerland
reasons why life expectancy increases: medical emphasize the multidimensionality of age; they
advances, for instance, decrease infant-mortality are also in line with an overall tendency in the
rates, which in turn increase life expectancy. European Union, where, in particular, old-age
However, lower infant-mortality rates do not people today feel biologically younger than
contribute to healthier old age. Better nutrition their ancestors. However, differences between
and healthier lifestyles, on the other hand, do countries exist and some display an opposite
improve health, and help to prolong average trend. Applying a universal and rigid threshold
lifespans. This distinction is important when for retirement would therefore not live up to this
debating longer working lives because working complexity.
longer requires workers to be in better mental
and physical shape as they grow older. Hence,
mortality-adjusted indicators only tell one part of Statistical measures do not necessarily
the story. represent the reality of every individual

Other factors come into play when determining Policymakers need to design policies that
biological age. An alternative measure includes address the problem of both aging and longevity.
the age corrected for the level of self-perceived While people are on average becoming older,
health (Figure 2). When looking at the measure deviations from the norm can vary substan-
adjusted for self-perceived health for different age tially between individuals. For instance, linking
groups, the changes are somewhat heteroge- normal retirement age to life expectancy – a
neous. For instance, in Switzerland, a 35-year- policy often proposed as a reaction to an aging
old in 2008 was still a 35-year-old in 2018 and society – would only be fair for those people who
a 51-year-old in 2008 was comparable to a age in line with the average life expectancy. On
50-year-old in 2018. The largest changes apply the one hand, people exceeding the average life
at older ages: 70 is the new 66. expectancy would need to work even longer to

Figure 2: Biological age developments differ across age groups in Switzerland

Chronological age compared to biological age in Switzerland; biological ages adjusted for levels of self-perceived health*
of 2008 and calculated for each age group
80

75

70

65

60

55

50

45

40

35

30
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Chronological age (35) Biological age

Chronological age (50) Biological age
Chronological age (70) Biological age

* Self-perceived health is measured as the share of respondents declaring “good” or “very good” health
Source: Eurostat, Credit Suisse

Rethinking retirement 29
pay for pensions, while people who do not live as
long as the average life expectancy would lose Mortality-adjusted indicators of aging
their pension rights if the same retirement age is
imposed on everybody. This example illustrates Calculating the mortality-adjusted age first requires the crude death
that basing policies on a generalized statistical rates of a country or region over a certain period. Indexing a crude
measure may fail to address the needs of indi- death rate of 10.1 per 1,000 individuals (1950–1955) to the value
viduals in a fair and accurate manner. of 100 leads to a crude death rate of 9.9 per 1,000 individuals
(1955–1960) being equivalent to a value of 97.6. Having calculated
Where policymakers fail to address the multi- the indexed values for the entire series (1950–2020) gives us a
dimensionality of age, such policies can lead “mortality index,” which summarizes the changes in mortality rates
to inequality, creating winners and losers: while over a certain period. On the basis of the mortality index, biological
healthy people will enjoy the benefits of longer age can be calculated from chronological age using the following
working lives, people who are less healthy may formula:
be seriously challenged by additional years in the
labor force, while not working would lead to a
reduction in old-age income. This is particularly
worrying as people with higher incomes often
have higher life expectancies and therefore tend
to benefit from pensions for a longer period of
time (OECD, 2019b). Those pensions, to some
extent, are financed by those who die earlier and
they are often the same people who have lower
incomes during their working lives. In order to Note that there is a positive relationship between the mortality
mitigate these inequalities, policymakers should index and biological age: once mortality rates fall, for any given
provide support for old-age workers who are chronological age, people become biologically younger than their
unable to work longer. ancestors.

The key is more flexibility when designing

policies. In order to make longevity a success,
policymakers need to help healthier old-age
workers find employment, while, on the other
hand, allowing less-healthy old-age workers to
either improve their health during their working
lives or retire earlier if necessary (see Chapter
5). That said, it is clear that designing such a
flexible system is challenging, not just because
of the measurement issues, but also because of
potential moral hazard.

30
Japan’s “adjustment approach”
to the future of retirement
Masa Higo
Professor of Sociology and Social Policy at Kyushu University in Fukuoka, Japan

A successful retirement system would enable workers, although possibly for reduced wages,
older people to continue working as long as they and retain them at least until age 65. Moreover,
desire to secure their socioeconomic well-being this is expected to increase to age 70 in the
without institutionally constraining their opportu- future. Without challenging the pay-as-you-go
nities and decisions. At a national level, it would framework, the government has until now only
mitigate the impact of anticipated workforce announced that it would consider raising the
shortages and fiscal insolvencies of social secu- minimum age from 65 to 70 to start receiving
rity programs, including old-age public pension pension benefits.
programs. Japan is the world’s forerunner of
population aging. The country seems not only Overall, Japan will likely pursue a successful
to be headed in the right direction; but it may retirement system, at least in coming decades,
even exemplify a variation of retirement reforms primarily through carefully and incrementally
for other countries to follow. For Japan to fully adjusting – rather than abolishing – age criteria
develop a successful retirement system that is used in the conventional pension systems. This
sustainable for decades to come, however, it “adjustment approach” goes against the global
must take urgent action to effectively incorporate course to establish an “age-free” society as the
women into this future scenario. timing of workers’ retirement is still institutionally
determined. But it will also institutionally enable
Amid a global search for effective retirement them to remain socioeconomically active longer
reforms, two notable trends have emerged than in the past. If successfully sustained in the
over the past few decades. First, the USA, the future, the traditional pension system will also
UK, Australia, New Zealand and most recently protect citizens from major shortcomings of
Canada have fully abolished employer practices privatization models, including great inequalities
of mandatory retirement as part of the efforts to in retirement life.
remove institutional barriers to working beyond
conventional retirement ages. Second, an in- In order to realize a successful retirement system
creasing number of countries, particularly in Latin for all citizens in Japan, the country needs to
America and Eastern Europe, have privatized – urgently and effectively address its enduring
fully or partially – their traditional pay-as-you-go policy agenda: supporting women’s working
public pension programs, aiming in part to pro- lives. The country’s workplace remains largely
vide individual workers with stronger incentives to male-dominated and has struggled with helping
remain in the labor force as long as possible. women, particularly working mothers, to maintain
a reasonable work-life balance. While pursuing
The rest of the aging world might assume that the adjustment approach described above, it is in
it is simply inevitable for a hyper-aged Japan this policy area surrounding women in the labor
to swiftly join these emerging trends. Even market that the country must make swift and
today, however, mandatory retirement is widely drastic reforms to its traditional institutions and
prevalent across the country, with 60 being the cultural legacies. Women in Japan are among
most common age to force retirement. Despite the healthiest and most educated populations
various adjustments to the pension system over by international standards. The future of retire-
the past three decades, the government is still ment in Japan will only be successful in reality
committed to this traditional framework char- if women of all ages are effectively brought into
acterized by redistributive and intergenerational the country’s ever-aging and shrinking workforce
support mechanisms. Instead, while still permitting in order to enhance their socioeconomic well-
mandatory retirement, current law pressures being and to sustain the country’s economic
employers to rehire post-mandatory retirement vitality in the future.

Rethinking retirement 31
32
4. Attitudes
toward retirement

Can traditional retirement systems adequately and sustainably support

people in old age? How concerned are various generations about their
material well-being during retirement? Will working for longer become
the savings plan of the future? A cross-country survey sheds light on
these issues.

Figure 1: Has social security in your country tended to improve Not-so-great expectations
or deteriorate in the last ten years?
Share of respondents by country Population aging and its consequences for
old-age provision, healthcare, the labor market and
100% ultimately economic growth are well known.
90% But how do those directly affected view these
80% developments and what expectations do young-
70% er generations have for retirement and life in
60% old age? Based on a survey in 16 countries,
50% we have tried to assess the attitudes toward
40% retirement and related issues from the point of
30% view of retirees and soon-to-become retirees on
20% the one hand and young people on the other.
10% The questions were part of the comprehensive
0% Credit Suisse Progress Barometer Survey
Singapore

South Korea
India
Germany

Indonesia
UK

Brazil

Australia

Canada
Russia

Japan
Switzerland
South Africa

Chile

China
USA

2019/2020, a representative poll conducted

online to determine how people perceive
progress and their country’s future sustainability
(see Box on the following page).
Tended to deteriorate Tended to improve I am not sure No answer

Overall, concerns are growing around the

Source: Credit Suisse Progress Barometer Survey 2019/2020 world about the quality and sustainability of
social security. In developed countries, 53% of
respondents stated that, in the last ten years,
social security in their country has tended
to deteriorate (Figure 1). The proportion of
pessimistic answers is only slightly lower in
developing countries (43%). However, the
fact that 42% of respondents think that social
security has actually improved – in developed
countries, only 26% share this view – shows

Rethinking retirement 33
that social security systems are still maturing
in some developing countries and that percep- Credit Suisse Progress Barometer Survey
tions can differ.
To mark the 200th anniversary of the birth of its founder and true
Of the countries included in our survey, concerns visionary Alfred Escher, Credit Suisse launched a so-called Progress
are most pronounced in South Africa, where Barometer in 2018. This representative survey attempts to measure
67% of respondents perceived a deterioration the capability for progress in the areas of economy, society and
in social security over the last ten years. While politics, and details projects and issues that people most want to
more than 80% of people above retirement age move forward as well as the areas in which respondents would prefer
are in fact receiving a pension, replacement progress to slow down. After a first edition limited to Switzerland, the
rates are very low and the country does not rank survey was extended last year to 15 more countries for the purpose
well with regard to future sustainability either, of a global comparison of the perception of progress. The survey
which helps to explain the pessimistic attitude. In was conducted online in September, using a representative sample
contrast, the relatively high proportion of respon- of 1,000 voting-age respondents for each country. In the case of
dents attesting a deterioration of the systems Switzerland, about 460 opinion leaders were surveyed as well. These
in countries like Germany and Switzerland persons exert an influence beyond their own immediate environment
(both 61%) possibly arises from the recognition in a political, cultural or entrepreneurial sense.
and perception that their systems need to be
reformed in the direction of higher sustainability, The Progress Barometer is the latest member of the Credit Suisse
lower pensions and higher retirement age. barometer family. Together with the Worry Barometer, the Youth
Barometer and the Europe Barometer, the Progress Barometer
amounts to a comprehensive demoscopic information system to
Income situation during retirement years take the pulse of the population.

