“Explore the need for India to increase its retirement age. Learn from global examples like France and understand how demographic shifts impact retirement policies. Stay informed about recent proposals and changes in retirement age across Indian states, considering the economic and demographic landscape.”
You might want to change your after retirement plans as this is the mood Indian government is setting right now. Both in domestic as well as international arena, the hot topic of retirement age is gaining the limelight. Both types of responses are being seen everywhere with some fraction of people roaring up against the reforms of increase in retirement age and others simply holding up and supporting it. Now, its just a matter of time before this wave of increase in retirement age grasps the whole world within its shade.
The France Story
Not long ago, the France government has introduced a proposal for a reform policy to increase the retirement age from 62 to 64 years by 2030 in France. This new reform policy is attracting rebellious attention from the French citizens by doing protests and showing displeasure against it. The new plan has also made it compulsory to provide 43 years of service in the workforce in order to grasp the pension benefits, irrespective of the age of joining. For example, if a person has joined at the age of joined the workforce at the age 23, he shall be eligible for pension only after the age of 66, which is above the set cap. These new rules are set to be in force starting 2027, with the retirement increasing gradually, reaching the desired limit by the year 2030.
In most of the European and the Western countries, the lower birth rate is also an important factor in contributing to the idea of increase in the retirement age there. Due to low birth rate and increasing old population, an imbalance has arisen which is taking place in the demographic arena of the population as the base of young working population is getting equal and, in some cases, even smaller than the top tier of the old age population in these countries. As a result, it is becoming difficult for the governments to maintain the retired people with limited working class of younger generation.
In order to restore the economic equilibrium in this inter-generational set-up of co-dependency on each other, these European countries are resorting to the scheme of increasing the retirement age. The ratio of the worker population to the old age dependent people has been increasing in these countries due to this demographic instability. This has indirectly morally and economically compelled these countries to increase the retirement age. The goal should be to keep the old-age dependency ratio as low as possible as it will promote equipoise and reduce the chances exploitation of the young workers.
These countries are waking up to this powder keg which might explode in the coming years, as it will become burden on the government to support the retired population with limited funds, owing to lesser and unproportionate working population. There are also instances where, while providing for and supporting the retired population, the countries may enter into international debts due to lack of financial security for retired people in the government treasury.
On the brighter side, motivation for this proposal is behind the rationale of taking full advantage of the knowledge and experience of the older age groups in the development and functioning of the national affairs of public and general importance.
The Indian Status
Seeing the current international trends, now this process has become a universal fever. More and more countries are adopting this policy. The continual repetition of this change around the globe is becoming more inevitable as each day is passing. It is high time India should also adopt this wave as it can resolve many problems which might come along with the management of the retired population.
In October 2020, the Kerala state government had issued an order for increase in the retirement age of employees of nearly all the government sectors to 60 years of age. In another instance, the state government of Andhra Pradesh in February 2020, had promulgated an ordinance, increasing the age of retirement from 60 to 62 years for the state government employees. In the year 2021, the Economic Advisory Council to the Prime Minister (EAC-PM) had also recommended to the central government to increase the retirement age on the basis of study conducted by the Institute of Competitiveness. The 6′ Pay Commission of India had also in its report suggested the central government of India, to increase the retirement age of central government employees from 60 to 62 years.
Most recent example is of Madhya Pradesh, where the general administration department of the state has proposed to the Chief Minister to increase retirement age cap as 63 years for the old government employees. They had increased previously from 60 to 62 years only in 2018. The latest proposal does have the potential to get passed by the state government, seeing the ground realities have confirmed the success of the 2018 reform.
Looking at the history, the retirement age for central government employees was changed only in May 1998, when it was altered from 58 to 60 years. India has one of the lowest retirement age globally. The retirement age of western countries is significantly higher than that of
India’s, with United states of America and Demark, having 67 years and 66.5 years as retirement cap, while Ireland having 66 years as cap. On an average, it has been stalled at a constant of 60 years in India. Simultaneously, the age in the private sector has been broadly in the 58-to-62-year range.
Retirement age of any country should be according to the life expectancy of that region. It should be formulated keeping in mind the demography of the population as well. Another reason why the retirement age cap should be increased in India is because the average life expectancy in India has also increased significantly, 61.7 years in 1998 to 70.1 years by 2020 according to the World Bank, with states like Kerala and Tamil Nadu, showing results far better than majority of the other states.
According to United Nations, World population prospects, the birth rate in India was at its peak in 2002 in the past two decades. It has been declining ever since, with birth rate in 2022 being 17.16% and in 2023 being 16.94%, declining at the rate of 1.23% and 1.25% from their previous years respectively. This is showing a constant downward trend in the birth rates over the past decades. As a result, there might not be enough workers for every retied person, which may mutate into an economic nightmare for India also.
EPFO’S Involvement
In India, the Employees Provident Fund Organization (EPFO) and the Ministry of Labor and Employment are responsible for the regulation and management of the pension schemes the old age sector of the Indian population. Coming under the umbrella of Ministry of Labor, the EPFO which is in charge of regulating the pension schemes for the employees in the private sector.
According to the EPFO rules, the more the retirement age of a person is, the more pension he is entitled to. The EPS (employment pension scheme) by the EPFO, is a scheme, where the workers of the organized sectors are entitled to pension, after retirement at the age of 58 years.
KK Jalan, Central EPFO Commissioner tells, Jalan said “that there will be no burden on the government if the age is increased from 58 years to 60 years. He said that on increasing the retirement age, the pension fund size will go up.” It will reduce the pressure of pay-outs to the retires citizens of the country.
Way out for the early birds
However, beyond a certain age the government should keep the option of continuance of service an open-ended choice for the employees themselves. In countries like Finland, Canada, and Sweden, among others, there are flexible retirement age regimes, like people there can take retirement before the set age, with their unique terms and conditions. Among others, Voluntary Retirement Option (VRS) is the way forward. The option was VRS should be continued as part of the regime. Such as beyond a certain the VRS should not be denied to the old age employees, because not always everyone is in proper mental as well as physical capacity to work anymore. At times, some jobs are no more practical, such as the old employees lack the same physical strength to perform certain jobs, which they had twenty years ago. Where particular physical activities are just not feasible for them.
Conclusion
One of the major advantages of this increase in the retirement age is that it will give rise to an increase in the contribution to the pension fund by the working class, including the senior citizens, mainly because this way the employees will be able to contribute for longer time than before. As a result, over all, it will reduce the pay-outs of pensions in the long run as their will be lesser old people to support in that same time period.
Nevertheless, there are various perks, in this new policy idea, which far outweighs the disadvantages. Having the senior population on the board along with the other member of the workforce, will provide the younger employees with guidance and experience of the elders. Their loyalty and commitment, will be a motivation for the younger workers to learn from. Their delayed retirement will aid in the contribution both to the economy as well as to the employee’s provident fund. It can be said without any hesitation that having the elder working force is certainly beneficial both to the workforce environment and the national economy of our country. With various changes and policies coming into picture to alter the retirement age for both private and public sector employees in India, a change is inevitable and its time we brush ourselves to get ready for it.
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