With Greece currently in a state of economic woe, thoughts are turning to their existing policy of giving people in "hazardous" occupations the chance of an early retirement, at the age of 50.
If you are interested in retiring early yourself, contacting a specialist IFA now.
People in a variety of occupations have been given this early retirement, even if their job does not seem too dangerous, on the surface at least.
Vasia Veremi is a hairdresser, one of the occupations that falls in to the bracket and not exactly a mine inspector in Afghanistan. She told the International Herald Tribune: “I use a hundred different chemicals every day — dyes, ammonia, you name it,’’ she said. ‘‘You think there’s no risk in that? People should be able to retire at a decent age, we are not made to live 150 years.’’
Whilst Miss Veremi’s comments may have a ring of truth to them, there are still reservations about Greece’s policy. In total there are 580 jobs that the Greek government has deemed dangerous enough for the workers to take early retirement, at the age of 55 for men and 50 for women. Some of the jobs, including bomb disposal and coal mining, are obviously fairly dangerous and may warrant an early retirement but eyebrows are being raised at other occupations such as the aforementioned hairdressers and other fairly innocuous roles like television and radio presenters, who are thought to be at risk from bacteria on their microphones, and also musicians who use instruments like the saxophone, due to the strain it has on the respiratory system.
All in all 700,000 members of Greece’s work force, or 14 percent, have been promised the boon of early retirement, its national average retirement age is 61, one of the lowest levels in Europe. This ‘deal’ was borne out of lengthy bartering between strong-arm unions and pandering governments, and has certainly added to the problems that plague Greece’s financial state, its spending, and inevitably the sovereign debt problem that Europe is currently facing. The big question for Greece is whether they will be able to afford these early retirements in the near future, and if not, what will happen to those promised?
Worryingly, Greece is not the only place that is setting itself up for a potential fall, with Europe in such a bad state much larger countries like Germany, Spain, Italy and France are being implored to re-assess the commitments they have put in place with regards to generous and early pensions.
Concerns have also arisen in America. Their social security and Medicare are predicted to hit a mighty strain as baby boomers in the region of 78 million will begin to lean on these resources as they enter their retirement. The problem is that without a significant increase of revenue, either from higher taxes, smaller benefits or a later retirement, both the Social Security and Medicare programs will quickly run out of money.
These issues have already spilled out of the cabinets and into the streets in several European cities. Worried workers who want the governments to keep their promises have protested at the prospect of a later retirement age.
So as it stands the ominous spectre of unfunded pension liabilities is more of a concern than the vast amounts of money that governments owe to creditors- their official sovereign debt. Research conducted in Washington by noted economist, Jagadeesh Gokhale, shows that were Greece to declare their promised pensions on their balance sheet it would show that its debt was actually 875 percent of its GDP, as opposed to their stated level of 113 percent. This ‘actual’ figure gives Greece the highest level of debt out of all the 16 nations in the euro-zone.
Greece is not the only country to place a shroud over its obligations. France shows its level of debt is 76 percent of the GDP but adding on the pension liabilities takes that figure up to 549 percent. In Germany the same calculations lead to 69 percent leaping up to 418 percent.
Looking at these inflated figures is perhaps a more accurate way of assessing debt in countries with large pension liabilities, especially as a generation of people approach the age of retirement, however the only insight such figures offer is that without some sort of action things could get rather sticky.
In his report Mr Gokhale says: "You have to look ahead and see how pension expenditures are rising in comparison to the revenues needed to finance them. It’s not just Greece; all major European countries are facing pension shortfalls. It is a very difficult challenge because it involves selling pain to current voters."
It is thought that extreme measures will be necessary if there is any chance of fulfilling the pension obligations. Mr Gokhale says that European countries would have to save eight percent of their GDP per year, which of course is no easy task at all. To save such sums would require a raise in taxes at least, and with levels already high such raises could deliver a hammer blow to their economies.
Even the United States blanket their debt levels, by taking all obligations into account, including Medicare, Social Security and Medicaid, the percentage of GDP owed is 500. Now some of these obligations will not be paid out for a number of years, even decades, but most countries are now reaching their saturation points in terms of borrowing; they are fast getting to the point where more borrowing will not be possible.
Unfortunately for Greece, they are again the best place to highlight this point. In 2009 the International Monetary Foundation published a report on Greece and stated that the large amounts of money spent on OAPs will lead to an official debt level of 800 percent of GDP by 2010, echoing the warnings made by Mr Gokhale. It is unlikely that debt levels will reach that though, because soon enough creditors will stop lending the money, until government programs are changed at least. Greece have begun to make moves, such as the proposed raise to the average retirement age up to 63, but this will only be the beginning.
Speaking on the matter, Kevin Featherstone, an expert on Greek Economy at the London School of Economics, told the International Herald Tribune: “The pension crisis is the biggest single test of Greece’s willingness to tackle long standing reform. Any meaningful reform must lead to reduced benefits for workers — the government needs to show that it can overcome union pressure.”
Again, Greece is in no way the only country facing such problems. Both Spain and France have made serious considerations to increase their age of retirement, it is known that Nicolas Sarkozy, the President of France, has discussed these matters with various unions and Spain have gone a step forward by actually proposing a two year increase from 65 to 67, though intense pressure from unions has led to Spain re-thinking the proposal. Over in Germany moves have already been made to not only increase the age of retirement to 60, but also to reduce benefits.
With all this talk of pensions and pension pay outs and strong liabilities, what of the pensioners themselves? The many people who were promised the pensions will in no way give up what they are owed without a fight. Mr Christos Bourdakis, a retired Government accountant in Greece, has written a book in an attempt to highlight the need to defend the pensions, “The Guide to Granting Civil Service Pensions in Greece”.
He says that: "We have to protect our standard of living. The pensioners should not have to pay for the crisis created by the bankers." However, the final and more ominous word goes to Manos Matsagnis, an expert on Greece’s pension schemes and a professor at the University of Athens. He simply says that: “Projected pension expenditures are expected to double. That is unsustainable.”