Retirement and the pensionable age: What does the global employer need to know?

Author: Ronelle Barreto

Whether your employees are eagerly anticipating retirement or share Friedrich Nietzsche's belief that the meaning of life lies in the continued struggle, it is important to know when they are legally entitled to retire and receive their full pension benefits. The starting point is to calculate an employee's pensionable and retirement ages - which is not always easy to do and will vary according to where they are in the world. Here we provide an overview of some important considerations.

Recent retirement age and pension eligibility reforms - driven by an increase in life expectancy, the economic impact of an aging workforce, social security reforms and different legal frameworks - have hit the headlines in countries across the globe. Practically, these developments have made calculating the retirement or pensionable age more complex as the global HR professional needs to consider a variety of factors, including an employee's location, length of employment, occupation, gender and birth year.

The terms "pensionable age" and "retirement age"

The terms "pensionable age" and "retirement age" have different meanings depending on the context and country. Some countries use the terms interchangeably, while others have specific and distinct definitions for each. Broadly, pensionable age refers to the age at which individuals become eligible to receive their full pension benefits from a social security or pension system. Retirement age usually refers to the age at which individuals stop working and leave their employment permanently.

Retirement or pensionable ages may also change over time due to various social and demographic factors. From 2013 Poland decided it would raise the retirement age in increments until it reached 67 years, but then in 2017 the retirement age was lowered to 65 years.

Whether or not there is a clear distinction between pensionable and retirement ages in a particular country, both ages are important in anticipating when an employee may exit the labour market.

The retirement or pensionable age and the increase in life expectancy

Average life expectancy has increased in many countries, so much so that in 2022 the share of the population aged 65 years and over stood at 18% on average in the Organisation for Economic Co-operation and Development (OECD) countries. This is projected to rise further to 27% by 2050.

As employees now have longer working lives, and draw on pensions for extended periods, governments have passed reforms to increase the pensionable and retirement ages, for example in Austria, Belgium, Bulgaria, Denmark, Finland, France and Germany. Most increases in these ages are introduced gradually over several years, and some pertain only to women, so it is important for HR professionals to keep themselves informed of ongoing adjustments.

Chart showing the rise in the pensionable age (PA) or retirement age (RA) in 12 different countries (hover over the dots to see more detail)

Factors that affect the calculation of the retirement or pensionable age

An employee's retirement or pensionable age may depend on several factors, including the employee's date of birth, gender, occupation, number of children and pension contribution history. For instance, in France, Finland and Germany, the calculation depends solely on the year of the employee's birth, whereas in the Czech Republic it depends on the person's date of birth, gender and number of children.

In Brazil, employees can generally retire under a state system that adds together the employee's age and contribution period as part of an overall points system. Several countries grant access to early retirement for individuals who perform hazardous and arduous jobs, for example Finland, Spain, Belgium, Greece and France. Importantly, some countries still have different retirement and pensionable ages for men and women.

Chart showing the difference in retirement age (RA) or pensionable age (PA) for men and women in eight countries in 2024 (hover over the dots to see more detail)

The mandatory or compulsory retirement age 

Several countries have enacted legislation to eliminate mandatory retirement ages and promote equal opportunities for workers regardless of their age. However, the right to include a mandatory retirement age in an employment contract may still be valid in some jurisdictions. For instance, in South Africa it is common practice to specify the retirement age in employment contracts, whereas in Germany, Ireland and the Netherlands flexible retirement options are the norm.

In the UK, an employer may, in limited circumstances, apply a compulsory retirement age if this is objectively justified as a "proportionate means of achieving a legitimate aim". In such cases where a compulsory retirement age is objectively justified, the employer must, as with any dismissal, follow a fair procedure. In Norway, when employees reach the age of 72, they may be dismissed with the proper notice or may resign with one month's notice.

Employers should familiarise themselves with local regulations and practices before drafting employment contracts that specify a mandatory retirement age as labour laws may change, and the prevalence of specifying a retirement age in the employment contract can also vary within industries, states or sectors in each country, as is the case in India and China.

Practical implications for the global HR professional

By proactively monitoring and understanding the pensionable and retirement ages of their global workforce, HR professionals can:

• navigate specific regulations related to employing individuals who have reached retirement milestones;
• develop tailored retirement plans;
• provide appropriate retirement options, eligibility criteria, financial planning and resources to help employees make informed decisions;
• ensure successful succession planning by anticipating potential skills gaps and identifying talent pipelines;
• facilitate effective knowledge transfer processes between retiring employees and successors;
• offer targeted training programmes; and
• introduce suitable policies and flexible work arrangements, eg phased retirement or reduced hours leading up to full retirement.