Europe balks at reforms pushing retirement age back

Anthony Kilner had big retirement plans. After working hard and saving prudently for 3-1/2 decades, he wanted to devote more time to golf, his granddaughter, and his garden. He even thought about buying a vacation home in Florida.

Little did he suspect that eight years after retiring, he would be forced to work 40 hours a week at a local supermarket - greeting customers and announcing special offers - just to scrape by.

"It's a good [thing] I've got my health," he fumes. "Who would look after me if I wasn't healthy?"

The prospect of a retirement like this is alarming workers across Europe as economies struggle and state pension plans creak under the weight of aging populations and low birthrates.

Currently there are four people of working age for every pensioner in Europe. By 2050, there will be just two for every retiree. The average senior citizen already spends 20 years drawing a pension, compared to 13 years a generation ago, and life expectancy is seen as increasing by another five years in the next half-century. With birth rates stagnating, the outlook is stark: Fewer and fewer people will be generating economic wealth and growth, while more and more will be dependent on it.

This week, more than a million demonstrators protested the French government's plans to force people to stay in the work force longer.

The problem is felt most acutely in countries that operate a so-called "pay-as-you-go" system in which today's workforce subsidizes today's pensioners through a state-run mechanism. In France, Germany, and Italy, pension payments currently account for 12 to 14 percent of GDP, and this is set to rise by 3 to 6 percent by 2050.

It's a scenario that has elicited dire warnings from Frankfurt, where the European Central Bank has its headquarters. In a surprisingly frank report last month, the bank said governments had to radically overhaul their pension systems, preparing people to expect to work longer, and provide for their own retirement income. In the 12 countries that have adopted the euro - the retirement age now averages between 58 and 64 for men, lower for women.

"Overly generous provisions will need to be reduced," the report said. "Particular attention should be paid to raising effective retirement ages," warning that otherwise, budgets would be sorely tested.

Such rumblings about reform have prompted angry responses. This week's strike in France ran from Tuesday through Thursday. Austrians also returned to the streets to protest a pension reform provision on Tuesday - after a rally last week. The French government is proposing to gradually increasethe time that employees must contribute to earn full retirement rights. And Austria wants to penalize early retirees by reducing their benefits.

The moves are part of a broad European effort to get individuals to provide for their own retirement. The ECB says it's time for "strengthening the prefunding of pension entitlements" - a euphemism for encouraging companies and individuals to share the burden, as they do in the US and Britain.

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