ECONOMY

Population drop to raise age of retirement to over 70

Greece’s poor demographic performance is evolving into a major threat for the country’s social security system, as a recent study conducted by the National Actuarial Authority and submitted to the European Commission has shown that the Greek population will shrink dramatically from 11.045 million last year (according to Eurostat) to 8.5 million in 2060.

The picture painted by the study shows that in the not-so-distant future, in 45 years’ time, six out of 10 members of the active population in Greece will be over the age of 65 and one in four Greeks aged between 65 and 74 years will still be working.

According to the report, the retirement age will come to 71.9 years and main and auxiliary pensions will drink drastically. The replacement rate for pension spending will drop from 80 percent today to 56 percent by 2060, with the decline starting no later than 2020, when the rate will reach 64.6 percent – and this does not take into account any possible claims on funds’ cash reserves by the government.

The National Actuarial Authority also points to an increase in the dependence of the elderly going hand-in-hand with the significant reduction in the population.

The main reason given for the population decline is a drop in net immigration up to 2030. This will double the rate of the active population aged above 65 years old from three in 10 today to six in 10 by 2060. This, in turn, will result in ever-older workers choosing to stay in employment: While in 2013 just 4.9 percent of the workforce was aged between 65 and 74 years old, by 2030 this is estimated to rise to 14.3 percent before climbing to 24.4 percent in 2060.

In 2026 the average age of the country’s workforce will be 44 year d old, compared with 39 nowadays. The average age of entry in the labor market will remain stable at 22.4 for men and at 24.7 for women, but due to recent changes in retirement age thresholds the average age for retirement for men will grow from 61 years old in 2013 to 64.9 in 2020, 65.9 in 2030 and 67.5 in 2060. For women it is projected to rise from 61.2 years old in 2013 to 65.5 in 2030 and to 67.1 by 2060.

The new administration of the Labor Ministry, which has received the study, has said that it plans to abolish laws that result in a rise to the age of retirement and in a reduction of pension levels. Such a move would almost certainly affect the study’s forecasts but there is a lot more concern about how it would impact on the sustainability of the country’s pension system.