Speaker: Assia Billig
Increases in longevity and decreases in fertility have led to the aging of many countries' populations and to increases in old-age dependency ratios. At the same time, current interest rates in many countries are at very low levels. These developments have increased concerns about the economic sustainability of current social security programs, resulting in pressure to modify their structure through reduced benefits and / or increased contributions, and in particular through an increase in their eligibility age (the age when an individual is eligible according to program rules to begin receiving full retirement benefits) that is the subject of this paper. Simultaneously, these trends have increased pressure to contain the cost and manage uncertainty associated with defined benefit employer-sponsored pension plans, and created concerns regarding the ability of defined contribution plans to provide adequate retirement income.
The paper discussed impacts and issues related to increase in the eligibility age in respect of all retirement income pillars. In particular it concludes that such increase should be examined as a part of any strategic reform that aims at creating a balanced and efficient old age policy that adequately responds to the challenge as well as minimizes the collateral damage for more vulnerable segments of population.
Actuaries are well placed to assist policymakers and employers assess the effects of an alteration to the eligibility age or the effect of other responses to changing conditions. Actuaries can model the complex interactions of the economic and demographic factors with a program's benefit provisions to assess the overall cost and how it is distributed between population sub-groups and different generations. The role of the actuary extends to effectively communicating the availability of alternatives, the results of the calculations and to identifying the main drivers of the expected outcomes.