Sozialpolitische Studienreihe

MOTIVATION AND INTRODUCTION

SESSIONS AND DECREES OF THE COMMISSION FOR LONG-TERM PENSION GUARANTEE

“The intention of the Pension Commission is to monitor changes in the actual age of retirement, along with the other indicators that have been raised in the short-term report, on a yearly basis - beginning with the year 2012 in respect of the results for 2011. The figures shall be presented according to type of pension, age group and gender, such that they can be used with the best possible level of meaningfulness. If it should turn out that the purpose of an increase in the actual retirement age cannot be determined to the desired extent, taking account of a start-up phase, stricter measures for achieving the goals will need to be discussed no later than when the legally prescribed report is being generated in autumn 2013.”

This is the decree of the Commission on Long-Term Pension Guarantee dated April 4th 2011. It is the consequence of the sustainability discussion in general and specifically of the question of the extent to which sustainable financing is actually practical and possible through application of the five control parameters specified under law (retirement age, federal funds, contribution rate, pension adjustment, pension increment). In doing so, the Commission for Long-Term Pension Guarantee reached the conclusion that the primary objective for controlling sustainability was to increase the actual retirement age. The Commission also expressed the opinion that this proposition had to be accompanied by valid, comprehensive monitoring of this control parameter.

Consequently, at the Commission meeting on October 27th 2011, a brief initial discussion was held regarding the substance of the monitoring. The outcome of this was that this question would be addressed again on the basis of the given proposals at a meeting held in the 1st quarter of 2012 called specifically for this purpose. In association with this, concrete targets would have to be formulated concerning the content of the retirement age monitoring that had been decided upon.

The meeting just mentioned took place on March 26th 2012. At this meeting, the members of the Commission drafted various requirements based on different illustrations. These are intended to contain highly meaningful numbers available for analysing actual changes and for the measures based on them. Hence the report attempts to go beyond mere comparison of global values, where this is possible on the basis of the data available.

CONTENT OF THE 2011 MONITORING REPORT

At the core of the Report is the analysis of the retirement practices for the year 2011. Besides the detailed representation of the principal indicator “actual (average) retirement age”, broken down by:

  • gender
  • pension insurance provider
  • type of pension
  • place of residence, and
  • age group

for 2011, time series data primarily relating to the retirement age from 2005 was also included. Furthermore, as an accompanying measure, comprehensive background information was provided concerning statutory pension insurance. This specifically includes:

  • number of claims, awards and rejections
  • number and level of newly granted benefits for recently retired persons, broken down by age group
  • plus budget data and other performance indicators, such as income replacement rates.

Besides illustrating the average retirement age for 2011 and providing this background information, not only should a single, average value be determined when monitoring the retirement age, but also the associated distribution indicators.

These include statistical values such as:

  • the median representing a solid statistical gauge
  • upper and lower decile values and, derived from these,
  • the range and other distribution indicators.

Additional background information requested by the Commission concerns demographic aspects. This should specifically relate to data concerning:

  • the population separated by age group, and
  • changes to life expectancy

linked with data from the pension insurance sector in a meaningful way.

By linking this to the demographic data, on the one hand potential statistical deficiencies still remaining when determining the average retirement age should be eliminated: an actual retirement age demographically adjusted by the size of the relevant age category is to be determined that essentially enables any change over time to be indisputably assessed. In addition, the attempt to determine a “retirement age by category” is presented as an alternative to this.

On the other hand, by doing so it should be possible to make a first step towards linking this with data on the economically active population (employment, unemployment). This implies a transition from a somewhat descriptive representation of the actual retirement age to a more analytical perspective, principally with regard to issues such as those concerning the possible causes of early retirement on the one hand or potential factors contributing to an increase in the same on the other.

Such enhanced analyses can of course only be accomplished if the “average retirement age” indicator is modified in two regards, compared to the current aggregated calculation method:

  • through precise calculation of the retirement age for the relevant pension start date on an individual basis, and
  • only by restricting consideration to those newly retired individuals who are resident in Austria can a connection be made between the demographic and the earnings situation.

