Norges Bank in favour of more flexible retirement
Norges Bank supports the general points in the Olsen Committee's proposal for a more flexible early retirement scheme, as indicated in the central bank's consultative statement to the Ministry of Finance regarding NOU 1998:19 Flexible retirement. Norges Bank agrees that individuals should be confronted to a greater extent with the costs of their own early retirement.
The Olsen Committee proposes a general, flexible scheme with a permanent reduction of pension benefits for persons choosing to retire before normal retirement age, and supplementary benefits for persons choosing to work longer. Today the costs associated with decisions regarding retirement are to a large extent passed on to society at large, which includes generations of future labour force participants who have no opportunity to influence decisions at the present time.
Norges Bank points out that National Insurance Scheme expenditure will increase sharply over the next twenty years as a result of the ageing of the population. Little will be required before a further increase in government expenditure substantially reduces the authorities' fiscal leeway. At the same time, the expense of providing for the elderly will have to be covered by a dwindling economically active population. In the long term, a continued decline in the average retirement age and a greater dependency burden for the working population may undermine the chances of maintaining the retirement pension system that has been developed.
By subsidising early retirement, the authorities today are actively encouraging people to retire early. In the opinion of Norges Bank, measures should be implemented to increase the incentive of older workers to remain in work longer. It is important to eliminate strong economic incentives for choosing early retirement, and disincentives for postponing retirement.
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