People do not know how long they will live and

can quickly feel insecure about their ability to
support a (very) long life. Rising living costs or
unanticipated medical expenses can derail years
of retirement preparation. Similarly, the prospect
of low pension benefits as a result of inadequate Figure 2: How confident are you that you will have enough
or unsustainable pension systems, or patchy money to live comfortably throughout your retirement years?
working careers can be a source of concern. – country perspective
Share of respondents by country
According to our survey, almost half of the
respondents in both developing and developed
100%
countries (46% and 49%, respectively) are
either very or somewhat insecure about whether 80%
they will have enough money to live comfortably
throughout their retirement years (Figure 2). 60%
In developed countries, the overall assessment 40%
is slightly more pessimistic. This perception
possibly stems from growing concerns about 20%
the need to reform pension systems in those
0%
countries. It also underlines the subjectivity of
Japan
Russia

Singapore
Germany

Australia

Switzerland

India
Canada
USA

South Korea
Chile

South Africa

UK
Brazil

China

Indonesia

these matters: welfare perceptions are strongly

determined within a society and do not always
reflect the “objective” cross-societal reality. As
for the differences between men and women, Very insecure Quite/somewhat insecure
women have, on average, greater concerns Quite/somewhat confident Very confident
Don't know/can't decide/no answer
than men regarding their financial situation in
old age (Figure 3). Earnings gaps, shorter em-
ployment careers and lower pension coverage Source: Credit Suisse Progress Barometer Survey 2019/2020
might explain this result.

34
Figure 3: How confident are you that you will have enough Across age groups, concerns seem to be more
money to live comfortably throughout your retirement years? pronounced for soon-to-become retirees (55–64
– overview years old), with 54% of respondents being either
Share of respondents by development level, age, generation, gender very or somewhat insecure in both developed
and retirement status and developing countries. In contrast, respon-
dents who have already retired are more confi-
Developed countries Developing countries dent about their income situation, especially in
developed countries. This is likely because they
75+ 75+ are better able to assess their financial means
65-74 65-74 and expenses. Also, in countries with well-devel-
oped pension systems, they can take advantage
55-64 55-64
of good coverage. Younger respondents below
40-54 40-54 20 years of age, the so-called “Generation Z,”
20-39
are generally more optimistic, with a lower pro-
20-39
portion of respondents worrying about the means
Below 20 Below 20 to live comfortably during retirement – only
slightly more than one-third are either very or
somewhat insecure. Overall, in terms of behavior,
Silent Silent
it appears that the closer the retirement date,
Boomers Boomers the greater the concerns. Once uncertainty is
Generation X
removed (as in the case of retirees) or far away
Generation X
(as in the case of young respondents), fears
Millennials Millennials diminish.
Generation Z Generation Z

0% 25% 50% 75% 100% 0% 25% 50% 75% 100%

Sources of income during retirement
Women Women
Men Men Attitudes toward retirement and the way people
perceive the adequacy and sustainability of
retirement systems in their countries clearly
shape expectations regarding the main sources
of income in old age. Not surprisingly, 45%
of respondents in developed countries expect
Very insecureBelow retirement age Very insecure Below retirement age retirement provision to be the major source of
Quite/somewhat insecure income during retirement. The corresponding
Quite/somewhat insecure Above Above
figure for developing countries is 39%. In general,
retirement Quite/somewhat confident retirement

Quite/somewhat confident
age Very confident age the level is higher in countries with wider pen-
Don't know/can't decide/no answer sion coverage and/or higher replacement rates
(Figure 4).

For respondents who have already retired, the

Very insecure Very insecure question refers to their current major source of
Quite/somewhat insecure Quite/somewhat insecure income. Accordingly, in both country groups, the
Quite/somewhat confident Quite/somewhat confident
proportion of respondents stating that retirement
Very confident Very confident
provision is their major source of income is higher
Don't know/can't decide/no answer Don't know/can't decide/no answer
for retirees than for people below retirement age
(Figure 5). It is interesting to note, however, that
Source: Credit Suisse Progress Barometer Survey 2019/2020
the gap between people in retirement and those
who are not is wider in developed countries than
in developing countries (17 versus five percent-
age points).

Rethinking retirement 35
As mentioned above, people in developed Figure 4: To what extent do you expect retirement provision
countries seem to be more concerned about the and/or social benefits to be a source of income in retirement?
sustainability of their retirement systems. They – country perspective
are aware of the need for painful reforms and Share of respondents expecting income from retirement provision
have already seen some measures implement- and/or social benefits to be a major source of income by country;
ed in their own countries. Consequently, their retirees: current major source of income
expectations regarding retirement benefits in the
future are somewhat lower. Conversely, in several Switzerland
China
developing countries, retirement systems are
Germany
still maturing and younger generations expect to UK
achieve better coverage. Retirement provision in South Africa
these countries has not been a reality for many Brazil
Russia
individuals, and people are generally not used to
India
relying on it. Canada
Australia
The results by age group and generation provide Indonesia
USA
additional support for this interpretation. Younger
South Korea
generations are expecting retirement provision Singapore
to be less important as a source of income than Japan
older generations. Compared to developing Chile
countries, however, young people in developed 80% 40% 0% 40% 80%
countries appear far more pessimistic than their
Retirement provision Social benefits
parents and grandparents (Figure 5).

Social benefits generally play a smaller, but

not negligible, role as an income source during
retirement. In developed countries, 28% of Figure 5: To what extent do you expect retirement provision
respondents expect to have to rely on such and/or social benefits to be a source of income in retirement?
benefits as a major source of income; in devel- – overview
oping countries, the proportion is slightly lower Share of respondents expecting income from retirement provision
(23%). The lines between age groups and and/or social benefits to be a major source of income by development
generations are less clear for social benefits level, age, generation, gender and retirement status; retirees: current
than for retirement provision. Interestingly, in major source of income
developing countries, the younger the respon- Developed countries Developing countries
dents, the higher the proportion attesting that
75+ 75+
social benefits will be a major income source in
retirement. 65-74 65-74

55-64 55-64
Apart from essentially publicly funded sources
40-54 40-54
of income like retirement provisions and social
benefits, private sources of income will also 20-39 20-39
play a role in financing old-age living. Personal
Below 20 Below 20
savings and investments are even expected to
become as important as retirement provision as
a source of income in the future. About 44% of Silent Silent
respondents in developing countries state that
Boomers Boomers
they expect personal savings and investments to
be their major source of income in old age, with Generation X Generation X
the highest values in countries like Brazil, South Millennials Millennials
Africa and India (Figure 6). In developed coun-
tries, the corresponding figure is 40%. Although Generation Z Generation Z

people in developed countries may have more

significant levels of savings and wealth than in Above Above
developing countries, these assets seem to play retirement age retirement age
Below Below
a smaller role in financing living during retire- retirement age retirement age
ment. In both country groups, the relevance of
this source of income increases the younger the
Women Women
respondents are.
Men Men

0% 25% 50% 75% 100% 0% 25% 50% 75% 100%

Retirement provision Social benefits Retirement provision Social benefits

Source Figures 4 and 5: Credit Suisse Progress Barometer Survey 2019/2020

36
Figure 6: To what extent do you expect personal savings and Another important financial source during
investments and/or income from work to be a source of retirement is income from work. This is clearly
income in retirement? – country perspective more often the case if a country is still developing,
Share of respondents expecting personal savings and investments, with 44% of respondents expecting work to
and/or income from work to be a major source of income by country; be a major financial source during retirement
retirees: current major source of income (Figure 7). In developed countries, this pro-
portion decreases to 25%. As we will see in
Switzerland
more detail in the next section, most people in
Brazil
Singapore developing countries with low pension coverage
South Africa and inadequate replacement rates literally need
India to work until the end of their lives. At the same
Indonesia time, people in these countries are less used to
Germany
China
retirement as a work-free stage of life.
USA
Canada Looking at the results by age group, it seems
Australia that, for younger generations, longer working
Chile years will become the savings plan of the future.
South Korea
Russia
In developed countries, 30% of millennials and
UK 35% of Generation Z members expect income
Japan from work to be their major financial source
80% 60% 40% 20% 0% 20% 40% 60% 80% during old age (Figure 7). For soon-to-become
retirees, the corresponding figure is only 23%.
Income from work Personal savings and investments
Young generations are also planning to rely more
on family support and inherited wealth than their
parents and grandparents. On average, 18%
of respondents in developed countries expect
Figure 7: To what extent do you expect personal savings and
this source of income to become the major one
investments, family support or inherited wealth, and/or income
during retirement, versus 23% in developing
from work to be a source of income in retirement? – overview
countries. This figure increases to 28% and
Share of respondents expecting personal savings and investments,
32%, respectively, for respondents under 20
family support or inherited wealth, and/or income from work to be a
years of age.
major source of income by development level, age, generation, gender
and retirement status; retirees: current major source of income

Developed countries Developing countries Attitudes toward work beyond normal

retirement age
75+ 75+

65-74 65-74 Retirement decisions are very individual.

55-64 55-64 Depending on factors such as financial position,
40-54 40-54
marital status, health conditions or job satisfac-
tion, people may arrive at different conclusions
20-39 20-39
about whether to prolong their working careers.
Below 20 Below 20 Figures 8 and 9 show how survey participants
responded to the question of whether they
wish to continue working after reaching normal
Silent Silent
retirement age.
Boomers Boomers

Generation X Generation X Countries’ development status plays an important

Millennials
role in whether people wish to continue working
Millennials
after reaching retirement age. Specifically, re-
Generation Z Generation Z
spondents in developing countries display a higher
working morale when it comes to extending their
Above Above working life beyond the normal retirement age
retirement age retirement age
Below Below compared to respondents in developed countries.
retirement age retirement age Around 53% of respondents in developing coun-
tries wish to continue working versus only 28% in
Women Women developed countries.
Men Men

0% 25% 50% 75% 100% 0% 25% 50% 75% 100%

Personal savings and investments Personal savings and investments

Income from work Income from work
Family support or inherited wealth Family support or inherited wealth

Source Figures 6 and 7: Credit Suisse Progress Barometer Survey 2019/2020

Rethinking retirement 37
Respondents in Germany (18%), Canada Figure 8: Do you wish to continue working after reaching the
(25%) and Switzerland (28%) show the lowest normal retirement age? – country perspective
proportion of people who wish to continue Share of respondents by country
working after reaching normal retirement age
(Figure 8). The most obvious reason is that 100%
people in these countries consider themselves 90%
to be wealthy enough at the point of retire- 80%
ment and see no need to work beyond it. Con- 70%
versely, respondents in India (75%), Indonesia 60%
(65%) and South Korea (63%) are among 50%
the countries with the highest share of people 40%
wishing to continue working after reaching 30%
normal retirement age. In these countries,
20%
not working beyond retirement age is associ-
10%
ated with poverty. In India and Indonesia, the
0%
coverage rates are relatively low at 25% and

