sou · H1B325 · 2013-04-09 00:00:00 — New functions and resources for research on the connections between work environment, health and work capacity and for an evaluation of work environment p0licy. Resources for intervention studies. Continued measures to combat age discrimination International research indicates that effective legislation and its application in combating age discrimination have a positive effect on the employment of older people. Research on age discrimina- tion is limited in . The few studies that exist indicate that discrimination of older people in working life may be extensive and even more severe than discrimination that is connected with ethnic origin. than one-quarter of employees over the age of 50 state in questionnaires that they have been discriminated in the labour market because of their age. Eight out of ten people say that their age is an obstacle if they want to change jobs. The Commis- sion considers that protection against age discrimination needs to be strengthened: Strengthened legislation to combat age discrimination. The incidence of age discrimination should be examined and reported regularly. Discrepancies in laws, rules and agreements applying to the treatment of older people and age limits governing existing reg- ulations with regard to retirement should be identified and pro- posals for measures presented. A review of the Discrimination Act should be implemented in a few years, aimed at ensuring that the Act has had its full impact concerning the rules against discrimination that are linked with age (regarding older people). A research initiative to increase knowledge about age discri- mination. Better conditions for older people who wish to upgrade their skills Older members of the labour force are increasingly well-educated today. However, their knowledge can, with time, become out of date if it is not upgraded. It may be financially difficult to take leave of absence and study. People approaching retirement age (often even from 50 years of age) are often excluded from further professional development at their jobs. This may contribute to their performance, with time, not corresponding to their salary costs. This, in turn, leads to difficulties in or getting a job, changing oneʼs work tasks or seeking new jobs. The Commission proposes measures aimed at facilitating peoples ability to maintain and develop their knowledge and skills, throughout their working lives: Higher age limits and more generous terms for financial support for students. The development of a range of courses offered that are adapted to the demands of older people. Resources to the for ca- reer advice to older people. Greater opportunities for employment training programmes for older people (for people approaching the age of sixty or older? Contracted occupational pensions that contribute to a longer working life Occupational pensions that have been contracted play an im- portant role in giving citizens good financial security when they grow older. The Government Commission for Longer Working Life and Retirement considers that the defined benefit occupational pensions, which will apply for a long period in the future, will play a key role for the labour supply and pension behaviour of older people. The age rules of occupational pensions and other rules en- early exit from working life and make it more difficult to continue to work. It is the social partners that settle terms of employment in col- lective agreements. The social partners play a vital role in opportu- nities for older people to work for longer. The Commission con- siders that successful initiatives for a longer working life for older people are conditional on all the actors helping to achieve the nec- essary changes together. It is important that the constructive talks that the Commission has had with experts and researchers on the rules for, and information on occupational pensions, are deepened: Three party talks with the main organisations in the labour mar- ket should be initiated. Ways in which contracted vocational pensions and the legis- lation with regard to vocational pensions can be developed to help promote a longer working life should be systematically ex- amined in these talks. Greater opportunities for flexible working hours flexible working hours are considered to make it easier for older people to work for a longer period. Ordinary working sched- ules may be felt to be demanding for older employees. For people with reduced work capacity, a reduction in working hours may be a good alternative to drawing their pensions prematurely and com- pletely ending their gainful employment. Many older people state in the questionnaire that greater op- portunities to work part time during the last years before retire- ment and after would increase their interest in a longer working life. Certain fundamental issues regarding working hours are regu- lated in the Working Time Act. Working time issues are, however, normally determined in collective agreements in the labour market. The individual is usually not entitled to request flexible working hours, but the employer and employee may settle this in a special agreement. Within some agreement areas there are opportunities for partial retirement. According to the review of knowledge undertaken on behalf of the Commission, there is no agreement in research on whether or not flexible working hours contribute to increasing the number of hours worked among older people. It is therefore not suitable to consider legislation for the right to flexible working hours for older employees. However, the Commission considers that the question should be discussed further in joint talks between the Government and the main organisations in the labour market: Three party talks with the main organisations in the labour mar- ket should be initiated. How can agreements and working hours, etc. and the legislation concerning this be changed in order to give older people