Expected years in retirement
The indicator of expected years in retirement illustrates the average years of remaining life expectancy from the age of labour market exit. The indicator demonstrates how pension systems interact with labour market exit and reveals the financial pressures on the pension system in the context of an ageing population.
Men and women can expect to spend respectively 17.8 and 22.5 years in retirement on average (Figure 5.13). The most recent calculations of expected years in retirement exceed 20 years for men in Austria, Belgium, France, Greece, Italy, Luxembourg and Spain (Figure 5.13, Panel A). The duration exceeds 25 years for women in Austria, Belgium, France, Greece, Italy, Luxembourg, Slovenia and Spain (Figure 5.13, Panel B). The number of expected years in retirement was notably low for men in Korea and Mexico – less than 14 years – and for women in Korea, Mexico and Turkey – under 20 years.
Women can expect to spend, on average, almost five years longer in retirement than men. In most Eastern European and South American countries, as well as in Portugal, the gender gap was at least six years. Longer periods in retirement expose women to old age poverty, in particularly in those countries where price indexation of pension payment magnifies the gender pay gap.
The expected years in retirement for women in emerging countries varies from 25 years in Costa Rica to 18 years in South Africa. The variation is less for men, who can expect 13 to 15 years in retirement. While the effective age of labour force exit in Costa Rica was more than nine years lower for women than for men, the difference in South Africa was only one to two years.
The average expected number of years in retirement across OECD countries has increased over time. In 1970, men in OECD countries spent, on average, ten years in retirement and by 2017, this average increased to 18 years (Figure 5.14, Panel A). The increase in the expected years in retirement was similar for women; increasing from 14 years on average in 1970 to 22 years in 2017 (Figure 5.14, Panel B).
The increase in the expected years in retirement from 1970 to 2017 is due to both a drop in the effective exit age from the labour force and increased longevity. The effective age of labour force exit decreased gradually from 1970 to the late 1990s for both men and women. After a few relatively stable years, the average effective exit age started to increase slowly from the early 2000s. It increased by two years for both men and women between the mid-2000s and 2017.
Life expectancy at the effective exit age from the labour force increased substantially during this period, particularly for women, and over the last two decades for men as well. In the last few years, this increase in life expectancy at the effective exit age has been fairly equal to that of the effective exit age from the labour market, and potential years in retirement have stabilised.
Expected years in retirement is a calculation of remaining life expectancy from the time of effective age of labour force exit for men and women.
The average effective age of labour force exit is calculated as a weighted average of (net) withdrawals from the labour market at different ages over a five-year period for workers initially aged 40 and over. In order to abstract from compositional effects in the age structure of the population, labour force withdrawals are estimated based on changes in labour force participation rates rather than labour force levels. These changes are calculated for each (synthetic) cohort divided into five-year age groups. For more discussion see OECD (2017).
Estimates of the number of years of additional life are calculated based from the UN World Population Prospects, the 2017 revision dataset.
Further reading
OECD (2017), Pensions at a Glance 2017: OECD and G20 Indicators, OECD Publishing, Paris, https://doi.org/10.1787/pension_glance-2017-en.
Figure notes
Figure 5.14: OECD refers to an unweighted average of 36 OECD countries; 1970-95 data are trended from 28 countries, as information for Czech Republic, Iceland, Israel, Latvia, Lithuania, Mexico, Slovak Republic and Slovenia is not available from 1970.
Source: OECD (2017), Pensions at a Glance 2017, OECD Publishing, Paris, https://doi.org/10.1787/pension_glance-2017-en.
Source: OECD (2017), Pensions at a Glance 2017, OECD Publishing, Paris, https://doi.org/10.1787/pension_glance-2017-en.