Mandated Retirement Systems and Implied Benefits and Costs for Workers from Various Generations in Selected Countries

Abstract

In recent years, aging populations and growing pension costs have led to a number of concerns over existing retirement systems across much of the developed world. These concerns range from the macroeconomic effects of mandated retirement plans on national saving, labor supply, economic productivity, and intra- and intergenerational equity to more microeconomic issues and, notably, the efficiency of these systems as retirement savings vehicles. This article’s analysis explores the latter issue. It examines the mandatory retirement systems covering workers in Australia, Canada, the United Kingdom, and the United States and considers the marginal costs levied against workers’ earnings when they are covered under the respective programs and the benefits that they receive at retirement. The relative costs and benefits of retirement system participation for workers reaching retirement today are considered at three earnings levels across the four countries, and estimates are made of how the systems will treat the generations coming to retirement in 2025, 2035, and 2045 if current policies persist. The article also discusses briefly the possible effects of different reforms of Social Security on workers of different generations.