Session: 57

Social Security

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Summary

The average retirement age is often used as a benchmark when pension systems in different countries are compared. It can also be used as an indicator within a pension system in a single country to show the development in time. Because early retirement is one possible reason for rising pension costs, sometimes there can even be official targets for raising the average retirement age, as is the case in the programme of the present government of Finland.

Many different methods to calculate the average retirement age have been used and they can give quite differing results. There may even not be an agreement whether the retirement age is rising or falling. Problems in calculating a particular indicator can occur. For example, calculations can be misleading because of a changing age structure or some socio-econiomic fluctuation. This paper presents a calculation method for the average retirement age by using transition probabilities between different states in the pension system. This method requires detailed statistical data about the system. When sufficient data for the calculation is available, we can avoid some problems that occur using more simple formulae. The proposed method is particularly effective when the long term effects of some change in the pension rules have to be estimated.

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