greater opportunities for flexible working hours? Information needs to be developed Todays pension system means that the individual must take greater responsibility for his or her financial security during old age. This requires that citizens largely understand the relation be- tween their income from work throughout their lives, average life expectancy and the pension level. It is particularly important for more people to understand how large the financial benefits are of working longer and postponing drawing their pensions. From an international perspective, has very high ambi- tions with regard to information efforts. The Government Com- mission for Longer Working Life and Retirement considers that, despite, this, further measures are needed: A new Internet portal for information on longer working life and retirement. An assignment to the to increase the level of knowledge about the pension system among people who are approaching retirement age and regularly measure their knowledge. Development of the website so that people ap- proaching retirement age can calculate how their disposable in- comes will be affected for the rest of their lives by alternative pension decisions. Assignments and research resources to Policy (IFAU) to increase know- ledge of how pension information affects the labour supply among people of 60 years of age, or older. The age limits need to be adjusted What determines actual retirement age (the age of exit from the labour force) is primarily the age limits governing existing regula- tions and providing the norm for public and contracted pensions and related public compensation systems. The Commissions pro- posals to strengthen peoples conditions and resources for working longer will contribute to a higher, actual retirement age. However, several initiatives will only take effect in the long term and others should be expected to have a modest impact. The actual retirement age and the number of hours worked among older people, however, needs to be increased even in the short term. Otherwise the problem may worsen relatively quickly with regard to confidence in the pension system and the funding of welfare. The labour supply of older people can be sufficiently and immediately affected only via measures that have an impact on the age limits governing existing regulations that also form the norms for the point at which people should leave working life. The age limits in the public pension system and related systems should therefore be adjusted and automatically adapted to an in- creased average life expectancy. New recommended retirement age that reflects average life expectancy The income-related pension and the premium pension with a flexi- ble retirement age and the lifetime earnings principle provide the opportunity to earn pension rights regardless of age, and great freedom to combine work with a pension. This is one of the foun- dations of the pension system, and must be upheld. Each individual is able to adapt their exit from working life to their own conditions and wishes. The Commission considers, however, that the state should be clear about the retirement age that will provide an acceptable level of pension. A recommended retirement age should therefore be in- troduced into the public pension system. This recommended re- tirement age is a strong alternative to current notions of retirement age in terms of the individuals financial security, the national economy and the pension system: The recommended retirement age is a non-choice alternative for older people who are not able, or do not wish to analyse the ef- fects of different retirement dates and to make decisions of their own. It will govern age limits in the pension system and other related insurance systems. It is to be adjusted annually to the development of average life expectancy for people of 65 years of age. It is to be calculated by the , estab- by the Government as of 2015, and applied from the be- ginning of 2019. It can be used as a reference for age limits in non-public sys- tems. An increase in the 61-year age limit for the earliest point at which an old-age pension can be drawn People in general are short-sighted in their financial decisions. There is a risk that older people choose to retire early because they do not fully understand the private-financial consequences in the longer term. Many of those who retire early discover, however, after a number of years as a pensioner, that their incomes are low compared with those of younger people and in relation to what is needed to maintain an acceptable standard of living. Since the pension reform was decided, average life expectancy is estimated to have increased in 2014 by 2.4 years. The age limits for the flexible retirement age should be adapted to this increase in average life expectancy. Raising the age limit should take place rela- tively quickly in order to fund offensive initiatives for the work environment, further professional development, etc. The Com- mission considers that the lowest age limit for when an old-age pension can be drawn should be raised in 2015: The 61-year age limit for a pension should be raised to 62 in 2015. After that, the age limit should be raised in line with the recom- mended retirement age, which according to forecasts will be 66 in 2019. The 65-year age limit for a guarantee pension will follow the recom- mended retirement age The norm that older people are to retire at 65 will be maintained by retaining the 65-year rule in both the public and contracted regu- latory systems. Around 30 per cent of all newly granted pensioners, half of all women, have a retirement age of 65 through their guar- antee pensions. All those who are supported via various social in- surance schemes, such as sickness compensation, sickness benefit, unemployment benefit, etc. have a retirement age of 65 in practice. In addition, an estimated 70 per cent of all employees have con- tracted occupational pensions and