South Korea

Singapore
India

Germany
Indonesia

UK
Brazil

Australia

Canada
Russia

Japan

Switzerland
Chile

South Africa

China

USA
14%, respectively, indicating that the majority
of people cannot rely on the pension system
to fund a work-free period after retirement.
By contrast, South Korea ranks among the Yes I don't want to, but I will have to continue No Don't know/can’t decide

countries with the highest relative poverty rate

among the elderly (see Figure 4 on page 47).
Hence, for many Koreans, not working beyond
normal retirement age may pose a real threat Figure 9: Do you wish to continue working after reaching the
of slipping into poverty. normal retirement age? – overview
Share of respondents by development level, age, generation, gender
It is interesting to note that respondents had and retirement status
the choice of selecting the option “I don’t want Developed countries Developing countries
to, but I (will) have to,” but only 10%–16% of
respondents in these countries chose it. In India 75+ 75+
or Indonesia, this can be explained by the fact 65-74 65-74
that work-free periods are not a reality for most 55-64 55-64
people. Hence this is a question that does not
40-54 40-54
come up very often. Most people in countries
20-39 20-39
with low pension coverage or insufficient pension
schemes literally need to work until the day they Below 20 Below 20
die. That said, the question above takes on an-
other dimension. Accordingly, many respondents Silent Silent
wish to work beyond normal retirement age
Boomers Boomers
because the alternative option of not working into
Generation X Generation X
old age is synonymous with poverty. They do not
see this as being forced to work longer because Millennials Millennials
they do not know any different. Generation Z Generation Z

0% 25% 50% 75% 100% 0% 25% 50% 75% 100%

When comparing age groups, an interesting
pattern arises (Figure 9). The younger the Women Women
Men Men
people in developed countries, the more they
wish to continue working after reaching normal
retirement age. They also expect income from
work to become a major financial source during
retirement (Figure 7). Conversely, the younger
the people in developing countries, the less they Yes Yes
Below retirement age Below retirement age
wish to continue working beyond retirement age.
They possibly expect to achieve better coverage I don't want to, but I will have to
Above I don't want to, but I will haveAbove
to
continue retirement continue retirement
once the retirement systems in their country No No age
age
have matured. Overall, however, Millennials and
Generation Z are most undecided when asked
about wanting to work beyond normal retirement
age, which strengthens the stereotype of these Yes Yes
two generations. At the same time, one might I don't want to, but I will have to continue I don't want to, but I will have to continue
No No
say that the younger the people, the less likely Don't know/can’t decide/no answer Don't know/can’t decide/no answer
they are to be informed about the topic and
therefore have no opinion on it. Source Figures 8 and 9: Credit Suisse Progress Barometer Survey 2019/2020

38
Figure 10: Do you think individuals should take on more There is little difference between men and women
responsibility in managing retirement savings? in both developing and developed countries.
– country perspective About 31% of men and 25% of women wish to
Share of respondents by country work beyond retirement age in developed coun-
tries, compared to 54% and 52% in developing
100%
countries, respectively. Retirement decisions
90%
between men and women can differ depending
80%
on the family situation, the health of individuals,
70%
and the reliance of the household on additional
60%
income.
50%
40%
30%
Responsibility in managing retirement
20%
savings
10%
0%
People face several challenges when planning
Singapore

South Korea
India

Germany
Indonesia

UK
Brazil

Australia
Canada
Russia

Japan

Switzerland
South Africa

Chile

China
USA

for retirement, which vary according to the type

of pension arrangement. In many OECD coun-
tries, the growing role of funded private pen-
A lot more responsibility Some more responsibility
sion schemes relative to pay-as-you-go public
No more responsibility Don't know/can’t decide/no answer
pensions in retirement income provision means
that individuals must increasingly take responsi-
bility for their retirement as well as make a range
Figure 11: Do you think individuals should take on more of decisions and assume risks related to retire-
responsibility in managing retirement savings? – overview ment saving (OECD, 2018a). Besides having
Share of respondents by development level, age, generation, gender a basic understanding of the system (e.g. the
and retirement status level of mandatory contributions, eligibility rules
Developed countries Developing countries and the way benefits are calculated and taxed),
people also need to know how potential risks
75+ 75+ like unemployment, financial turmoil or inflation
65-74 65-74 can influence the level of retirement benefits.
55-64 55-64 Moreover, they need to understand the need for
40-54 40-54 pension reforms and their consequences.
20-39 20-39
But do individuals really wish to take on more
Below 20 Below 20
responsibility in managing their retirement
savings? According to our survey, this is more
Silent Silent
often the case in developing countries than in
Boomers Boomers the developed world. In developing countries,
Generation X Generation X 49% of respondents believe that individuals
Millennials Millennials should take on much more responsibility in
Generation Z Generation Z managing retirement savings; another 34% say
they would take on some more responsibility.
0% 25% 50% 75% 100% 0% 25% 50% 75% 100%
In developed countries, the proportion of
Women Women respondents who wish to assume much more
Men Men
responsibility is clearly lower at 27%, whereas
40% are ready to assume some more responsi-
bility (Figure 10).

From a cross-country perspective, it is inter-

A lot more responsibility
esting to note that the retirement systems in
Below retirement age A lot more responsibility
Below retirement age countries where people wish to take on more
Some more responsibilityAbove Some more responsibility Above responsibility, are generally not among the
retirement retirement
No more responsibility age
No more responsibility
age better-rated systems according to the Mercer
Don't know/can’t decide/no answer Index (see Figure 3 on page 19). In South
Africa and Indonesia, for instance, where
replacement rates and/or pension coverage are
very low, more than 70% of respondents wish
A lot more responsibility A lot more responsibility to take on more responsibility in managing their
Some more responsibility Some more responsibility own retirement savings (Figure 10). A lack
No more responsibility No more responsibility
Don't know/can’t decide/no answer Don't know/can’t decide/no answer
of confidence in poorly functioning retirement
systems could explain this result. On the other
Source Figures 10 and 11: Credit Suisse Progress Barometer Survey 2019/2020 side of the spectrum, one finds countries like

Rethinking retirement 39
Switzerland and Germany with mature retire- Figure 12: The higher the knowledge level, the more
ment systems, where the proportion of respon- pronounced the desire to manage one’s own retirement savings
dents ready to take on much more responsibility Share of respondents by level of business acumen
decreases to about 20%. Do people in these
countries feel that they already take enough
responsibility, or do they shy away from poten- A lot more responsibility
tial risks or wrong decisions because they are
generally well off and do not need to optimize
Some more responsibility
further?

Similarly, in developed countries, younger people No more responsibility

do not seem to want more responsibility compared
to older people, at least not much (Figure 11). By
Don't know/can’t
contrast, in developing countries, the younger the decide/no answer
respondents, the higher the proportion wishing to
take on more responsibility in managing retirement 0% 20% 40% 60% 80% 100%
savings. This gap between generations is also
very clear when comparing people below retire- I have excellent business acumen I have quite good business acumen
I don’t have that much business acumen I have no business acumen at all
ment age with those already retired. Don't know/can’t decide/no answer

The ability to manage one’s own retirement

savings requires a certain level of economic and
Source: Credit Suisse Progress Barometer Survey 2019/2020
financial knowledge. Only with such knowledge
can individuals make decisions in line with their
specific needs to enhance their retirement
benefits. It is therefore not surprising that, in
our survey, the desire for more responsibility in
managing retirement savings correlates strongly
with the business acumen of respondents, a
variable that can be seen as a proxy for the
more narrowly defined financial literacy
(Figure 12). Among the respondents asserting
that they would like to take on much more
responsibility in managing their own retirement
savings, 39% have relatively good and 21%
have excellent business acumen. Among those
who prefer to avoid more responsibility, many do
not have much business acumen (36%) or have
none at all (19%).

In light of these results, the transition to

retirement schemes that require individuals to
assume more responsibility and risks may prove
problematic. To tackle the issue, the OECD has
developed recommendations and frameworks
to promote financial education, both for adults
and young people. Adequate levels of financial
literacy among the general population, how-
ever, will take some time to materialize. There
is therefore a need for other approaches like
improving the design of retirement systems
(OECD, 2018a).

40
The hidden market advantage of being over 50
Andreas Rudolph
Managing Director at Lee Hecht Harrison Switzerland

With population aging and the shortage of digitalization and the new economic reality com-
skilled workers, everyone in the workforce bined with a new desire for flexibility have given
becomes important. Since fewer young people space for new ways of working. These could
are entering the labor market, the integration of act as a catalyst to enhance the employability of
senior workers will become crucial in the future. older workers on the labor market. Whether it is
Nevertheless, older workers are still considered part-time, freelance or self-employment, these
less attractive, although they bring high potential, new forms of work need to be embraced and
motivation and skills. The prejudices in our society treated like standards.
may lead to a loss of self-confidence among
older workers looking for a job. A study we con- Existing instruments such as “bow careers”
ducted among approximately 1,700 job seekers (where an employee’s workload or responsibil-
in Switzerland who were supported by a career ities are reduced shortly before retirement) or
transition or outplacement program following public grants for on-the-job training are not well
dismissal in 2017 shows this clearly. Around known and hardly used. Grants provide finan-
86% of those surveyed believe that people over cial relief for companies that offer job seekers
50 are disadvantaged in the Swiss labor market the opportunity to acquire the necessary skills.
– even though most of them did not experience Only 5% of the respondents in our survey were
it themselves. Many outplacement candidates familiar with these instruments. This is possibly
therefore massively lower their expectations after because such practices are not sufficiently in line
just a short job search. with social trends. Bow careers are still hardly
accepted. From the point of view of those affected,
In our experience, the prospects of successful such a career path bears the risk of lowering
re-employment for people over 50 are not worse their standing in society. Older employees are
than for younger people. On average, re-employ- also often advised against accepting a reduction
ment only takes two to three months longer. How- in salary. As a result, job seekers do not accept
ever, one should not wait too long after dismissal interesting job opportunities and remain unem-
to get started. People who start thinking early ployed for a longer time.
about the next chapter of their career are more
likely to be successful. In this context, support To sum up, future skills, integration of the senior
from an outplacement or career transition program workforce and alternative forms of work are the
immediately after a dismissal has a positive effect key success factors to ensure the sustainable
on the success of older job seekers. competitiveness of the labor market, in Switzerland
and abroad. Continuous up- and reskilling and a
Further education and skill development play a key timely offering of robust career coaching to laid
role in maintaining employability. Several studies off employees, particularly older workers, must
have shown that older workers are generally less be considered an integral part of employers’
willing to invest in further education. However, responsibilities. Every person, for their part, is
our study shows that respondents clearly recog- an actor in their professional life, responsible for
nize that they should invest in the development shaping and strengthening his/her own profes-
of new skills and in networking. This suggests sional perspective by continuously learning and
that only drastic experiences such as dismissal not waiting for a dramatic event like a job loss to
make people realize the importance of training realize the need for proactivity. As regards the
for employability. It is also interesting to note that state, a flexible retirement age combined with the
the respondents do not necessarily recommend right incentives and a proper consideration of the
wage flexibility, but rather flexible forms of work new forms of work within the retirement system
and the rethinking of one’s own profile. In fact, should be a priority.

