Increasing retirement age would help sustain pension funds

I wish to thank Mr. Sumith de Silva for his response to my letter of  June 30 regarding the retirement age.

Mr. de Silva expresses the view that extending the retirement age would place an additional burden on pension funds. However, I respectfully disagree. In fact, a gradual increase in the retirement age would help ease the pressure on pension schemes.

When the retirement age of 60 was adopted, life expectancy in Sri Lanka was approximately 60 years for men and 64 years for women.

 Today, life expectancy has risen to about 76 years for men and 81 years for women. As a result, pension funds are required to pay benefits for much longer periods than originally anticipated, placing them under increasing financial strain.

If the retirement age remains unchanged at 60 while life expectancy continues to rise, pension funds will require ever-increasing levels of capitalisation to meet their obligations. This raises the risk that future pensioners may face uncertainty over the sustainability of their pensions.

Many Western countries have already recognised this demographic reality and have responded by increasing their retirement ages. The United Kingdom has raised its State Pension age to 66 and plans further increases to 67 and eventually 68. France has increased its retirement age to 64 while Australia is also progressively raising the age at which people qualify for  pensions, now at 67 and progressively increased over the years mainly to relieve the stress on pension funds.

 Extending the retirement age, where appropriate, would not only allow the country to benefit from that experience but would also contribute to the long-term sustainability of pension funds.

Upali Weerasinghe