From Iceland — "Make People Work For Longer"

“Make People Work For Longer”

Published November 12, 2014

Postponing Retirement Will Counteract Debt Relief

Postponing Retirement Will Counteract Debt Relief

In the 2012 Finance Ministry’s report about the effects of a housing mortgage debt relief program, such as the one now underway, the University of Iceland’s Economics Inistitute proposed raising the retirement age by one to three years. This would counteract, the report said, such a program’s effect on the equity of the country’s pension funds.

This November, Pétur Blöndal, member of Alþingi on behalf of the Independence party and member of Alþingi’s Committee on the Reconsideration of Social Security, told Morgunblaðið that the committee plans to propose such a change this winter. He said the committee will suggest raising the age of retirement by three years, in steps, over a period of three decades. The change will be implemented in a law proposal.

One of the major concerns in relation to the Government’s “Correction“, a debt relief operation for house-owners, is the effect on pension funds, which foresee less income from outstanding loans than otherwise presumed.

By raising the age of retirement from 67 to 68, the Ministry’s 2012 report said, pension funds’ obligations would be reduced by 7.3%. Raising it to 69 years would reduce the obligations by 14.4% and a raise to 70 years as the age of retirement, would reduce them by 21.3%.

Late last summer, before any mention had been made of the now anticipated proposal, the aforementioned Pétur Blöndal explained to Viðskiptablaðið that such a change would be desirable, since “People who are now seventy are much livelier than people were at that age thirty years ago, for example. The solution is raising the retirement age, make people work for longer. That is a positive operation.”
No member of the committee has so far cited the context of the Government’s debt relief as a reason for the change.

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