Rethinking retirement 41
42
5. The changing
face of retirement

For much of human history, life has consisted of two stages at most:
education and work. It is only during the past century that retirement
has completed the three-stage lifecycle in many countries worldwide.
With life expectancies on the rise, the traditional three-stage path may
not suit the new reality. Enabling new life paths brings new challenges.

Reconsidering traditional career paths acceptance of an increase in retirement age.

When reforming pension systems, policymakers
In light of rising life expectancies, delaying should also take into account the fact that the
retirement – or prolonging working lives – seems traditional concept of the three-stage lifecycle
a suitable way to help alleviate the strain on pen- with retirement as a fixed career endpoint is being
sion systems worldwide. Current data on effec- increasingly blurred by transformations in the
tive retirement ages and labor force participation working world caused by technology and more
rates of older people show that a shift toward a flexible work arrangements such as part-time or
later exit from the labor market is actually already temporary employment. Traditional career paths
taking place to some extent in most developed thus need to be reconsidered in order to maxi-
economies. There are significant differences mize the advantages of longevity.
between countries, however, and the participa-
tion of older people in the workforce remains
low in many places, suggesting that often there Working past traditional retirement age:
is still scope for reforms to encourage longer An assessment of the current situation
working careers.
Before looking at ways to promote longer
Increasing the retirement age would appear to working careers, let us first assess the current
be the most obvious policy instrument to make situation in different countries. The “average
people work longer. As seen in Chapter 2, several effective age of labor market exit” is an indicator
countries have already taken such a step in recent often used to approximate the average effec-
years or are planning to do so. Countries such as tive retirement age in a country.1 Across the
Denmark and the Netherlands have linked retire- OECD and EU member countries, labor market
ment age to life expectancy. However, raising
the retirement age is often a controversial 1. Formally, the exit age from the labor force and the effec-
and highly debated issue. This highlights the tive retirement age are not necessarily the same, as people
need for additional measures to motivate older may leave the workforce without receiving retirement benefits
or, on the contrary, retire – thus receiving pension benefits
workers to remain in the labor force longer, and
– while continuing working. The OECD defines the average
encourage firms to employ them. Moreover, effective age of labor market exit as the average age of exit
policies need to ensure appropriate working from the labor force for workers aged 40 and above over a
conditions at all ages in order to improve social five-year period (e.g. 2013–2018).

Rethinking retirement 43
exit ages have increased on average since the Figure 1: Effective retirement age on the rise in advanced
turn of the 21st century, after falling constantly economies since the beginning of the 21st century
for several decades (Figure 1). The increase Average effective age of labor market exit, average of OECD
was more pronounced for women, with an and EU countries, 1970–2018
average gain of approximately 2.8 years in the
OECD between 2000 and 2018, compared to
70
2.3 years for men over the same period. But,
69
despite the increase in exit ages registered in
68
the last decades and higher life expectancies,
67
the average effective retirement ages in OECD
66
and EU countries remain well below their levels
65
in 1970. In OECD countries, men currently
retire from the workforce at an average age of 64

65.4 and women at 63.7. In EU countries, the 63

average labor market exit ages are even lower 62

at 64.0 for men and 62.3 for women. 61

60
The situation across the different countries is 59
anything but homogeneous, however, as shown 58
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
in Figure 2. In South Korea, the average effec-
tive age of labor market exit was 72.3 for both OECD men OECD women EU-28 men EU-28 women
men and women in 2018 – the highest value
among OECD countries. In Japan and Chile, as Source: OECD, Credit Suisse
well as in non-OECD developing countries like
Indonesia and India, men work on average until
around 70 or above. Portugal and Iceland register
the highest values in Europe, with an average
effective retirement age above 68 for men. The
USA is just behind with an exit age of just under
68. At the other end of the scale, French men
quit the workforce at 60.8 on average, i.e. more
than seven years earlier.

Figure 2: Significant differences across countries in the effective retirement age

Average effective age of labor market exit vs. normal retirement age, 2018
75

70

65

60

55

50
South Korea

Japan

Canada

Netherlands
Portugal
Indonesia

USA

China

OECD

UK
Australia
Chile

Denmark
India

Sweden

Norway

France
Iceland

Brazil

Finland

Germany

Russia

Poland
Switzerland

Italy

South Africa

Belgium
Spain

Effective age of labor market exit (men) Effective age of labor market exit (women) Normal retirement age (men) Normal retirement age (women)

Source: OECD, Credit Suisse

44
 The differences between the countries cannot age are only part of the explanation for the
be explained solely by differences in the normal variance across countries. For example, Iceland
retirement age (Figure 2). In some countries, and Norway both have the normal retirement
people on average work beyond (and sometimes age set at 67, the highest normal retirement
well beyond) the respective normal retirement age in the OECD, but the labor force participa-
age.2 The difference between the average tion rates of people aged 65 and over differ by
effective and the normal retirement age is almost nearly 13 percentage points between the two
ten years or more for men and women in Brazil countries (23% in Iceland, 11% in Norway). And
and South Korea, and for men in India. It even there are several countries where the labor force
amounts to 16–17 years in Indonesia. In other participation rate of older people is high despite
(mostly European) countries, the average effec- a relatively low normal retirement age. The latter
tive retirement age is, in contrast, (well) below is at 56 in Indonesia, 61 in South Korea, 58 in
the normal retirement age. The largest negative India and 60 in China. Nevertheless, in all of
discrepancies are registered in Italy (–3.7 years these four countries, between 20% and 40%
for men, –5.1 for women), followed by Belgium of the people aged 65 or above are still in the
(–3.4 years for men, –4.5 for women). workforce, compared with the OECD average
of 11%. Conversely, this rate was under 5% in
Data on the labor force participation rate of older Italy in 2018, despite a normal retirement age of
people shows a similar picture, with significant around 67.
differences between countries (Figure 3). In
Indonesia, around 40% of the people aged 65+ Although the levels remain low in some places, an
are still in the workforce, according to the Inter- increase in the labor force participation rate of older
national Labour Organization (ILO). Conversely, people has been observed since 2000 in most
only 3% or less of French, Belgian and Spanish countries under review (Figure 3). Notable excep-
people stay in the workforce past the age of 65. tions are Portugal, Brazil, Indonesia and Poland, as
Here again, differences in the normal retirement well as Russia and India to a lesser extent.

2. Defined as the age at which individuals with an uninter-

rupted career from age 22 are eligible for full retirement
benefits without penalties (OECD, 2019b).

Figure 3: Labor market participation of older people generally increased, but remains low in some countries
Labor force participation rate of people aged 65+, 2000* and 2018**
45%

40%

35%

30%

25%

20%

15%

10%

5%
N/A

0%
Canada

Netherlands
Japan

UK

France
South Korea

OECD
China

USA

Australia

Portugal

Norway

Denmark

Germany

Sweden

Finland

Russia

Poland

Belgium
Indonesia

Italy
Singapore

Brazil

South Africa

Spain
India

Chile

Iceland

Switzerland

2000 2018

* except South Africa (N/A); ** except South Korea and Indonesia (2015)
Source: ILO, Credit Suisse

Rethinking retirement 45
What drives labor force participation In some cases, people may be willing to continue
beyond retirement age? working (well) past the traditional retirement age,
but are not offered the possibility to do so by
As already mentioned, changes and differences employers. Many OECD countries still have
in the normal retirement ages are just part of so-called mandatory retirement rules that allow
the explanation for the disparities in the labor employers to “force” employees to retire past a
force participation of older people across certain age (OECD, 2017). Factors weighing on
countries and over time. Various other factors the cost-benefit ratio of employing an older person,
can influence an individual’s decision or ability such as seniority wages, age-based social
to continue working past a certain age. Some insurance contributions by employers, special
of these are personal and others are linked to employment protection for older employees,
the specific policies or the general economic etc., may reduce the incentive for firms to retain
and social environment. There are also varia- or hire them. The lower perceived productivity
tions over time. of older workers is also often an issue. We will
come back later to the key role education and
Pension systems and their features play a further training play in this context.
key role in this respect. Depending on pension
coverage (whether a person receives retire-
ment benefits at all) and replacement rates Postponing retirement today:
(how much of the previous income pension A choice or a necessity?
benefits cover) in the specific country, older
people will have a greater or lesser need to The weight of the different factors mentioned
continue working beyond the normal retire- above on the labor force participation of older
ment age. Next to the normal retirement age, people varies from country to country (note that
rules governing early and deferred retirement the list is not comprehensive). However, for the
(minimum and maximum age, financial pen- sake of simplification, the different countries can
alties and bonuses, etc.) may also influence be roughly divided into three groups, although
the effective retirement age. Pension reforms the distinction is not always clear-cut:
carried out over the past decades in many OECD
countries, raising eligibility ages and closing or 1. In developing countries where pension systems
at least tightening early-retirement schemes, are are underdeveloped or still maturing, and pension
among the main drivers of the general increase coverage is low as a result, many people have
in average effective retirement ages and labor no choice but to continue working into older age
force participation of older people shown above to sustain themselves and their families, leading
(OECD, 2019a). to comparatively high average effective ages of
labor market exit and labor force participation
The design of other welfare programs can also rates of older people. Indonesia and India are two
have an impact on the labor force participation prime examples for this group in our selection of
of older workers. This is the case, for example, countries. According to data from the International
where age-based rules in unemployment or Labour Organization, only 14% of the people
disability schemes act as an incentive for older above retirement age in Indonesia received a
recipients to stay out of the labor force until they pension in 2016 and 25% in India (Figure 4). In
reach retirement age instead of going back to this group of countries, the three-stage lifecycle
work if they are able. as more developed countries know it – education,
work, retirement (see Box on page 28) – does
Where pension benefits are insufficient to not really exist for a large part of the population.
sustain people and their families (or to attain The “retirement” phase is mostly short or even
the desired standard of living), the decision to non-existent in some cases. In Indonesia, for
continue working past the normal retirement age example, the remaining life expectancy at the
also depends on the availability of alternative average effective age of labor market exit is below
income sources such as personal savings and ten years.3 By comparison, this figure is close to
investments, family support, inherited wealth or 25 years in France.
social benefits (see Chapter 4).
Hence, in this group of countries, the ques-
Health is another relevant factor determining tion of whether someone wants to continue
labor force participation of older workers, as are working beyond retirement age often does not
working conditions and job satisfaction. even arise. This is best illustrated by the survey
Hence, the growth in the share of service em- results presented in Chapter 4, according to
ployment (i.e. generally less physically strenuous which around three-quarters of the respondents
tasks) in total employment over the last decades in India and two-thirds in Indonesia answered
has probably contributed to the increase in labor
force participation rates of older people in the 3. Life expectancy at age 75 was 8.3 years in the period
OECD over this period. 2010–2015, according to UN estimates.

