Retirement Plans From Around the World

Fact checked by Hans Daniel JaspersonReviewed by Ebony Howard

Retirement is becoming more and more of a pipe dream for many workers. The rising cost of living paired with longer life expectancies is forcing many to continue to work far past the age they imagined because of a lack of sufficient savings.

This shortfall has spurred many governments to increase the age at which citizens can receive money from social security plans in an effort to minimize the number of people in the system. However, not every country has been proactive enough to provide its inhabitants with an adequate retirement income. Here’s a look at retirement rules and benefits available to citizens around the globe.

Key Takeaways

• Changes in the global economy, paired with longer life expectancies, are forcing many individuals around the world to continue to work far past the age they imagined because of a lack of sufficient savings.
• Depending on the country you live in, there are many different retirement rules and benefits available to citizens; the U.K., Singapore, Malaysia, the U.S., Australia, and Canada all have very different approaches to ensuring that their citizens have adequate retirement income.
• Countries, such as Singapore, offer programs for re-employing retired workers as a means of providing their older citizens with more employment opportunities.

The U.K.

In 2011, the U.K. government ended fixed retirement in the country, which means that employers can no longer force staff to quit simply because they are 65 or older. It has also increased the State Pension age, which used to be 60 for women and 65 for men, on a sliding scale that started in 2011. It is 66 for both men and women and it will increase to 67 between 2026 and 2028.

Workers in the U.K. can continue to work after they reach State Pension age and still receive their pension. They can also put off claiming their State Pension, which might make them eligible for extra State Pension funds or a lump-sum payment when they claim it.

According to the Office for National Statistics in the U.K., in 2021, the latest data available, the workplace pension participation rate was 79%.

Singapore

In Singapore, there is a statutory minimum retirement age, which is currently set at age 63. This means that an employer can require an employee to retire upon reaching that age and prohibits any employers from terminating an employee on the grounds of age before reaching age 63.

At the same time, Singapore also maintains a re-employment program, per the Retirement and Re-Employment Act. This act is intended to provide older workers with employment opportunities. Employers may be required to “re-employ” a retired worker up to the “re-employment” age, which is currently set at 68 years of age.

In order to be eligible for re-employment, an employee must meet certain criteria:

• A Singapore citizen or permanent resident
• Worked for their employer for at least two years before reaching the minimum retirement age for employees hired at 55 or after
• Satisfactory work performance as assessed by the employer
• Medically fit to keep working

Under the Retirement and Re-Employment Act, the employee must be “re-employed” for at least one year (and the employment being renewable each year up to the “re-employment age”).

Employees are not required to be “re-employed” if they choose not to be. However, an employer that is not able to provide a re-employment opportunity to one of their employees must make an Employment Assistance Payment (EAP) to the employee. This payment is generally 3.5 months’ salary.

The Singapore government implements a comprehensive social security savings plan called The Central Provident Fund (CFP). Under the plan, all working Singaporeans and their employers make monthly contributions to four CPF accounts. Savings in the Ordinary Account can only be used for specific expenditures such as investment, education, CPF insurance, or to purchase a home.

The Special Account is earmarked for a person’s elderly years and investments in retirement-related financial products. The Medisave Account can be used for medical expenses, such as hospitalization costs and approved medical insurance. Finally, the Retirement Account is automatically created when an employee turns 55 years old.

The government encourages retirees to supplement their CPF with personal savings. As of December 2023, the fund had 4.5 million members and a balance of $571 billion.

Malaysia

This country in Southeast Asia enforces a compulsory retirement age of 60 for public sector employees.

Public sector workers are provided with two types of retirement schemes, including the pension scheme, which entails a monthly fixed income, a service gratuity, and free medical treatment at government hospitals.

The Employees Provident Fund scheme provides for retirement through a mandatory savings account in which employees and employers make monthly contributions.

The government has a mandatory retirement savings scheme for all Malaysians working in the private sector. The retirement age in the private sector is also 60.

The retirement outlook for Malaysia is not strong due to its aging population. As of 2022, 51.5% of EPF members had savings below RM 10,000, which is just a little over $2,000. Only 18% of members are expected to save RM 240,000 (approximately $50,000) by the time they retire.

Important

The earlier you start investing in a retirement fund, the better, as you will benefit more from compounding over a longer period.

United States

The age at which U.S. citizens are eligible for full retirement benefits ranges from 66 to 67, depending on their year of birth. Early retirement begins at 62 when people can begin receiving a fraction of their full retirement payout.

The Retirement Confidence Survey (RCS) for 2023 finds that workers’ and retirees’ confidence has dropped to 2018 levels. Only 18% of workers feel very confident about retirement while 64% feel somewhat confident.

Australia

Down under, the social security program is called Age Pension. The government describes Age Pension as “an adequate income in your retirement.” To receive Age Pension you must be between 65 and 67 depending on the year you were born and meet the 10-year qualifying Australian residence requirements.

Income, assets, and other circumstances affect how much pension an Australian worker will get.

Australia has a relatively conservative and mandatory retirement saving system for its citizens, which requires them to put away 11% of their salaries every year into a private/public 401(k) called a superannuation account. This amount will be raised to 11.5% in July 2024 and 12% in July 2025.

Canada

In the wake of its first budget deficit since the mid-1990s, the Canadian government announced the eligibility age for Old Age Security (OAS) and the Guaranteed Income Supplement (GIS) would gradually rise from 65 years of age to 67 by 2029.

However, in 2019, the government of Canada restored the age of eligibility for OAS and GIS benefits from 67 back to 65 to help ensure future vulnerable elderly people do not face higher risks of living in poverty. Eligibility will remain at age 65 as part of an effort to guarantee that the elderly do not have to wait two additional years to collect their OAS and GIS benefits.

OAS is funded completely through government revenues as part of the country’s public pension system. Canadian citizens or permanent residents 65 and older who have lived in the country for at least 10 years are eligible for OAS. Pension increases per the number of years a person has lived in Canada.

The maximum payout if you are between 65 and 74 is CAD 713.34 a month but your annual world income must be less than CAD 134,626. If you are older than 74, then the maximum monthly payout is CAD 784.67, but your global income must be less than CAD 137,331.

Which Countries Are the Best for Retirement?

According to a 2023 study by Natixis, the best country to retire in is Norway. Following Norway, are Switzerland, Iceland, Ireland, and Luxembourg. The rankings were based on the following categories: health, quality of life, material well-being, and finances in retirement.

What Is the Cheapest Country to Retire In?

Countries that are often considered to be the cheapest to retire in include Portugal, Panama, the Philippines, Malaysia, Mexico, Thailand, and Vietnam.

How Much Money Do I Need to Retire?

The amount of money you will need to retire will vary on many factors, such as your health, where you live, any dependents, how you would like to spend your retirement, debts, and more. Generally, it is recommended you will need 80% of your pre-retirement income.

The Bottom Line

Retirement is handled differently depending on where you live in the world, but it seems that most individuals and governments struggle with how to fund life after work. Your best bet is to take matters into your own hands. Don’t count on government programs to sustain you through your retirement.

Read the original article on Investopedia.