Pension reform: “Why later retirement increases the risk of death”
09.05.2023 14:53
Many societies around the world are aging rapidly: the OECD expects the number of pension recipients per employee to increase by 50 percent by 2050. Politicians are responding to the increasing costs with pension reforms - the central instrument here is raising the minimum retirement age. However, a new study by the EPoS Research Center at the University of Mannheim comes to the conclusion that the abolition of early retirement pensions increases the risk of death. The authors of the discussion paper “The Effect of Removing Early Retirement on Mortality” are: Cristina Bellès-Obrero, Ph.D., Prof. Sergi Jiménez-Martìn and Prof. Han Ye from the EPoS Collaborative Research Center Transregio 224, a cooperation between the Universities of Bonn and Mannheim.
“Our research empirically shows that later retirement increases mortality,” say the economists. “In order to meet the challenge of aging societies, political decision-makers like to provide incentives for longer working lives. The effects of later retirement and how the negative consequences can be mitigated are therefore very relevant. To do this, in a long-term analysis we examined social security data from Spain, which started before or after the pension reform of 1967. This year the age for early retirement was raised: those who had paid in before January 1, 1967 were allowed to continue to retire voluntarily at the age of 60. Those who made their first contributions after this deadline could only voluntarily claim a pension at the age of 65.”
Working conditions at the end of working life are crucial
The results show that delaying retirement by one year increases the risk of dying between ages 60 and 69 by 4.2 percentage points. Depending on the working conditions in the final years of employment, delaying retirement has different effects on life expectancy. Characteristics such as physical and psychosocial stress, self-esteem at work and qualification level each have an influence.
Experiences of success are important for health
The results show that the loss of the right to early retirement can lead to the premature death of people who work in physically demanding jobs and are also exposed to high levels of psychosocial stress. In contrast, employees with a sense of achievement and recognition at work do not show any negative effects on mortality. If the retirement of low-skilled workers is postponed by one year, the probability of dying between the ages of 60 and 69 increases by 5.4 percentage points.
No “one-size-fits-all solution”
“These results show that there can be no one-size-fits-all solution to retirement,” says the research team. “We find that policies that generally eliminate access to early retirement can exacerbate socioeconomic inequalities in life expectancy. Our results also show that Spaniards did not fully comply with the increase in the statutory retirement age. Before applying for a regular pension, they used other ways to leave the labor market, for example by applying for occupational disability insurance or a partial pension.”
Outlook: Flexible retirement arrangements
People who were able to claim a partial pension had a lower mortality rate. This shows that a gradual transition to retirement counteracts the negative effects of a longer working life. “A gradual reduction in working hours at the end of working life is a good way to address the labor market challenges of an aging population while protecting the health of workers,” say the authors.