Government may consider hiking retirement age after election

A few months ago, the French government made a proposal to raise the retirement age in France from 62 to 64, a move that triggered significant protests. This development has raised concerns that other countries, including India, that are working on proposals to raise the retirement ages for government employees.

As of now, India has one of the lowest retirement ages globally. In contrast to countries like Spain and Italy, where retirement ages are set at 66 and 67 years, respectively, employees in India typically retire between the ages of 58 to 60, while central government government employees retire at 60. The state government employees in the states retire at 58-62 years. However, there are indications that this situation may change in the near future.

Let's explore the various aspects of retirement age in India.

Retirement Age in India

India's current retirement age of 58-60 years is among the lowest worldwide. In October 2020, the Kerala Government took a significant step by increasing the state's retirement age from 55 to 60 years, applying this change to all government sectors within the state. This decision followed a similar move by the Andhra Pradesh Government, which raised the retirement age for state government employees from 60 to 62 years.

The retirement age of government employees in India falls under the jurisdiction of individual states, with each state determining this age at their discretion, provided they adhere to guidelines established by the Central Government.

It is expected that the 8th Central Pay Commission (CPC) will be constituted soon. It is possible that the 8th CPC may consider hiking the retirement age, given the recommendations of the Parliamentary Standing Committee on Finance and the Parliamentary Standing Committee on Personnel, Public Grievances, Law, and Justice. The recommendation will be studies for 

• The fiscal impact of increasing the retirement age.
• The impact on the efficiency and productivity of the government workforce.
• The impact on the morale and motivation of government employees.
• The impact on the pension system.
• The practices in other countries.

If the 8th CPC does recommend hiking the retirement age and the government accepts it, it is likely to be done in a phased manner so that the government and employees can adjust to the change.

Recent Development

In a recent office memorandum, the Ministry of Science and Technology (MoST) has stated that a proposal for the enhancement of the retirement age of scientists in autonomous bodies of science departments/Ministries is being worked out. The OM distributed to 14 autonomous bodies funded by the Department of Science and Technology (DST) is meant to collect the data for studying the potential financial implications of an extended retirement age. This can be seen as a starting move, which can be extended to other orginasations and offices and ultimately to cover all central government employees.

Public Opinion

The general opinion can go against raising the retirement age could make it more difficult for young people to find jobs, as there would be fewer job openings available.  This would reduce the number of job openings available, as older workers would remain in the workforce for longer. This is especially true, especially in the lower cadres of jobs. 

Overall, raising the retirement age for central government employees would have a number of negative consequences for young people. It would reduce job opportunities in the immediate future and increase competition for jobs. As a result the entry age for the jobs also will increase, making it more difficult to advance into more senior positions.

And importantly, the opposition is likely to highlight all the negatives of the retirement age hike as potential propaganda against the government, which could build public opinion against the hike.

The government will be careful to consider all of these factors before making a decision on whether or not to raise the retirement age for central government employees.

Any decision in this regard is likely to be taken up only after the 2024 general election or while implementing the 8th Central Pay Commission recommendations.

Benefits of Hiking Pension Age

In general, the benefits of increasing the retirement age outweigh  the detrimental factors

• Reducing the burden on the pension system: Raising the retirement age would allow central government employees to contribute to the pension system for a longer period of time, which could help to reduce the long-term financial burden on the government.
• Increasing the number of experienced workers: Raising the retirement age would keep experienced workers in the workforce for longer, which could benefit businesses and the economy as a whole.
• Improving the quality of life for retirees: Raising the retirement age would give retirees more time to save for retirement and to enjoy their retirement years.

Potential Changes in Retirement Age in India

Although there has been no definitive announcement from the Central Government, there is a growing possibility that the Indian government may draw inspiration from France's recent proposal. Many states have already increased the retirement age for their employees to 62 years. Following this trend, the Central Government might consider raising the retirement age for central government employees from 60 to anywhere up to 65 years. Ongoing discussions regarding this matter are taking place across various departments and ministries.

