Pension Reform: When Necessity Clashes with Popularity

Editorial

The extension of the pensionable age, a measure frequently undertaken by governments early in their mandate, is a global phenomenon driven by an undeniable demographic reality of ageing populations and declining birth rates, coupled in some cases with dire financial straits. This imbalance places immense strain on “pay-as-you-go” pension systems, where current workers’ contributions fund current retirees, forcing governments worldwide to confront the politically fraught issue of reform. The unpopularity of raising the retirement age often compels new administrations to push through such changes swiftly, hoping the initial public outcry will subside over their term.

The reasons for this global shift are clear. People are living longer due to advances in healthcare and improved living conditions, leading to extended retirement periods. Simultaneously, falling birth rates mean fewer working-age individuals are contributing to the pension pot. This combination of factors creates significant financial deficits, threatening the long-term sustainability of national pension schemes. Increasing the pension age is seen as a necessary, albeit painful, lever to reduce the duration of pension payouts and extend the period of contributions.

Across the world, numerous countries have already implemented or legislated increases in their pensionable age. France, in 2023, controversially raised its retirement age from 62 to 64, a move aimed at stabilizing its pension system. Denmark is set to have one of the highest projected retirement ages, reaching 70 by 2040, having formally linked its official retirement age to life expectancy since 2006. Singapore is progressively raising its retirement age to 65 and re-employment age to 70 by 2030, with a notable survey indicating significant public support for these changes among its senior workers. The UK continues to review further increases, with some projections suggesting a state pension age of 71 by 2050. Brazil, Australia, and even China, in its first such increase in many years, have also recently implemented or announced higher retirement ages. Many OECD countries, including the Netherlands, Portugal, Spain, and Sweden, have adopted similar measures, often pegging increases directly to life expectancy to depoliticise the issue.

However, the necessity of these reforms does not diminish their unpopularity. Raising the pensionable age almost universally sparks public opposition, protests, and social unrest. The reasons are deeply rooted in a sense of fairness and quality of life. Many workers, particularly those in physically demanding professions or who began their careers early, perceive it as unjust to be compelled to work longer, especially if their health or job prospects are already precarious. Opponents argue that working longer encroaches upon a “dignified senior life,” reducing time for family and leisure. A lack of transparent public consultation or a perceived unilateral imposition of reforms can further erode public trust, as dramatically exemplified by the widespread and often violent protests in France in 2023. Unions organised mass strikes, bringing public services to a standstill, yet President Emmanuel Macron’s government pushed the reform through using special constitutional powers. Even in economically healthy Denmark, the planned increase to 70 has sparked union-backed protests, with opponents decrying it as “completely unfair”.

The ongoing situation in Mauritius vividly illustrates this dynamic. The Mauritian government’s proposal to raise the pension payment age from 60 to 65, unveiled in the 2025/2026 budget, has met with public outcry. This measure, part of a broader economic reform package aimed at addressing the island’s demographic and financial challenges, is intended to ensure the long-term viability of the pension system in a rapidly ageing population and challenging economic climate.

Recognizing the intense backlash, a ministerial committee, chaired by Paul Bérenger in the absence of Prime Minister Navin Ramgoolam, met to consider attenuating measures. Discussions focused on potential exemptions for individuals whose health prevents them from working beyond 60, as well as for those in particularly arduous professions. Sugar industry labourers, whose work is physically demanding, and transport sector workers and other manual workers, facing arduous conditions, have been mentioned as candidates for such derogations. The report from these discussions will likely be put to the Cabinet, with a special session to be chaired by PM Ramgoolam next Monday to “finetune” the budget points and potentially announce complementary measures for the Basic Retirement Pension (BRP) for the most vulnerable.

Trade unions are mobilizing against the pension reform. The General Workers Federation (GWF), along with other trade unions, has vehemently rejected the changes. The GWF president condemned the decision as “unjust, taken without consultation,” noting it wasn’t in the government’s electoral manifesto. He argued that the universal pension is a fundamental social contract that shouldn’t be unilaterally altered, especially as it disproportionately affects vulnerable workers in physically demanding jobs like factory workers, drivers, and public service employees. He also criticized the influence of external rating agencies like Moody’s, suggesting an economic agenda dictated from outside at citizens’ expense.

Different governments employ various strategies to manage these crucial, unpopular reforms. Gradual implementation, phased over years or decades, is a common tactic to allow for adjustment and reduce immediate shock. Linking pension ages to life expectancy aims to depoliticise the issue and create an automatically adjusting system, as seen in Denmark. Some governments, like Singapore, offer comprehensive reform packages that include incentives for working longer, re-employment opportunities, or protections for vulnerable groups in arduous jobs. Effective communication and public engagement are paramount, as building trust and explaining the necessity and equity of reforms can lessen resistance. Conversely, a perceived lack of transparency or unilateral action, as witnessed in France can exacerbate protests. Fiscal management and economic context also play a role; reforms during strong economic growth may be more palatable due to the ability to offer compensatory measures. Furthermore, addressing concerns about older workers’ health and work-life balance through adaptable work environments and training can support longer working lives. Finally, prioritizing social dialogue and consensus-building with trade unions and stakeholders, though challenging, often leads to more sustainable outcomes than imposed changes.

The demographic imperative for extending pensionable ages is undeniable, yet the political and social challenges remain immense. Governments face the unenviable task of balancing financial sustainability with social equity and public acceptance. Mauritius’ current struggles with pension reform highlight this global problem: how to manage strong public opposition while building a sustainable system for the future. While increasing the pension age might fix a government’s finances and address the sustainability of the pension system, its ultimate success depends on thoughtful implementation, particularly by engaging the public and allowing exceptions for vulnerable groups. Neither our dire financial straits nor Moody’s ratings can be dismissed, and no reform will get unanimous consent, but the way forward is to find without undue delay a consensus that is acceptable for government and key stakeholders.

Mauritius Times ePaper Friday 13 June 2025