46
Figure 4: Pension coverage and old-age poverty rates in a country comparison
Proportion of population above retirement age receiving a pension, 2014*; relative income poverty rate of population
aged over 65, 2016**

Denmark
Netherlands
France
Norway
Finland
Belgium
Poland
Germany
Sweden
Canada
Russia
UK
Switzerland
Japan
China
South Korea
Italy
USA
Portugal
South Africa
Chile
Brazil
Australia
Iceland
Spain
India
Indonesia N/A

100% 80% 60% 40% 20% 0% 0% 20% 40% 60%

Proportion of population above retirement age receiving a pension Income poverty rate of population aged over 65

The old-age income poverty rates show the proportion of people aged 65 or above living on incomes of less than half the median equivalized household disposable
income in a country (OECD, 2019b). Note that income poverty measures do not take account of wealth, therefore possibly overestimating the occurrence of old-age poverty
in cases where retirement capital is paid in a lump-sum upon retirement. This helps to explain, for instance, the comparatively high poverty rate in Switzerland.
* except Brazil, Canada, Chile, Germany, India, Indonesia, South Africa (2016), China, Russia (2017); ** except China, India (2011), Brazil (2013), Iceland, Japan, South
Africa, Switzerland (2015), Canada, Chile, Finland, Norway, South Korea, Sweden, UK, USA (2017), Indonesia (n/a)
Source: ILO, OECD, Credit Suisse

that they wish to continue working after reach- normal retirement age is usually not necessary
ing the normal retirement age – despite being in these countries, as pension benefits mostly
given the possibility to reply “I don’t want to, but provide an adequate source of income for older
I (will) have to.” people. Thus working into older age is mainly still
optional for most people. However, with growing
2. The second group is comprised of countries demographic and economic pressures on their
like Japan or South Korea, where, despite pension systems, the need for longer working
universal pension coverage, many people above lives is growing in these countries as well, thus
the normal retirement age continue working calling for appropriate policies aimed at encour-
because they have to. These countries are often aging longer working careers.
characterized by low pension replacement rates
and above-average relative old-age poverty rates Going forward and for the purpose of simplicity,
(Figure 4). According to our survey, the propor- the study focuses on the set of countries in
tion of people above retirement age that have the second and the third group. The reason is
to continue working although they would rather that these countries have pension systems in
not is well above 20% in Japan. In South Korea place that allow (most of) their citizens to enjoy
– the OECD country with the highest relative a period of retirement. Countries in these two
old-age income poverty rate – the answers show groups are in advanced stages of population
a similar pattern to the first group of countries, aging, therefore posing financial strain on their
suggesting that stopping working at the normal pension systems. The way these countries
retirement age is not even an option for a majority deal with aging societies, however, can contain
of the people there. valuable information for the first group of
countries (see Chapter 1).
3. In countries from the third group, such as
France or Germany, the three-stage lifecycle
is still a common model. Working beyond the

Rethinking retirement 47
The challenge of prolonged working Figure 5: Reconsidering the traditional three-stage lifecycle of
careers illustrated a middle-class worker
Schematic representation of three-stage and multiple-stage lifecycles
In order to illustrate complex problems, it some- with further education, part-time and temporary work, in years of life
times helps to use models that depict a simpli-
fied version of real life. In our context of aging
Two stages
societies, the model consists of the human
lifespan of a middle-class worker whose life is
divided into different stages. These life stages Three stages
differ in number and with regard to their content (20th century)
and length across countries and individuals.
There are two typical categories in terms of how Three stages
these life stages are structured. (21st century)

The first category consists of countries, where Multiple stages

people pass – at best – two stages during their
lifetime. The first stage consists of education,
0 10 20 30 40 50 60 70 80
where children study as a preparation for working
life. After finishing school, they enter working life Education (Temporary) work Further education
Work (Part-time) work Retirement
and stay there until the day they die (Figure 5).
Since many developing countries do not have
* This figure is only a schematic representation. The lengths of each life stage can differ across
(well-functioning) pension systems in place, individuals and countries along with the content.
the third stage for this category of countries Source: Credit Suisse
has never been something people worry about
because they rarely benefit from it. As mentioned
previously, this category is not at the center of
this analysis. education, a prolonged working life and retire-
ment.4 The idea of a prolonged working life, at
The second category consists of countries that first glance, may sound exhausting.
moved away from the two-stage life at the turn
of the 20th century. During this time, societies of The lack in appeal of a longer working life arises
(now) developed countries began rethinking the because people simply imagine the future to
situation, which led to the birth of the pension be like the past and think that the structure of
system. In the light of their work-intensive lives, this prolonged working life will still follow the
employees increasingly requested a reward for traditional three-stage life model. In their book,
that burden. What they wanted was a short period Gratton and Scott (2016) endorse a move away
of retirement and a government that provided from the traditional model of three stages. Coun-
for financial security during this stage (see Box tries should think about alternative options that
on page 28). This resulted in the three-stage could make a prolonged working life much more
lifecycle consisting of education, working life and attractive. In particular, countries should allow for
retirement. Since then, a typical three-stage path a life in multiple stages in which people not only
is as follows: after graduating from school, people invest in tangible assets but also in intangible
work for several decades before they retire and assets. Intangible assets include productive
enjoy their pension. assets (knowledge, skills) and vitality assets
(mental health, physical health, friendships, part-
Owing to a significant rise in life expectancy nerships) and, just like other assets, they require
in the past decades and the resulting financial care to not deteriorate. The multiple-stage model
pressure on pension systems, people in this is an extension of the three-stage model and not
second category see themselves confronted a complete novelty for many developed coun-
with a new reality. They can either choose to tries. In fact, the transition to a multiple-stage
retire at the normal retirement age and risk model is already unfolding in many developed
financial bottlenecks in a prolonged retirement countries, with people increasingly looking for
period or extend the second stage of working. more flexibility with opportunities to retrain and
With lifespans in developed countries often work in non-standard working arrangements.
exceeding 80 years, most people will have to
work longer. 4. An equivalent extension of working lives cannot be
assumed for people performing physically demanding work
Only people who have accumulated enough (e.g. construction work, mining), which cannot be easily
savings during their working lives or people who performed at 70 years of age. Therefore, these people are
less likely to postpone retirement and more likely to rely on
are willing to make substantial sacrifices with
financial support to cope with a prolonged retirement period.
regard to their living standards during retirement In the following pages, the focus lies on middle-class
can avoid this situation. For the rest, the three- workers who should be the target of policies aimed at
stage lifecycle in the 21st century consists of prolonging working careers.

48
 Why are intangible assets gaining importance Rewarding work and later retirement
for a prolonged (working) life? First, in order to
make longer working careers possible, old-age Strengthening longer working careers is a
workers need to be in good physical and mental complex endeavor that asks for a variety of
shape. Old-age workers in poor shape will be less approaches and solutions. In this regard, the
able and likely to pursue longer working careers. OECD (2019a) recommends a large number of
Second, working for longer requires contemporary policies (Table 1). These policy recommenda-
skills that are increasingly important in a fast- tions aim at extending workers’ careers and are
paced world with disruptive technologies. based on reform experiences of countries that
are dealing with an aging society.

Ideally, the pension system should be arranged

Table 1: Policy recommendations to strengthen in a way that people receive higher benefits if
longer working careers they work beyond the normal retirement age,
creating an incentive to delay retirement. Con-
1. Increasing incentives for older workers to continue working
versely, when retiring before the normal retire-
Rewarding
work and later 2. Decreasing incentives for older workers to retire early ment age, the pension benefits should be lower.
retirement 3. Limiting the use of publicly funded early-retirement schemes, This is what the OECD refers to as rewarding
especially for old-age workers still in good shape work and later retirement.
4. Discouraging mandatory retirement by employers
Encouraging 5. Tackling age discrimination in recruitment The OECD (2017) has designed a concept
employers 6. Reducing labor costs and enhancing productivity of older workers called “actuarial neutrality.” According to this
to retain and 7. Eliminating special employment protection and unemployment
concept, an actuarially neutral pension scheme
hire old-age benefit rules for older workers and setting wages based on produc-
workers tivity and competences rather than age is a system where a worker is “financially neutral”
8. Implementing initiatives that provide guidance on work organiza- from an actuarial perspective or indifferent
tion, training, health measures and working time policies to change between retiring or working an additional year
capacities of old-age workers as he/she approaches retirement age. Although
Promoting the 9. Facilitating access to lifelong learning costly for the pension provider, offering higher
employability I0. Improving working conditions and job quality at all ages benefits than what is actuarially neutral for
of workers II. Limiting the risk of long-term joblessness postponing retirement would provide a financial
incentive to work longer. Conversely, offering
Source: OECD a bonus below the amount that would imply
actuarial neutrality would act as a disincentive to
working longer. The factors taken into consid-
eration for calculating the actuarially neutral
Figure 6: Rewarding deferred retirement pays off bonuses are the retirement age, mortality rates,
Labor force participation rate of people aged 65+ (2018*); bonus for the discount rate and the indexation of pension
deferring retirement by one year (2016), OECD countries**, in % in payments. Other parameters used to compute
pension benefits are not considered. The figure
35% is independent of what pension systems actually
Labor force participation rate

provide. On average across OECD countries,

of people aged 65+

KOR
30% actuarial neutrality suggests a bonus of roughly
MEX
5.5% on past entitlements for postponing retire-
25% CHL ment by one year.
JPN
ISR ISL
20%
USA Plotting the bonus of deferring retirement by one
15%
year against the labor force participation rate of
AUS
TUR CHE
CAN
EST people aged 65+ shows that there is a positive
NOR GBR OECD PRT correlation between the two variables. For each
10% LVA
DEU DNK FIN CZE year of retirement postponement, Japan, for
5% POL SWE ITA SVK AUT example, offers higher basic and earnings-related
FRA
BEL
GRC ESP LUX SVN HUN bonuses as well as extra contributions resulting
0% in a total incentive of 11.3%. In other words,
-4% -3% -2% -1% 0% 1% 2% 3% 4% 5% 6% 7% 8%
working one additional year on average leads to
Bonus for deferring retirement by one year pensions increasing by 11.3%. Since a Japanese
worker is actuarially neutral when a pension bonus
* except South Korea (2015); ** AUS: Australia, AUT: Austria, BEL: Belgium, CAN: Canada, CHE: of 5.1% is given, the effective bonus of one
Switzerland, CHL: Chile, CZE: Czech Republic, DEU: Germany, DNK: Denmark, ESP: Spain, EST: additional year of work compared to the outside
Estonia, FIN: Finland, FRA: France, GBR: United Kingdom, GRC: Greece, HUN: Hungary, ISL: Ice- option of retiring is 6.2% (Figure 6). At the same
land, ISR: Israel, ITA: Italy, JPN: Japan, KOR: South Korea, LUX: Luxembourg, LVA: Latvia, MEX: time, the labor force participation rate of Japanese
Mexico, NOR: Norway, POL: Poland, PRT: Portugal, SVK: Slovakia, SVN: Slovenia, SWE: Sweden, workers aged 65+ was relatively high at 23.4% in
TUR: Turkey, USA: United States. 2018. In South Korea, postponing retirement by
Source: OECD, ILO, Credit Suisse one year leads to pensions increasing by 11.0%.

