On the dole at 60: Will transitional pensions become a necessity?
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At least two countries are currently debating the introduction of transitional pensions for people who end up being unemployed in their 60s but are too young to draw a state pension. Will the UK have to follow suit?
Elections prompt transition pension promise in Ireland
Election campaigning is in full swing in Ireland, which goes to the polls on 8 February. One big issue in the election campaigns is the rise in the state pension age, which has gone up to 66 and under current plans, will rise to 67 in 2021 and to 68 in 2028.
Many take issue with the fact that this puts older workers in limbo as many Irish employers still force people into 'retirement' at 65, effectively pushing them onto jobseekers’ allowance.
Amid growing discontent from unions and promises to halt or revert state pension age rises from left-wing parties, current taoiseach and leader of centre right party Fine Gael, Leo Varadkar, has reportedly said that his party would reintroduce a transitional pension that was abolished in 2014. Later, he clarified that this would only apply from age 66 and cost the state about €150m.
Are transition pensions about dignity – or preventing another shift to the right?
Ireland is not the only place where unemployment of older workers has become a sore point. Switzerland’s government has proposed a transition pension from age 60 for workers made unemployed at 58 or later – the retirement age for men is currently 65 and 64 for women. The state pension can be taken up to two years earlier in exchange for a reduction.
The transition payments would only be available to people with a national insurance record of at least 20 years and who have been employed for 10 out of the 15 years preceding their 'removal’ from jobseekers’ allowance; Switzerland obscures its unemployment statistics by only classing people as unemployed for two years, and as ‘removed’ (ausgesteuert) thereafter.
Around 4,400 people a year would be entitled to draw a transition pension, costing CHF30m in 2021 and then increasing to around CHF230m a year from 2030, according to the government.
The debate is ongoing; the smaller chamber has so far watered down the proposals to limit the duration of transition pensions until early retirement age, 62 and 63, rather than normal retirement age.
The Swiss government’s rhetoric is around dignity for workers who have been employed for most of their lives and find themselves pushed out as they get older.
Local media note, however, that it is bringing the measure in with one eye on an upcoming referendum on limiting the free movement of people from the EU, seeking to appease voters tempted to blame their economic situation on migrants.
Such a vote could undermine ongoing negotiations with the EU, something the UK will now have to deal with as well. Switzerland’s relationship with the EU has been increasingly tense since the EU has been seeking to sign an overarching framework agreement, including recognition of the ECJ and better access to social security for EU migrants among others. A people’s vote that would demand limits to free movement would lead to retaliation, as has previously been the case with the non-renewal of an agreement regulating stock exchange equivalence.
Will the UK feel the political impact from jobless older workers?
The UK might want to pay attention to the dynamics that have led to transition pensions in both Ireland and Switzerland. Unemployment among older workers could quickly become a central issue as, like in Ireland, the UK state pension age rises while age discrimination in the job market is rife, if not state-sanctioned.
And like in Switzerland, people’s anger about their job situation and lack of protection by the government could result in a further shift to the right, giving hardliners more power to shape future elections. Additional support before retirement for older people who suddenly found themselves on the street after a lifetime of employment might just help to manage this.
Do you think the UK will have to introduce transitional pensions in the future?