High Court and Supreme Court Judge Retirement Ages in India

Currently, India boasts 25 high courts. High court judges in India retire at 62 years, while supreme court judges retire at 65 years. This age was previously set at 60 years but was increased to 62 years following the introduction of the 15th Constitutional Amendment in 1963.

A recent presentation from the Department of Justice clarified that there is presently no consideration to change the retirement age of high court or supreme court judges. Nevertheless, arguments have been made both in favor of and against this rule. Raising the age could help reduce the number of pending cases, but it might also lead to a higher number of non-performing judges.

Retirement Age for Central Government Employees in India

At present, the retirement age for Central Government employees is 60 years. However, the retirement age for state government employees is determined by the respective state governments. While there have been no significant protests regarding changes in the retirement age, the stance of government employees on this matter remains unclear.

Increasing the retirement age could potentially delay the payment of retirement benefits for government employees and could create challenges for young individuals aspiring to advance in their careers, particularly given India's youthful population.

Retirement Age for Private Sector Employees in India

Private sector employees in India typically retire between the ages of 58 to 60. However, the retirement age can vary depending on the company. Some companies, such as JP Morgan, have increased the retirement age, while others, like Tech Mahindra, have lowered it to 55 years. Therefore, there is no uniform retirement age for private sector employees in India.

A higher retirement age allows businesses to retain their experienced leaders and subject matter experts for a longer duration, providing an advantage in terms of delaying retirement benefits, similar to the situation for government employees.

Retirement Age for Army Personnel in India

The retirement age for army personnel in India varies based on the rank of officers. It ranges from 54 to 58 years in the Indian army. For personnel in the air force, the age limit is 60 years, and for Navy officers, it is 56 years. In 2021, a proposal to increase the retirement age of army officers met with resistance from some who argued that it contradicted the idea of maintaining a "young and fighting fit" army. There were also discussions about reducing pensions for those retiring early.

Retirement Age for Police Personnel in India

The retirement age for police officers in India varies from state to state. For instance, in Uttar Pradesh, the retirement age for police personnel is set at 60 years, and the retirement age for all Central Armed Police Force (CAPF) personnel is also 60 years.

Possible Increase to a Retirement Age of 62

While there is no definitive decision regarding an increase in the retirement age to 62 in India, it is becoming a topic of consideration based on current demographic trends. India has one of the lowest retirement ages globally, and citizens' life expectancy has increased from 61.7 in 1998 to 70.1 in 2020. This means that retired individuals might have limited stable sources of income for almost a decade in their later years, relying mainly on their pension and retirement benefits. A higher retirement age could enable individuals to build a more substantial Employees Provident Fund (EPF) corpus at the time of their retirement.

Recommendations for hiking retirement age

The Parliamentary Standing Committee on Finance has recommended that the retirement age of central government employees be increased from 60 to 62 years in its 22nd report on 'Pension Reforms and Social Security'. The committee has also recommended that the government consider increasing the retirement age to 65 years in a phased manner.

The committee has cited several reasons for its recommendation, including:

• Increased life expectancy: Life expectancy in India has increased significantly since the 1960s, when the retirement age for central government employees was set. The committee argues that the retirement age should be aligned with current life expectancies so that employees can continue to contribute to the economy for longer periods of time.
• Improved health standards: Improved health standards have also led to employees being able to maintain their physical and mental fitness for longer periods of time.
• Need to address the fiscal burden: The government's pension bill has been increasing rapidly in recent years. The committee believes that increasing the retirement age will help to reduce the fiscal burden on the government.
• Global practices: The retirement age for central government employees in India is lower than the retirement age in many other countries. The committee believes that increasing the retirement age will bring India in line with global practices.

The committee has also recommended that the government consider providing incentives to employees who choose to retire early, such as a higher pension or a one-time bonus.

The government has not yet announced its decision on the committee's recommendation. However, if the government accepts the recommendation, it will require a change in the pension rules.

Closing Thoughts

Changes in retirement age have sparked controversy in many parts of France. However, several governments worldwide are contemplating similar moves. While extending working years and delaying retirement benefits may present challenges, such changes could benefit both businesses and governments in the long run.