Rethinking retirement 49
Taking into consideration the actuarially neutral Another aspect is the growing importance of
value (5.1%) gives a net bonus of approximately investing in vitality assets. This group of intan-
5.8%. Similarly, the labor force participation rate gible assets comprises all those assets related
for old-age workers in South Korea was at a to an individual’s relationships and health. First,
relatively high level of 31.4%. life is more enjoyable if you are surrounded by
a supportive family and caring friends; neglect-
In many countries, workers do not have enough ing them during a prolonged working life can
financial incentives to further postpone retirement adversely affect relationships such that these
once they are eligible for their full pension. For assets either deteriorate or disappear complete-
instance, there is no bonus for postponing retire- ly. Second, good health in old age is of great
ment in Belgium and Germany because in both importance. The gift of longevity only unfolds if
countries the total bonus of deferring retirement these additional years on earth are spent in good
by one year is below the actuarial neutral value, physical and mental health.
resulting in a disincentive to postpone retirement.
In 2018, Belgium had one of the lowest labor But good health – just like good relationships
force participation rates among people aged 65+ – cannot be taken for granted. Instead, both
at roughly 2.6%, with only Spain (2.1%) having need investments. Some workers can arrange
a lower rate. In Germany, only 7.2% of old-age for a longer working life with enough time spent
workers (65+) still worked in 2018. on strengthening relationships and living a
healthy lifestyle. However, others have a hard
Rewarding work and deferred retirement is one time reconciling the two. For the latter group of
way to incentivize longer working careers. How- workers, a multi-stage lifecycle would allow them
ever, solely extending working careers through to spend more time with family and friends, while
financial incentives is short-sighted. In order to at the same time exercising and doing sports.
make this a relevant discussion, old-age working For instance, workers could consider part-time
first needs to be a realistic option. This means employment to invest in tangible assets and
that old-age workers need to have the skills and simultaneously build up meaningful relationships
good health to allow them to work longer. These and better health. The benefits would be
two factors can therefore be regarded as neces- healthier workers who are productive for longer,
sary conditions for longer working lives. thus allowing longer working careers.

In sum, reducing working time or taking a short-

Importance of further education, term break during a prolonged working career can
partnerships and good health be an opportunity to invest in intangible assets
such as knowledge, relationships and good
Today, one key difference to working in the health. With updated skill sets, better physical
20th century is the rising importance of further and mental health, workers can enhance their
education. Many prolonged career paths require employability and, at the same time, encourage
an investment in personal skills and knowledge employers to retain or hire them as old-age
at some point because, over a longer working workers (Table 1). Allowing for a multi-stage
career, the employment landscape is more likely lifecycle with breaks to invest in intangible
to undergo dramatic changes. This also means assets is thus in line with several of the OECD’s
that skills acquired during the first stage of policy recommendations.
education can potentially be outdated in the
later stages of working life.
Increasing share of old-age employees
If needed, a multi-stage lifecycle would allow working part-time or on a temporary basis
workers to undertake investments in productive
assets. These investments should prevent the Evidence suggests that workers often reduce
skills of employees (particularly old-age workers) weekly working hours when retiring (Figure 7).
from deteriorating during the second stage In all countries investigated, workers aged 55 to
of continuous work. If skills are outdated and 64 had longer working hours than workers older
further education is neglected, the employees than 65. A reduction in working hours can have
affected could lose their appeal on the labor different causes. One possible cause is that
market and discourage employers from retaining old-age workers become too expensive over
them. Therefore, a short break to engage in time for companies and are therefore forced to
further education can boost and more impor- reduce their working hours. Another might be
tantly extend the working careers of employees. the lack of financial incentives to work beyond
While a short absence in the labor market leads the normal retirement age. Yet another could be
to short-term losses in contributions to pension the employees’ decision to achieve more flexi-
funds, not investing at all can lead to patchy bility, meaning that old-age workers voluntarily
working careers in the long run and lower total decrease working hours in search of a better
pension contributions. work-life balance.

50
Figure 7: Weekly hours worked decrease with old age
Distribution of the working population by weekly hours worked and age group, selected countries, 2018
100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%
55 to 64 65+ 55 to 64 65+ 55 to 64 65+ 55 to 64 65+ 55 to 64 65+ 55 to 64 65+ 55 to 64 65+ 55 to 64 65+ 55 to 64 65+ 55 to 64 65+
Australia Brazil Canada Chile Germany South Korea Russia South Africa Switzerland UK

1 to 19 hours 20 to 29 hours 30 to 34 hours 35 to 39 hours 40 hours or more

Source: OECD, Credit Suisse

The increasing demand for a better work-life In Switzerland and Germany, the share of men
balance has given rise to non-standard work- working part-time increased in most age groups,
ing models in recent years. Non-standard work with the upward trend being particularly strong
models such as part-time work, temporary work, for employees older than 65 years (Figure
teleworking or freelance working have gained 8). At the same time, the already high propor-
in importance. Some (soon-to-become) retirees tion of women working part-time at age 65+
may find ways to reconcile these non-standard has remained relatively constant. If workers
working arrangements with a long-delayed hobby in Germany and Switzerland work beyond the
or to perform gratuitous services to society sharing normal retirement age, they increasingly look
their expertise with others (see Box on page for more flexibility in the form of part-time work.
54). The spread of the internet at the turn of the In Japan and South Korea, the proportion of
millennium and the emergence of new informa- women working part-time has increased signifi-
tion and communication channels have boosted cantly across all age groups – particularly female
the flexibility of work arrangements even further workers aged 65 years and above (Figure 9).
as these technologies make it possible to provide In Japan, the share of female part-time workers
services independent of location and time. (65+) increased from 45.1% in 2002 to 59.2%
in 2018, and, in South Korea, the share rose
A widespread form of non-standard work is part- from 25.6% to 46.3%.
time work. According to the OECD, a person is
generally considered to be in part-time employ- For male workers in Japan and South Korea, the
ment if weekly hours worked do not exceed the share of part-time workers also increased slightly
threshold of 30 hours. In 2018, roughly 33.2% of for the oldest age group. However, the increase
male and 49.5% of female employees aged 65+ was much smaller for men than for women. Even
in OECD countries worked part-time. This form though part-time employment increased more
of work is becoming more and more widespread significantly in Japan and South Korea, the level
within the older age groups, although there are of part-time employment in the two countries
still country- and gender-specific differences. To in 2018 was still below that of Switzerland and
illustrate this point, we focus on four countries. Germany. Since people in Japan and South
Switzerland and Germany represent countries Korea are increasingly forced to work for longer,
whose populations mostly leave the workforce a possible reason for the lower proportion of men
around the normal retirement age, while Japan working part-time could be the need to generate
and South Korea represent countries whose pop- higher earnings.
ulations are increasingly forced to work longer.

Rethinking retirement 51
 Figure 8: Part-time work popular among older workers in Europe
Share of part-time workers in total employment aged 20–65+ by age and gender, 2002–2018

20-24 25-54 55-59 60-64 65+

100%
Hundreds

80%

60%

40%

20%

0%
2002

2010

2018
2002

2010

2018
2002

2010

2018
2002

2010

2018
2002

2010

2018
Male: Switzerland Female: Switzerland Male: Germany Female: Germany

Figure 9: Upward trend of part-time work for women in Asia

Share of part-time workers in total employment aged 20–65+ by age and gender, 2002–2018

20-24 25-54 55-59 60-64 65+

100%
Hundreds

80%

60%

40%

20%

0%
2002

2010

2018
2002

2010

2018
2002

2010

2018
2002

2010

2018
2002

2010

2018

Male: Japan Female: Japan Male: South Korea Female: South Korea

Source Figures 8 and 9: OECD, Credit Suisse

52
 Figure 10: Old-age workers rarely do temporary work in Germany
Share of temporary workers in total dependent employment by age, Switzerland and Germany, 1998–2018
15-24 25-54 55-64 65+
100%
Hundreds

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%
1998

2003

2008

2013

2018
1998

2003

2008

2013

2018
1998

2003

2008

2013

2018
1998

2003

2008

2013

2018
Switzerland Germany

Figure 11: Old-age workers in South Korea often seek temporary work
Share of temporary workers in total dependent employment by age, Japan and South Korea, 1998–2018

15-24 25-54 55-64 65+

100%
Hundreds

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%
1998

2003

2008

2013

2018
1998

2003

2008

2013

2018
1998

2003

2008

2013

2018
1998

2003

2008

2013

2018

Japan South Korea

Source Figures 10 and 11: OECD, Credit Suisse

Rethinking retirement 53
Fixed-term employment contracts are another they have lower occupational pension coverage.
type of flexible working model: jobs for specific Owing to these frequent job changes, temporary
projects, internships or maternity replacements workers also have a relatively short employment
are forms of fixed-term employment contracts. tenure, resulting in shorter unemployment benefit
In 2018, for instance, the share of temporary durations or restricted access to unemployment
workers aged 65+ measured as a percentage benefits. In sum, frequent job changes lead to
of total dependent employment across OECD lower pension entitlements. Another important
countries was 16.4%. On a country level, there point is that temporary workers have fewer op-
are notable differences with regard to temporary portunities for further education and fewer career
employment: in South Korea (62.2%), the share options compared to workers with permanent
of temporary workers in 2018 was much higher positions in companies. Further education is
than in Switzerland (14.0%) or Germany (7.7%) particularly important in an extended working life,
for the oldest age group (Figures 10 and 11). where skills need to adapt to a fast-changing
Moreover, the share of temporary workers in business environment.
Switzerland and Germany does not increase
substantially by the time normal retirement age To conclude, non-standard work arrangements
is reached. In South Korea, however, the share offer possibilities to prolong working careers,
of temporary employment more than doubles while at the same time posing a risk if workers
from 30.4% in the 55–64 age group to 62.2% rely on them excessively in a multi-stage lifecycle
in the 65+ age group. Despite these differences, or if they are insufficiently covered by pension
there is a slight upward trend in all four coun- schemes. The difficulty here is to design pension
tries, indicating a higher importance of temporary systems in a way that suits the needs of an
employment for old-age workers. increasingly heterogeneous group of workers.
 
