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This report investigates how partial retirement schemes can contribute to sustainable and adequate pension systems by enabling and motivating people to extend their working lives. It maps schemes at the national and sector levels in the EU and Norway, examines their characteristics and assesses their impact on the extension of working lives. An executive summary is available.

Interview
Hans Dubois, Research Officer at the Living Conditions and Quality of Life Unit at Eurofound
(published in IR Notes 59, 14 September 2016)

You have published a report on national, sectoral or company schemes aimed at extending working lives through flexible retirement schemes. Are such schemes common practice across Europe?
Over half of the EU Member States have a partial retirement scheme, at the national level, at the sector level, or both. Earlier research by Eurofound further shows that 45% of workers aged 50 or over would prefer to work fewer hours, taking into account their financial needs. So, a reduction in working hours can motivate and enable people close to the retirement age to extend their working lives. For many people, though, such reductions may not be feasible as they cannot afford the drop in income. If people can draw part of their pensions early, this facilitates such reductions and may thus extend working lives. Early pension withdrawal may come at the cost of lower future pensions, but longer working lives can enhance pension entitlements.

Are some schemes particularly successful?
We have not identified a partial retirement scheme which was unequivocally successful. Usually there is a group of workers for whom partial retirement really is a solution to continue working. They may include people with health problems, disabilities or care commitments. However, the group of people who use the scheme to reduce their hours under favourable conditions, without prolonging their working lives, tends to predominate. Furthermore, while partial retirement has sometimes prevented redundancies, it has also been used involuntarily, to effectively make workers partially redundant. Schemes suffer from different problems. For example, some of the schemes which have been successful if measured by large take-up, such as the former Austrian and Swedish schemes, have been very costly for the tax payer. In addition, several schemes, such as those in Austria and Finland, were used in particular by higher socio-economic groups, which raises the concern of inequity because these groups benefited disproportionately from these public funds.  Other schemes have been used by too few people to have a considerable impact on the whole, such as the Czech and French schemes up until recently, and several Dutch sector-level schemes in the Netherlands. Few people may know they are entitled to them, or it is simply more attractive to take full early retirement, or to draw full pension and to continue working beside it. Schemes can clearly extend working lives though, if they effectively compete with an alternative full early retirement scheme. Furthermore, whether a scheme is successful or not, naturally depends on its objectives.

What are the main recommendations to government or social partners for building successful schemes?
First of all, I think it is worth keeping partial retirement in mind. In the past it has often not been successful in enabling and motivating people to work longer. However, it may become a more important tool now that many workers in Europe need to continue working longer because of recent pension reforms, and full early retirement is being discouraged. If governments, social partners or pension funds consider implementing partial retirement, it is crucial to get the design and implementation right. This is more complex than it seems. Eurofound’s report gives recommendations to support them with this, learning from experiences across Europe.