Government Retirement/Pension plans, by country.

Factual Questions
1

I’m curious about how other countries handle retirement and/or pension plans for their elderly.

I’m not referring to private saving schemes, I’m talking about what are sometimes referred to as entitlements. I’m also not referring to corporate pension schemes that are specific to your job/employer. Just government schemes. (And not medical, drug, nursing home care either. That needs a whole different thread!)

So I’ll start, in Canada, outside of any private saving or corporate plans, there are two basic schemes at work;

One is Canada Pension Plan, CPP, which you can choose to start receiving at 60yrs or later (the amount shifts down slightly if you begin earlier!) The payout is strictly based on what you have paid in over the course of your work history, lower income, lower payin/payout. But your employer matches whatever your contribution is calculated to be. And it’s deducted off of each paycheque, or due when you file taxes if you’re a self employed/contractor.

The second scheme is Old Age Security, OAS, it starts at age 65yrs, the amount is based on your income level during your earning years but not tied to what you paid in. Also people at the lowest end of the scale qualify for added subsidies which can amount to up to $6-7,000 yearly.

Also some of these benefits are survivable, so the widow continues to get most of her husband’s pension after he passes.

(It should also be said that some of these benefits, which were once full on entitlements, have begun to be subjected to means testing. So if your income is high enough, any benefits will likely be clawed back through your taxes.)

So what’s it like where you live? How does your government provide for the elderly? I’m certain there must be many creative approachs around the world. I am intrigued to learn the approaches other nations take!

2

The State Pension in the UK is nominally based on your record of contributions to the National Insurance Fund (though in practice the contributions in don’t cover the payments out and NI is treated like any other tax inCome, and likewise pension payouts draw on general public revenues).

The actual sums paid out are nowhere near enough for a comfortable life, and over the decades successive governments have tried all sorts of schemes to get people saving extra, either through state schemes or encouraging private pension schemes. They also offered an enhanced pension if you deferred drawing it for a year, and in future the payout age will rise from 65 to 68 (I think most European countries are doing something similar). I took up the deferred enhancement since I had enough coming in from a private employers’ scheme (one of the last of the relatively generous “final salary” schemes, i.e., so many 80ths of your final salary for so many years of payment into the scheme; even so, the final payout of State Pension is £8800 a year for me.

On the other hand, the threshold for paying tax is higher than that, so someone who has only that pays no taxes, and there are other perks as well, like the Freedom Pass for free (or much-reduced) public transport, an annual “Winter Fuel Payment” of £200 and free TV licences for over-75s. When the government was busy cutting all other benefits, these were left untouched for fear of pensioner voting-power, likewise current policy is based on a “triple lock” of increasing the pension level in line with the highest of average earnings, the consumer price index, or 2.5% (though that may not be sustainable in the long run).

On top of the
basic State Pension , there are additional means-tested benefits available.

3

Lot of publications online, for example:

4

Norway: Its complicated.

The public pension system has been revised several times. Since revisions cannot retroactively change things for people who have paid into the system for a while, in what is basically a binding contract, exactly what you get will be based on how old you are and under exactly what terms you have been paying into the system.

The minimum payout is about 27 000 for a single person or 45 000 for a couple as I understand it. This is generally for people who have no other source of income or pension rights, and most people will get more. This may seem a lot of you are from a low-cost country, but it does not go far in Norway. Pensioners often live in other countries to make the money go further.

For the current generation, every year you earn a public pension pot equal to about 20 %. Your employer is also required to put asides part of your salary in an additional pension scheme. When you decide to retire, your yearly public payout is equal to the pot divided by the number of years to the average age. You chose the number of years (10 +) your private pot is paid out for.

5

All you ever wanted to know about South Korea’s national pension.

6

Patrick pretty well covered it in #2. The rules are changed a lot, mainly to reflect the fact that people now live longer. In ye olden days, the retirements ages were 60 for women and 65 for men, but these ages are rising to 66 for all by 2020. From April this year a full UK state pension will be just shy of £166 a week for men and women who have paid National Insurance for 35 years.

The deferred pension scheme was a much better deal when I used it as every year of deferral added 10% - a bit of a gamble on how long one will live to collect it, but a much better return than savings.Like Patrick I have a final salary pension from my work in the NHS, as well as my state pension. As my wife does not have enough income to pay tax, she has transferred her allowance to me, which is worth over £200 a year.