A common feature of these jobs is that employ-
ment contracts are concluded from the outset for
a certain period of time. From the employer’s point
of view, this form of work enables a reduction in Voluntary work in old age
personnel costs by supplementing a lean work-
force with temporary staff only when necessary. In Once people enter retirement, they have the possibility to take
some cases, fixed-term contracts are converted up tasks that they barely had time for during their working lives.
into regular contracts based on aptitude. At the Many retirees use this newfound time to finally pursue a long-loved
same time, temporary work offers employees hobby, while others engage in volunteering activities. Such work has
the opportunity to combine various activities. In become an important aspect of many seniors’ lives. In Switzerland,
addition, there is a need for flexibility and variety, for instance, 53.2% of 65–74-year-olds did voluntary work in 2016
especially among young employees who do not – up from 37.8% in 2010. This age group has the highest participa-
yet want to consolidate their careers. tion rate in voluntary work of all age groups. Volunteering can either
take the form of formal voluntary work, such as activities in sports
Allowing for more flexible work arrangements and cultural associations, or informal voluntary work, which includes
also improves working conditions for old-age tasks such as looking after relatives’ children.
workers as they can opt for a model that better
suits their specific needs. At the same time, Using the knowledge and manpower of active retirees brings
it improves employability and encourages substantial benefits, and entrepreneurs have come to recognize
employers to retain or hire old-age workers (Table this. For instance, they have established websites where people
1) because if they are physically and mentally can “hire” retirees for a diverse range of daily tasks ranging from,
fit, they are more likely to be productive. Hence, for example, life coaching to installing electric appliances. This
allowing for more flexibility through non-stan- may even allow retirees to make money pursuing lifelong hobbies,
dard working agreements in the framework of a e.g. as tour guides in the mountains. On the one hand, such work
multi-stage lifecycle is also in line with the policy reactivates unused human capital and, on the other, it creates
recommendation of the OECD. added value for retirees who desire to remain active as they grow
older. Usually, retirees receive a low hourly wage in return for their
services. In view of the financial challenges pension funds face,
A multi-stage lifecycle offers opportunities, retirees may increasingly be tempted or indeed forced to substitute
but also risks unpaid services for paid activities.

While non-standard work arrangements such as

part-time employment or temporary employment
can help to lengthen working careers, they are
often also one reason for lower income. For
instance, temporary workers change jobs more
frequently and/or work fewer hours than in tradi-
tional employment contracts (OECD, 2019b). As
a consequence of these patchy working careers,

54
Work and pensions in the 21st century
Monika Bütler
Professor of Economics and Public Policy at the University of St. Gallen, Switzerland

Work and pensions have always been intrinsically But how to reconsider the link? Putting the
linked. Before the industrial revolution, work responsibility in the hands of employers will not
was the only source of old-age provision beside work anymore in a much more decentralized
the family; it still is in many informal sectors work environment. We need the state as a sponsor,
around the world. Strong formal links between not only as a co-financer (a role which is here to
employment and pension income have been the stay), but more importantly as a co-organizer. We
backbone of social security schemes in recent need a system that:
decades. Tellingly, occupational pensions have
even preceded public social security systems. 1. Provides a basic income level and prevents
Motives to provide such plans range from poverty in old age,
paternalistic to more selfish reasons, such as 2. Strengthens incentives to work and save,
retaining good workers. 3. Allows for a changing work environment with
more self-employment and intermittent work
The financial crisis, lower real interest rates and breaks,
demographic change have taken their toll on 4. Includes care work as a contributor,
the financial viability of social security schemes 5. Takes care of heterogeneity in terms of
and weakened the link between employment earnings ability and preferences.
and retirement income. Firms are shedding
their pension plans, often for regulatory reasons In short, we need a flexible scheme that sets the
as accounting rules impose an unpredictable incentives right without jeopardizing the protec-
burden on the balance sheet of the company. tion of the needy – and the other way around.
There are other reasons that make it more
difficult for employers to organize old-age pro- So here is an idea how to proceed: income
visions: shorter tenures, international migra- protection during working periods could be
tion, incompatibilities of pension plans across combined with a private savings pillar that goes
borders, and last but not least, the “uberization” beyond occupational pensions and offers a par-
of the workforce. tially (self-)funded income replacement scheme
during a person’s entire life. In a universal con-
The question is what to do: should work and tributory scheme, contributions should be levied
pensions be decoupled, or should we be recon- on all income, without any distinction between
sidering the link between work and pensions and self-employment and contractual employment,
put it on more solid ground? taking into account care work, especially for
elderly citizens.
One way to cut the link would be a universal
basic income, an idea that has become quite The contributions could be split between the in-
popular in recent years. However, most econo- dividual accounts of the contributors and a public
mists consider it too costly, not really addressing solidarity fund (which can also be alimented out
the problem of inadequate income, and harming of general tax revenues). Those without a job
incentives to work and save. (either because of unemployment or a voluntary
break) first draw on their individual savings and
Moreover, the recent developments hide the fact then, upon depletion, from the solidarity fund.
that strong links between work and pensions still
exist. The bulk of an average individual’s income The same logic would also apply to later stages
– and thus the obvious source for not only in life. Any money left in the individual account
pension savings, but also to finance redistributive can be used to finance a top-up on the basic
policies – remains labor. retirement income that is paid out of a public

Rethinking retirement 55
scheme. As both the solidarity fund and the accounts for decades. On a smaller scale, Chile
individual savings account provide a basic level introduced a similar system to provide for spells
of income even for those with lower income op- of unemployment and a possibility to top up
portunities and care work, the pension scheme pension income with left-over funds in 2002.
can be financed parsimoniously from a later Both have their drawbacks, the Singaporean
age onward (it should also be indexed to life scheme is overloaded with healthcare and
expectancy). housing expenditures, the Chilean system is
too low for low incomes. But both demonstrate
Sounds utopian? Not quite, there are a number that a work-pension link over the lifecycle is not
of existing policies that include aspects of the impossible.
proposed scheme. Singapore has financed
its social protection scheme out of individual

56
References

Gratton, L. & Scott, A. (2016). The 100-year OECD (2018b). Better Policies Japan: Pro-
life: Living and working in an age of longevity. moting Inclusive Growth for an Ageing Society.
Bloomsbury Publishing. OECD Publishing. Paris.

Group of Thirty (2019). Fixing the Pensions OECD (2019a). Ageing and Employment Poli-
Crisis: Ensuring Lifetime Financial Security. cies: Working Better With Age. OECD Publish-
Washington D.C. ing. Paris.

Mercer (2019). Melbourne Mercer Global Pen- OECD (2019b). Pensions at a Glance 2019:
sion Index 2019. Monash Centre for Financial OECD and G20 Indicators. OECD Publishing.
Studies. Melbourne. Paris.

OECD (2017). Pensions at a Glance 2017: Scott, A. (2018). The Myth of an “Ageing Soci-
OECD and G20 Indicators. OECD Publishing. ety.” World Economic Forum.
Paris.
United Nations (1999). The World at Six Billion.
OECD (2018a). Pensions Outlook 2018.
OECD Publishing. Paris. United Nations (2019). World Population Pros-
pects 2019.

Rethinking retirement 57
About the authors

Dr. Sara Carnazzi Weber is Head of Policy and Emilie Gachet is a Senior Economist at Credit
Thematic Economics at Credit Suisse, covering Suisse, working in the Policy and Thematic
regional, economic policy and thematic issues. Economics team, where she mainly covers labor
Her research focus includes demography, market issues. She joined Credit Suisse in 2010
retirement systems, the labor market as well as as a Swiss sector analyst, a position she held
regional economics. She joined Credit Suisse for more than seven years. She holds a Master’s
in 1999 and over the years has also acted as a degree in Quantitative Economics and Finance
consultant to national and regional authorities in from the University of St. Gallen / Switzerland.
Switzerland. She holds a Doctorate in Economics
from the University of Fribourg / Switzerland. Gabriel Staub is currently a Junior Economist
within the Policy and Thematic Economics Team.
Dr. Jan Schüpbach is a Senior Economist at In his role, he assists the team in the preparation
Credit Suisse. As part of the Policy and Thematic of different research reports. He joined Credit
Economics team, his research focuses on pen- Suisse in 2018 for a Career Start Program. He
sion systems, regional development and locational holds a Bachelor’s degree in Economics from the
quality. Prior to joining Credit Suisse in 2015, he University of Zurich / Switzerland.
worked as Economist at the Swiss State Secre-
tariat for Economic Affairs and in the reinsurance Pascal Zumbühl is a Junior Economist in the
industry. He holds a Doctor of Sciences from Policy and Thematic Economics team at Credit
ETH Zurich in the field of development economics Suisse. He joined Credit Suisse in 2019 after
and a Master in political science from the Univer- completing an internship at the Swiss National
sity of Zurich / Switzerland. Bank (SNB). At the SNB, Pascal supported the
Economic Education department, which offered
specialized teaching materials on economic and
financial topics for teachers of economics and
humanities at Swiss upper secondary school. He
holds a Master’s degree in Economics from the
University of Lausanne / Switzerland.

