Do you know which country can be proud of the first pension system’s appearance? Any guesses then? It’s Germany! To be exact, this is the achievement of Otto von Bismarck who made efforts to establish the state social welfare system at the end of the 19th century. Being guided by the intention to defeat socialists, he worked out the first modern social security system consisting of healthcare, accident insurance, and pension. With the slight national adjustment, the principle of its work remains the same even these days: those who work take care of the retired by paying the percentage of their earnings to the state pension fund. But the question is for whom this system works the best?
For this purpose, we’ve analyzed the experience of 7 countries for you to trace the tiniest national pension features and draw conclusions while working with the elderly target audience. This knowledge will be helpful a lot if you’re creating a product for them or offering some services. So, if your business speaks to the retired or closed to this age, this article is definitely for you!
7 Pension Systems to Learn from
Average monthly pension sum: EUR 1.961 as the regular payment for the married couple, EUR 1.404 for single men, and EUR 1.388 for single women. This rate is expected to augment by 4-5% in 2022. Though many Germans rely on this money as the basis for living, the majority still have the additional income source to support themselves — interest or rental predominantly.
Official retirement age: 65-66 years, depending on the birth date: 65 for those who are born up to 1947, and for each further birth year, 1 month of pension postponing is added. Meanwhile, they say that the limit will be raised soon to 67 or even 69 years to equal all pension recipients. For the time being, the German citizen is entitled to retire at the age of 63 if he/she has no less than 35-year work experience.
Pension types: State, company/occupational, and private are 3 possible pension options in Germany. The first one is mandatory, and the higher your wage rate was, the higher your pension would be. Two other plans can strengthen the former employee’s financial position by bringing home more bacon — if the person has work experience in the non-governmental sector or savings in banks or insurance providers.
Afterthought: If the elderly Germans stir your business interest, you need to know that not all of them live comfortably off. Even while they’re working, 20-22% of their salary is deducted from monthly payments to cover basic living expenses. Housing is also expensive in Germany, but the government will help only low-income families in this regard. So, Germans’ well-known greed can be somehow justified: they just care about their retirement!
#2. United States
Average monthly pension sum: USD 1,548 per month (or USD 18,579 per annum) — was increased in March 2021 from 91% to 100% funded status, even despite the Covid-19 consequences. That’s an outstanding example on a global scale, that’s why the US comes second on our list.
Official retirement age: 67 years — for both males and females born after 1956. However, some specific professions can change the situation: i.e., military officers and policemen can retire after the 20-year service. Still, the tendency of continuing employment is widespread among the American elderly people: a third of them are anticipated to work at least part-time in 2022.
Pension types: Most Americans combine the income from different sources during their retirement. The possible variations are pension, social security, financial assets, and insurance programs. Surprisingly, the second one is in the lead here, as 84% of the 65+ US citizens get monthly benefits from the Social Security Old-Age, Survivors and Disability Insurance (OASDI) program. It implies that they’re investing in their retirement beforehand by depositing the part of their salary by 9% interest (known as 401(k) retirement plan), but the requirement of having at least 10 years of work service is obligatory to have such an opportunity.
Afterthought: Americans don’t seem to be very flexible, especially when it concerns money savings. The obvious evidence for this is the scarcity of changes that have been brought into the pension welfare system since its molding in 1935. That’s why you probably need to account for this cultural feature while thinking about making a business focused on this TA.
Average monthly pension sum: PLN 2395, which constitutes almost 45% of the average wage in the country. Nevertheless, regarding the minimum subsistence level (PLN 1242), you may conclude that the Polish retired are supplied with normal living conditions. But the reality isn’t so bright! The high cost of living considerably decreases the value of the state material aid.
Official retirement age: Remarkably, Poland constitutes the minority when we speak about pension age reduction as the majority of European countries are on the other side of the road. That’s the reason why we put it as our #3. In 2017, the Polish authorities enacted the law allowing women to retire at 60 (with at least 20-year work experience) and men at 65 (with 25 years of work service). Earlier, it was equal for both at the age of 67. By this novelty, Poland aims at the ongoing state’s development by opening the career door to youth.
Pension types: There are 2 schemes in action — dividing and dividing-accumulating. The former works for those who are born before 1th Jan 1949, and the latter spreads for the rest. Simultaneously, the pension contributions are obligatory for all and divided between the employer and employee equally (19.5% from wage in total), even for the foreigners who work in Poland per the employment contract or the trust agreement. The only case when you’re free from paying is being as a private contractor, but this work period won’t be counted as the job history.
Afterthought: Working with the Polish elderly as the TA, you’re most likely to face their skepticism and lack of faith. This stems from the nationalization of Polish pension savings that occurred in 2014, after the new reform on diminishing the state’s debt. However, good arguments and proposals will heal the old wound!
#4. United Kingdom
Average monthly pension sum: Though it consists of a few payment parts, the state pension comprises the core financial nucleus. It’s equal for all UK citizens reaching the necessary age threshold and now approximates GBP 179.60 per week. To get it, you need to have 35 years of work contribution. In addition, the UK retired can count on the labor pension, the size of which depends on the job history and volume of wages. At least 10 years of work are obligatory to apply for this type of retirement benefit.