these are normally automatically disbursed at 65 years of age. It is reasonable for increasing numbers of citizens to work for longer when we live longer. It would be seen as unfair for people who have worked full time for most of their lives to have to work for longer when they are older in order to finance an increasing number of retirement years for people who have worked part time and/or a shorter period of their lives. As time goes by, there will also be too serious complications in the pension system if the 65- year age limit for guarantee pensions is retained, at the same time as other age limits are raised to keep pace with the recommended retirement age. The Commission considers that the 65-year norm can only be changed if the 65-year age limit for guarantee pensions is adjusted: The 65-year age limit for guarantee pension decided in 2019 will be raised with the recommended retirement age, which accord- ing to forecasts will be 66 in 2019. Older provisions will apply to guarantee pensions that were decided for the period before 2019. Guarantee pensioners to also benefit from continued work On the whole, the financial incentives for working longer and postponing drawing ones pension from the public pension system, including the effects of taxes and benefits, are appropriately de- signed. For people with low income-related pensions, however, the incentives to work for a longer period are weak. Many of these people would probably want to improve their financial situations by continuing to work. For reasons of fairness, the financial bene- fits should also be strengthened for people with lower pension lev- els: Incomes earned after the age of 65/the recommended retire- ment age should not be able to affect the guarantee pension or the housing supplement. People with fewer than 40 years of must be able to work to collect more insurance years after the age of 65. Increase in the age limit referred to in the Employment Protection Act to 69 years of age Under the Employment Protection Act, an employee is entitled to remain in his or her employment with full employment protection until the end of the month of his or her 67th birthday. The major improvements in the health, cognitive capacity and education of older people gradually raises the age when, based on the best knowledge, natural ageing can be regarded, on average, as considerably reducing the work capacity of an older person. The increase in average life expectancy means that more and more peo- ple must also work after 67 in order to obtain an acceptable pen- sion. Raising the age limit may help increase the labour supply among people of 67 or older. There are, of course, some risks associated with raising the age limit, such as employers who may be inclined to terminate a job before an employees 65th birthday so as to avoid having too many people continuing to work until they are 69. These and other risks can be reduced if the rules for giving notice are modified. Accord- ing to the Commission, the advantages of raising the age limit re- ferred to in the Employment Protection Act outweigh any disad- vantages: It is proposed to raise the age limit applying to the Employment Protection Act to 69 in 2016. The age limit will subsequently be adapted to the recommended retirement age. If the employer wants an employee who has had his or her 69th birthday to leave the job, the employer must give the employee who is over 69 written notice of this at least one month before- hand. In the event of a changeover in operations, however, no- tice of termination of employment will apply, but in such cases, the employee will not be entitled to a notice period longer than a month and will have limited right of priority to re-employ- ment. An appropriate government agency should be tasked with fol- lowing up the effects of abolishing the rules on notice of termi- nation of employment. Other age limits will be changed as a result The age limits in related social systems are also important compo- nents in norm formation on when older people should be consid- ered ready to leave working life. When the age limits of the pension system are gradually raised, it will be necessary to ensure that the age limits for insurance protection for people in gainful employ- ment follow suit. Peculiar effects may otherwise arise when some systems are linked to the recommended retirement age, while oth- ers retain the 65-year age limit. The Commission proposes that the age limit of 65 years in so- cial insurance and related social benefits in normal cases be ad- justed upwards in pace with the increase in average life expectancy. The age limits of 65 in other legislation should be adapted to the increase in average life expectancy in special procedures, if there is nothing to indicate otherwise: The age limit for sickness compensation that is newly granted as of 2019, together with the age limit for sickness benefit quali- fying income in the sickness insurance system, unemployment benefit, occupational injury life annuities, sickness benefit in special cases, maintenance support for elderly persons and the age limit for social security contributions will be adapted to the recommended retirement age, which according to the forecasts will be 66 in 2019. Older provisions will apply to benefits in the form of sickness compensation and insurance cases that were decided or refer to the period before 2019. Occupational aids and extended occupational life injury annui- ties will be linked to the age applying to the Employment Pro- tection Act. The continued right to protection of the sickness benefit quali- fying income, the disability allowance, car support, unemploy- ment benefit after the introduction of the recommended retire- ment age and coordination between pensions and unemploy- ment benefits should be examined further. Initiatives with regard to the attendance allowance should be followed up before a change in the age limit can be considered. The 