58
Guest authors

Keith Ambachtsheer is Director Emeritus of Masa Higo is Professor of Sociology and Social
the Rotman International Centre for Pension Policy at Kyushu University in Fukuoka, Japan.
Management (ICPM), University of Toronto. He He is also the Lead Researcher of the Module
is also Senior Fellow at the National Institute on Ageing & Later Life at the University’s Institute
Aging, Ryerson University, and on the Scholars of Asian and Oceanian Studies. His research
Council of Georgetown University’s Center for focuses on retirement and pension reforms from
Retirement Initiatives. He has advised pension a cross-national comparative perspective. He
and investment organizations, as well as govern- holds a Master’s degree in Sociology from the
ments and their agencies, on the design, gov- University of Central Missouri and a Ph.D. in
ernance, and investment policies of retirement Sociology from Boston College.
income systems since 1980. He holds degrees
from the Royal Military College of Canada and Andreas Rudolph is Managing Director at Lee
Western University, and pursued further graduate Hecht Harrison (LHH) Switzerland, global leader
studies in economics at McGill University. in talent development and career transition and
member of the Adecco Group. With nearly 400
Monika Bütler is Professor of Economics and offices in 66 countries, LHH supports businesses
Public Policy at the University of St. Gallen, in successfully transforming their workforce and
Switzerland, and Director of the Swiss Institute leaders so they can accelerate performance.
for Empirical Economic Research, University He has 25 years of experience in leading teams,
of St. Gallen. Her main research fields are creating and building sales concepts, developing
social insurance, the labor market, and political new products and services as well as deliver-
economics. She holds a doctorate in economics ing fully integrated and sustainable leadership
from the University of St. Gallen, an honorary programs.
doctorate from the University of Lucerne, and
a degree in Mathematics and Physics from the
University of Zurich.

Rethinking retirement 59
General disclaimer /
important information

This document was produced by Credit Suisse Group AG of CS, CS has not reviewed any such site and takes no
and/or its affiliates (“CS”). The opinions expressed in this responsibility for the content contained therein. Such address
document are those of the respective authors and not or hyperlink (including addresses or hyperlinks to CS’s own
necessarily those of CS. This document must not be read as website material) is provided solely for your convenience and
independent investment research. It has been prepared with information and the content of any such website does not in
the greatest of care and to the best of its knowledge and any way form part of this document. Accessing such website
belief and solely for information purposes and for the use of or following such link through this report or CS’s website shall
the recipient. It does not constitute an offer or an invitation by be at your own risk.
or on behalf of CS to any person to buy or sell any security
or banking service and does not release the recipient from This report is issued and distributed in the European Union
exercising his/her own judgement. Nothing in this material (except Germany): by Credit Suisse (UK) Limited and
constitutes investment, legal, accounting or tax advice, or a Credit Suisse Securities (Europe) Limited. Credit Suisse
representation that any investment or strategy is suitable or Securities (Europe) Limited and Credit Suisse (UK) Limited,
appropriate to your individual circumstances, or otherwise both authorized by the Prudential Regulation Authority and
constitutes a personal recommendation to you. The price and regulated by the Financial Conduct Authority and the Pru-
value of investments mentioned and any income that might dential Regulation Authority, are associated but independent
accrue may fluctuate and may fall or rise. This document legal entities within Credit Suisse; Germany: Credit Suisse
contains forward-looking statements that involve inherent Securities (Europe) Limited Niederlassung Frankfurt am
risks and uncertainties; predictions, forecasts, projections Main regulated by the Bundesanstalt fuer Finanzdienstleis-
and other outcomes described or implied in forward-looking tungsaufsicht (“BaFin”); United States and Canada: Credit
statements may not be achieved. Past performance, sim- Suisse Securities (USA) LLC; Switzerland: Credit Suisse
ulations and forecasts are not a reliable indication of future AG authorized and regulated by the Swiss Financial Market
performance. Supervisory Authority (FINMA); Brazil: Banco de Investi-
mentos Credit Suisse (Brasil) S.A or its affiliates; Mexico:
The information and analysis contained in this document Banco Credit Suisse (México), S.A. (transactions related to
have been compiled or arrived at from sources believed to be the securities mentioned in this report will only be effected in
reliable but CS does not make any representation as to their compliance with applicable regulation); Japan: by Credit Su-
accuracy or completeness and does not accept liability for isse Securities (Japan) Limited, Financial Instruments Firm,
any loss arising from the use hereof. A Credit Suisse Group Director-General of Kanto Local Finance Bureau ( Kinsho)
company may have acted upon the information and analysis No. 66, a member of Japan Securities Dealers Association,
contained in this publication before being made available The Financial Futures Association of Japan, Japan Invest-
to clients of CS. Investments in emerging markets are ment Advisers Association, Type II Financial Instruments
speculative and considerably more volatile than investments Firms Association; Hong Kong SAR, China: Credit Suisse
in established markets. Some of the main risks are political (Hong Kong) Limited; Australia: Credit Suisse Equities
risks, economic risks, credit risks, currency risks and market (Australia) Limited; Thailand: Credit Suisse Securities (Thai-
risks. Investments in foreign currencies are subject to ex- land) Limited, regulated by the Office of the Securities and
change rate fluctuations. Any questions about topics raised in Exchange Commission, Thailand, having registered address
this piece or your investments should be made directly to your at 990 Abdulrahim Place, 27th Floor, Unit 2701, Rama IV
local relationship manager or other advisers. Before entering Road, Silom, Bangrak, Bangkok10500, Thailand, Tel. +66
into any transaction, you should consider the suitability of the 2614 6000; Malaysia: Credit Suisse Securities (Malaysia)
transaction to your particular circumstances and independent- Sdn Bhd, Credit Suisse AG, Singapore Branch; India: Credit
ly review (with your professional advisers as necessary) the Suisse Securities (India) Private Limited (CIN no.U67120M-
specific financial risks as well as legal, regulatory, credit, tax H1996PTC104392) regulated by the Securities and
and accounting consequences. This document may provide Exchange Board of India as Research Analyst (registration
the addresses of, or contain hyperlinks to, websites. Except no. INH 000001030) and as Stock Broker (registration
to the extent to which the report refers to website material no. INB230970637; INF230970637; INB010970631;

60
INF010970631), having registered address at 9th Floor, (DIFC Branch) is located on Level 9 East, The Gate Building,
Ceejay House, Dr.A.B. Road, Worli, Mumbai - 18, India, T- DIFC, Dubai, United Arab Emirates. UK: The protections
+91-22 6777 3777; South Korea: Credit Suisse Securities made available by the Financial Conduct Authority and/or the
(Europe) Limited, Seoul Branch; Taiwan (Chinese Taipei): Prudential Regulation Authority for retail clients do not apply
Credit Suisse AG Taipei Securities Branch; Indonesia: PT to investments or services provided by a person outside the
Credit Suisse Securities Indonesia; Philippines: Credit Su- UK, nor will the Financial Services Compensation Scheme
isse Securities (Philippines) Inc., and elsewhere in the world be available if the issuer of the investment fails to meet
by the relevant authorized affiliate of the above. its obligations. To the extent communicated in the United
Kingdom (“UK”) or capable of having an effect in the UK, this
Additional regional disclaimers document constitutes a financial promotion which has been
Hong Kong SAR, China: Credit Suisse (Hong Kong) approved by Credit Suisse (UK) Limited which is authorized
Limited (“CSHK”) is licensed and regulated by the Securities by the Prudential Regulation Authority and regulated by the
and Futures Commission of Hong Kong under the laws of Financial Conduct Authority and the Prudential Regulation
Hong Kong SAR, China, which differ from Australian laws. Authority for the conduct of investment business in the
CSHKL does not hold an Australian financial services license UK. The registered address of Credit Suisse (UK) Limited
(AFSL) and is exempt from the requirement to hold an AFSL is Five Cabot Square, London, E14 4QR. Please note that
under the Corporations Act 2001 (the Act) under Class the rules under the UK’s Financial Services and Markets Act
Order 03/1103 published by the ASIC in respect of financial 2000 relating to the protection of retail clients will not be
services provided to Australian wholesale clients (within applicable to you and that any potential compensation made
the meaning of section 761G of the Act). Research on available to “eligible claimants” under the UK’s Financial
Taiwanese securities produced by Credit Suisse AG, Taipei Services Compensation Scheme will also not be available to
Securities Branch has been prepared by a registered Senior you. Tax treatment depends on the individual circumstanc-
Business Person. Malaysia: Research provided to residents es of each client and may be subject to changes in future.
of Malaysia is authorized by the Head of Research for Credit USA: This material is issued and distributed in the USA by
Suisse Securities (Malaysia) Sdn Bhd, to whom they should CSSU, a member of NYSE, FINRA, SIPC and the NFA, and
direct any queries on +603 2723 2020. Singapore: This CSSU accepts responsibility for its contents. Clients should
report has been prepared and issued for distribution in Singa- contact analysts and execute transactions through a Credit
pore to institutional investors, accredited investors and expert Suisse subsidiary or affiliate in their home jurisdiction unless
investors (each as defined under the Financial Advisers governing law permits otherwise. EU: This report has been
Regulations) only, and is also distributed by Credit Suisse AG, produced by subsidiaries and affiliates of Credit Suisse oper-
Singapore branch to overseas investors (as defined under the ating under its Global Markets Division and/or International
Financial Advisers Regulations). By virtue of your status as Wealth Management Division.
an institutional investor, accredited investor, expert investor or
overseas investor, Credit Suisse AG, Singapore branch is ex- This document may not be reproduced either in whole, or in
empted from complying with certain compliance requirements part, without the written permission of the authors and Credit
under the Financial Advisers Act, Chapter 110 of Singapore Suisse. It is expressly not intended for persons who, due
(the “FAA”), the Financial Advisers Regulations and the to their nationality or place of residence, are not permitted
relevant Notices and Guidelines issued thereunder, in respect access to such information under local law.
of any financial advisory service which Credit Suisse AG,
Singapore branch may provide to you. UAE: This information © 2020 Credit Suisse Group AG and/or its affiliates. All
is being distributed by Credit rights reserved.
Suisse AG (DIFC Branch), duly licensed and regulated by the
Dubai Financial Services Authority (“DFSA”). Related financial
services or products are only made available to Professional
Clients or Market Counterparties, as defined by the DFSA,
and are not intended for any other persons. Credit Suisse AG

Rethinking retirement 61
Also published by the
Research Institute

The Future of Politics Eradicating Extreme Poverty The Future of GDP

Davos edition Davos edition May 2018
January 2018 January 2018

The CS Family 1000 in 2018 Global Wealth Report Assessing Global Debt
September 2018 October 2018 Davos edition
January 2019

62
AI & The Future of Work Summary Edition Emerging Consumer Survey
Davos edition Global Investment Returns Yearbook 2019 March 2019
January 2019 February 2019

Healthcare transformation The CS Gender 3000 in 2019 Global wealth report 2019
June 2019 The changing face of companies October 2019
October 2019

Rethinking retirement 63
Credit Suisse Research Institute
[email protected]
credit-suisse.com/researchinstitute