Official retirement age: 66 for all, but the earlier ceasing of work is also possible at the age of 55. In this case, UK citizens are granted the defined contribution pensions only. Another possibility to retire even before 55 is the specific medical condition.
Pension types: The pension size in the UK is determined by the weight of 2 factors: reaching the retirement age (extends to all) and having a solid tenure (the bigger it is, the more substantial benefit you’ll have). In case you work for a particular business unity, you’ll be given the employment pension, which is notably higher than the state one. Or you may have both of them if you have varied work experience. Moreover, the country has no veto for being employed after retirement, which allows increasing the income rate with the help of temporary or permanent jobs.
Afterthought: The UK welfare system holds one of the leading positions in the European region, which explains its #4 place in our selection. Even the foreigners can feel socially secure there because of the ability to pretend to the alternative pension program under the condition of having 2+ years of work experience at any UK enterprise. At the same time, 10 years of work within the borders of the country guarantee state support for foreign visitors. For the local citizens, the various additional benefits are stipulated: for military and WW2 veteran service, widowhood as well as disability and injuries.
Average monthly pension sum: Around USD 1,413 per person (under USD 17,000 a year).
Official retirement age: 67 years for both sexes. Due to the harmfulness of work, the Norwegian can apply for retirement 5 years earlier than the set limit.
Pension types & peculiarities: The retirement benefits in Norway originate from 3 main sources: state pension (paying 18.1% fee and having 40 years of job history for full payment), mandatory employer and collective pension plans (a corporate allowance), and private pension (optional and consensual involvement in banks’ and insurance companies’ programs). Besides, there also exist additional retirement income options — annuities — you pay nothing until you withdraw money, which can be very helpful in case of emergency. Finally, the immigrants who work in Norway legally for a year or more can also apply for the Norwegian National Insurance scheme.
Afterthought: As opposed to the complex and well-thought system of pension payments, Norway has to find the solution for overcoming the accelerated age of the population. Particularly, the Norwegians are living to their 82 on average, which calls for the as-long-as-possible retention of employees on the government’s part.
Average monthly pension sum: About JPY 150,000, which is a bit lower than the pre-retirement income for employed Japanese (JPY 220,000). Nevertheless, the level of the state care over the retired still seems tangible if ignoring the fact that average monthly spendings of Tokyo’s residents constitute JPY 126,482 — the sum excluding the rent.
Official retirement age: 65 years, but if the 6% loss for each underserved year isn’t a drama, the earlier retirement is provided. But to be sincere, not so many people are interested in that. On the contrary, the statistics show the late exit out of the labor market — 71 among Japanese men and 69 among Japanese women. It indicates that Japan has a high employment rate among the elderly: almost half of the 65-69-year-olds continued working in 2018 versus 22% in the OECD countries. What’s more, the cases of criminal offenses among this age category are growing proportionally, where more than a third of culprits repeat the wrongdoing to go to jail and get better support from the country.
Pension types: The Japanese pension is comprised of 2 parts: basic (paid by the state) and auxiliary (calculated in accordance with wage, job experience, and place of work). All citizens of Japan are obliged to take part in the state pension insurance and pay the fixed fee for that. The exception is made for non-employed spouses that are on the welfare roll.
Afterthought: Japan even overruns Norway in terms of population’s life expectancy — 84 years on average, and over a half of people in the country are above 46. The working-age ratio is also the highest in the OECD, which poses a serious issue for the state banks to handle with the pensions.
Average monthly pension sum: Despite the Chinese pension funds’ attachment to regions, we can point out the average amount of the retirement pay in the country — CNY 5740 (USD 10,788 per annum).
Official retirement age: 60 years for men and 55 for women. Regardless of this gender difference, there’s a steady trend of work preference even after reaching the necessary age limit. Specifically, 18% of 65+ Chinese prefer staying employed to sustain their financial stability. Meantime, the Chinese government expresses the intention to gradually raise the age bid for retirement till 2025. In this light, for every retired, there will be 2 senior age workers. The principal reason for that is the high life expectancy — 77 years — which, according to the latest estimates, should lead to 335 million 60+ citizens by 2050. And as 36% of current retirees are planning to prey on the state pension, the authorities are forced to interfere.
Pension types: The main type of the Chinese pension is called solidary: the employee has to pay 8% from the salary to the pension fund, while the employer covers the rest 20%. Another type of retirement aid is targeted at the civil servants: the bid of percentage fee is divided more substantially to the side of the government officials. And the last pension type exists for villagers and unemployed city/town dwellers — they get the minimum government pay in the amount of CNY 500-600.
Afterthought: Though the state pension is the core material basis for the majority of the Japanese elderly, they already demonstrate their willingness to have a backup plan — either cash/bank deposits or insurance programs. And despite the severe state control over the non-declared money (saved ‘under the mattress’), many Chinese who have extra income savings try hard to keep it in secret.
Does cultural scenario determine everything?
Each of the above-mentioned countries appears on our list not without a reason, and we hope that the quick acquaintance with these precise overviews will give you some food for thought. In any case, if you’re going to speak to the 60+ target audience, you need to obligatorily consider the cultural specifics. By serving to underserved, you have all chances to rock in your business arena! Don’t miss out on such an opportunity and find the gap to fill in with your timely marketing solution!