55-year age limit in the Income Tax Act is to be raised Employer costs for pensions to employees are deductable under the Income Tax Act, provided that the pension is not disbursed earlier than at 55 years of age. Vocational pension agreements therefore normally have 55 years as the lowest age for drawing a pension. The same requirement applies to private pension savings. The 55-year age limit in the Income Tax Act was introduced in 1951, when average life expectancy was much shorter, most em- ployees had a low educational level, the age of entrance into work- ing life was lower and the demands of working life different. Pen- sion income that is deposited in funds within the framework of the provisions of the Income Tax Act is treated more favourably than other savings, in terms of taxes. According to the Commission, there is now no underlying reason to subsidise such an early exit from working life as 55 years. There are, moreover, few people who actually make use of this possibility to draw their pensions at 55. The age limit of 55 gives the wrong signal to the labour market, now that more older people need to work for longer. The Commis- sion proposes that this age limit be raised: It is proposed to raise the 55-year age limit in the Income Tax Act to 62 in 2017. This means that it will not be possible to dis- burse vocational pensions or private pensions to people who are younger than 62. Special rules on exemptions will apply to certain private pension deposits and private pension savings and disbursements that have already begun. The consequences of the proposals The effects of these proposals will primarily depend on the labour market situation in which they are implemented. The Commissions assessment is based on a labour market that is balanced in supply and demand. The effects may be considerably more rapid and greater if the measures are implemented at the same time as recovers from the economic downturn of recent years. A higher retirement age extends working life Evaluations of changes in retirement age in other countries indicate that the average age for drawing the old-age pension and the pro- portion of people remaining in the labour force rises by 20–50 per cent of the higher retirement age. Experience also shows that a certain amount of overflow to other social insurance systems may occur. With reasonable assumptions on the effect of increased age limits and overflow to other social insurance, the Commission con- siders that its proposals will considerably increase the labour sup- ply among older people: The number of people in the labour force between the ages of 60–70 is expected to increase by 40 000–50 000 people in 2020. It is estimated that the dependency burden, i.e., the ratio be- tween the number of people who are not employed of 15 years and older and the number of employed people will be stabilised to about 0,8 in about . Even in the short term, public finances and the financial balance of the pension system will be strengthened as a result of a longer working life. Some of this income should be used to fund the Commissions proposals for measures to promote a longer working life: Public finances are expected to be strengthened by some million in 2015 and by 700 million by 2020 as the median alternative. The increased employment of older workers is estimated to have a levelling effect on the pension systems balance during the years 2018-2030. The costs of the Commissions proposals for a better work environment, skills etc. are estimated at some million in 2015 and million in 2020. The costs of extending the right to sickness benefit, unemploy- ment benefits and other benefits are estimated at some million in 2015 and 300 million in 2020. The Commission also gives an account of the impact in a high and a low alternative. The consequences for individuals Increased employment is expected to increase disposable income among people between the ages of 60 and 70 by up to 18 percent in 2015–2019. Income distribution is expected to even out somewhat as a result of the fact that financial standards, in relative terms, will be raised for older people. Typical case estimates show that an increased age limit for sick- ness benefits and unemployment benefits will improve financial standards for the people involved, both before and after retirement. The regulatory amendments for guarantee pensioners means that one year more of gainful employment increases disposable income by some 000 per year. With the current rules, con- tinuing to work provides only marginally higher incomes. Financial equality is considered to be positively affected, pri- marily through the proposal for guarantee pensions. The proposed regulatory amendments will lead to some transi- tional costs for employers and companies, but they are considered to be modest. The Commission proposes a gradual introduction, which means that the administrative consequences for the agencies involved are considered to be manageable. Assessments of the proposals effects are uncertain. Some effects are less difficult to predict, such as the effects of raising the lower age limit for drawing the old-age pension. For these regulatory amendments, it is reasonable to assume a considerable impact on labour supply. The proposal on a recommended retirement age is more difficult to assess. There is no experience of similar proposals from other countries. The proposed initiatives to improve the work environment, to strengthen opportunities for older people to preserve and develop their skills, increase information, etc. will contribute to a higher, actual retirement age. Several initiatives, however, will only take effect in the long term and others should be expected to have a modest impact. This uncertainty means that it will be necessary for the package of measures to promote a longer working life to be carefully moni- tored and evaluated scientifically: An expert group should lead efforts on follow-up and evalua- tion.