On entering into analytical consideration of the causes of taking retirement, the focus of the consideration is primarily on health aspects and data related to the labour market. Hence the retirement data for 2011 is analysed by:

  • illness groups with regard to those starting to draw a pension because of a restricted ability to work
  • the variables available in the data from pension insurance providers on recent retirements that concern the status of newly retired individuals drawing an invalidity pension (e.g. skilled, semi-skilled, unskilled)
  • the range of methods of switching from working life to retirement, and
  • the average income replacement rates on starting to draw a pension.

Consequently, the focus of this section of the analysis is not only on the “average retirement age” variable mentioned above, but also on an additional indicator that is extremely important for further analysis: the so-called “average exit age”, defined here as the age at which paid employment (subject to pension contributions) was last undertaken.

Under certain circumstances, this age can be substantially before the age of retirement, specifically when this is preceded by long periods of income from benefits from unemployment insurance (e.g. unemployment benefit, emergency benefits, pension advance) and/or from health insurance (sickness benefit).

Of particular interest here is the difference between these two values, which is referred to as the “transition period” in the Report and will be illustrated and analysed in greater detail in the following.

In view of the abundance of data to be presented and analyses based on this, there must of course be omissions in this initial Monitoring Report:

For example, there is no, or at best only limited, consideration given to:

  • regional aspects
  • the effects of sectors of industry and company size
  • the professions of newly retired persons
  • (the Pension Insurance Institution [Pensionsversicherungsanstalt] merely provides a rough evaluation by profession concerning blue-collar workers)
  • issues regarding nationality and migration background and
  • questions concerning potential intra-family influencing factors, such as the earnings situation within the family unit
  • nd potential personal leisure preferences.

All of these factors are surely of interest and potentially not without significance for current retirement practices. However, they have to be omitted here, both as a result of lack of resources and of a shortage of available data.

Overall the report can be considered as a comprehensive stock-take of retirement practices for 2011, and of retirement events in the period 2005 to 2011. Both the stock-take in its purely descriptive form and the initiation of deeper analysis serve to set future monitoring of retirement events on a valid and easily interpreted foundation.

STRUCTURE OF THE MONITORING REPORT

At the core of the Report is the “actual retirement age” (also alternatively referred to as the “average retirement age”) for newly retired persons in 2011. Throughout the entire Report - as a kind of common thread - this is presented as both a descriptive variable, and:

  • as a simple indicator
  • broken down into subgroups (e.g. pension insurance provider, type of pension, age, etc.)
  • into periods of time
  • in a more detailed form using distribution indicators
  • in an adjusted form, as a category-independent variable
  • and as an analysis variable in conjunction with other important variables (illness groups, type of transition and transition period).

The relevant data on this can be found in the text section and - in a more detailed form - in the attached table section. Data found in the series of tables is annotated with “Overview” and numbers in the body text in each case. Tables and graphics found in the report itself are appended with “Table” and “Graphic” plus numbering.

As already mentioned, both the Report and the table section are enhanced with a wide range of background information. This information is generally provided in separate sections and, as such, is accordingly marked as background information in the relevant section headings.

Additional enhanced information - for the purposes of comprehensive knowledge management - is also included in the text section and again additionally marked as such. This includes, for example, information concerning the method of calculating specific parameters, as well as other explanations considered necessary, such as the structure and composition of the data on newly retired members.

Furthermore, the following appears in a concluding section:

  • an assessment of the indicators presented for the “actual retirement age”, plus
  • a summary and assessment of the other most important analysis results.

Furthermore the relevant sections also include short summaries of the data presented.

OUTLOOK

The present Monitoring Report generated for 2012 contains a wide range of information intended as initial information and to represent dependencies. Some of these representations go way beyond the issue of the retirement age and are additionally included in other publications.

Repeating this additional information in the Monitoring Report on an annual basis therefore seems excessive. Hence in the coming years the Report will concentrate on data that directly concerns the retirement age. The data should be suitable for guaranteeing the greatest possible meaningfulness for the Report. Differences shall be identified by the commission in each case.