Patrick says* “The actual sums paid out are nowhere near enough for a comfortable life,”* but it is enough to live on, just about, even with no savings or other income.

7

I don’t think the OP quite got it right. His description of Canada (or Quebec) Pension Plan is right. But I have the impression that the OAS is an entitlement and the same for everyone, but at gross incomes above about $75K, it starts to be “clawed back” and is completed clawed back at around $95K. On top of that, there is a Guaranteed Income Supplement which is paid only to those with very low income and is an entitlement.

8

Er, Um…

= Guaranteed Income Supplement. So sorry I failed to call it by its full name!

If some are having it clawed back, it’s not, ‘the same for everbody’. Nor is it a full on ‘entitlement’, as a result.

YMMV. But I don’t think I am wrong, in fact. (SHE said!:D)

9

Australia’s system explained here.

Basically, a two-part system. The age pension is available from 65 [incrementing to retirement at 70 by 2035], while superannuation [‘super’], which is a retirement funding scheme paid for by compulsory employercontributions with discretionary employee top-ups, kicks in slightly differently.

Super funds are investment-based with the idea that employers+you+govt will create a big nest-egg over time from which you can harvest sufficient retirement income to live like those people on TV, or blow it on a Russian bride scam.

Super funds are vast and seen as ripe for pillaging by successive governments. At the same time they also try to encourage people to contribute, and provide tax incentives that also skew the benefits disproportionately towards wealthier income earners.

At the same time people who subsist on the pension are being made to justify their reckless desire to live into their 60s, and don’t have nearly as telegenic an existence to look forward to.

10

The same is true for the UK, where a great many Spanish beach resorts developed a trade catering for British pensioners on extended stays in the winter months, as well as those who took the plunge to move permanently (but they don’t get the inflation-linked increases to state pensions that they would if they lived in the UK).

One more post-Brexit headache - what happens to those people?

11

The New Zealand system is quite simple. Everyone is entitled to National Superannuation at age 65.

Payments are taxed at the normal rate which is low if National Super is your only income.

For a single person the nett amount is $385/wk.

For a couple $285/wk each.

We have a newish compulsory savings scheme - Kiwisaver. This is very similar to the phenomenally successful Australian scheme but still not as good. It will provide a lump sum from wages saved to pay interest to top up National Super.

12

“often” is a very vague measure. According to the government about 40 000 citizens receive retirement benefits abroad. 30% of those were born in another country. There are nearly 730 000 people above retirement age, and although a significant fraction of those, at the younger end, aren’t receiving benefits, that still indicates the “live in other countries” fraction is well below 10%. Pulling the other way I suppose would be the ones who spend most of the time, at least officially, in Norway.

I’m not saying 1 in 10 isn’t often, but often could just as well have been 1 in 2.

13

Its a bit more complicate than that, I am afraid, because “live” is also a bit fluid. The 40 000 citizens only counts people who have officially moved and taken up residence abroad, I think. Now, people who has spent most of their time aboard during their working years have to live in Norway to get their pension topped up to the minimum, which means at least 6 months residence every year. And I don’t think that is checked much as long as you have a Norwegian address.

My parents, along with most of their friends, spent 6-8 months in Spain every winter after they retired, and so did all their friends. My sister and brother-in-law spends most of the year in Portugal. None of them ever bothered to officially move. You would have to arrange to stay on Folketrygden, etc.

In other words, the number of people who live abroad for 4-8 months of the year, or have basically moved without officially doing so is probably many times larger than the number who officially live abroad.

In 2010 the number of properties Norwegians owned abroad was 46 000, and rising with about 6000 per year.

14

Which I acknowledged.

A biased sample, which you should take into account. Most the retires I know spend 0-2 months abroad, but I wouldn’t base anything on that.

And what you’re describing is breaking the law for ones own convenience, which a lot of people find objectionable, even if they disagree with the specific rules. Yes, it increases the uncertainty of the count, but it also discourages law abiding citizens from moving abroad.

Many times is again very vague. Is it twice as many? I wouldn’t be surprised. Three times? It’s possible. Four times? I’d be very surprised.

An interesting number, but with it including any sort of holiday home, its useless to estimate retirees abroad.

15

The basis in France for people who worked in the private sector (out of my head), is 50% of the average salary of the 25 best years of your career, providing you have worked for 41 years (and as a result paid into the system) and are 62 years of age.

For people wanting more details :

Of course, there are a lot of subtleties and not exactly the same rules applies to everybody since like in other countries there had been changes over the years, so someone who worked from 1950 to 1990 will benefit from a slightly different scheme than someone who worked from 1970 to 2010. Also people whose income would too low (mostly people who didn’t work long enough during their live) get state benefits to bring this income up to some (low) threshold once they’re of retirmement age. And people can work longer and receive higher benefits. And many, many other things, I’m sure.

Besides, when the “social security” was created, many companies or branches of activity already had their own retirement scheme in place. They were given the choice between joining the “general regime” or keep their “special regime”. Many such special regimes still exist to this day, some very big, some small (say, the miners have their own, but also the employees of the parliament). And some of these systems can be vastly more generous (famously, railways workers retire very early, for instance).

Finally the “general regime” isn’t even technicality a government scheme. It’s run by a somewhat independant organization under the supervision of unions and representatives of employer’s “unions” for historical reasons (that’s how the previously existing schemes were typically organized, so they kept this known system).

But generally speaking, what I wrote at the begining applies to the majority of people.

16

Expats in the EU still get their inflation-linked increases. That rule applies to anyone who goes elsewhere, even in the Commonwealth. We have neighbours who spend 4/5 months in Spain every year. Their relatives call round regularly to check the post etc.

I read that Chile is becoming a popular (well maybe not really popular) destination for moderately well off retirees.

17

Should also point out for Canada, there’s a taxable income deduction -IIRC about $10,000 - for people 65 and over. This is important because all these CPP, OAS, GIC entitlements get added to all your regular income (i.e.company pensions, non-taxed savings withdrawal) and you pay regular income tax on total income. So reducing the income on which tax is payable helps too.

IIRC - you pay CPP on up to 100% of covered earnings. This number is average industrial wage (YMPE?), currently about $45,000. The calculation is - drop the 7 worst years, then average what proportion of max you paid the rest of those years, and you get that percent of the maximum CPP payment. (Recently, added not counting any years taken off to raise children) So if you made that YMPE number or more for all but 7 years from 18 to 65, you will get the full CPP. There was a plan to jack the retirement date to 67, but that was rescinded with the new Liberal government, it stays 65. Also you can elect to take CPP early - anytime after age 60. IIRC it drops by .66% each month early that you take it, so people with poor health problems and low life expectancy might be better off starting early.

FYI, the payroll deduction for CPP now is annually about $2000. This doubled about 10 or 15 years ago to account for the expected baby boomer draw-down. (Hence the panic in the USA over Social Security - presumably the math is similar and SS deductions needed to double to accommodate demographics).

Current GIS supplement is about $850/month for a single person, to $515 for a married couple both receiving. If you have much other income, these will not apply. In most cases, they consider married income, so the bank manager’s spouse cannot collect something meant to subsidize poor pensioners.

And of course, all mentions are Canadian dollars, not real money. $1C = $0.75US

Your spouse or live-in partner inherits your CPP (if they are over 35) but the max any one individual can receive is the maximum personal CPP. CPP credits are also split on divorce, like other pension plans…

18

Patrick is completely accurate. :cool:

In my case, I paid in to the National Insurance Fund for over 36 years. My State pension will arrive in July 2018 (when I’m 65) and will be £6680 / year (about $8330 / year.)
I have already claimed two private pensions from my two long-term employers (fortunately both are index-linked ‘final salary schemes’. N.B. I think this type of pension has been discontinued.)

I get a free bus pass in July 2017 and the Winter Fuel allowance in 2018.

(And although not exactly what the OP asked, I have the wonderful NHS covering most of my medical, dental and optician costs.)

19

Real Social security benefits in the US are being allowed to shrink. Mine is up 5.2% since 2012. There was no increase this year. It was nominally 0.3%, (NOT 3%), but it was eaten up by a Medicare increase.

20

For the 2016 income year (the levels are adjusted annually to account for inflation), the OAS clawback (officially the Old Age Security pension recovery tax) starts at a net taxable income of $73,756 and reaches 100% at $119,615.