The option to transition into  retirement through phased retirement encourages older workers who  might otherwise retire immediately to continue working. Delayed  retirement may help alleviate pressures on national pension systems and  address labor shortages and shortages of skilled workers. Sources of Retirement Income

Similar to the United States, the retirement systems in other developed  countries consist of three main pillars: a national pension, similar to the  U.S. Social Security program; workplace employer-sponsored pensions  or retirement savings plans; and individual savings. Based on a  review of relevant research, studies, and interviews, we determined that  phased retirement programs in these countries were established in  several ways: (1) through national policies including legislative actions  and specific programs that encourage phased retirement; (2) at the  industry or sector-level through collective bargaining agreements that  cover specific occupations or sectors; and (3) by individual employers. Selected Countries’ National Policies Were Generally Designed to Encourage Phased Retirement, and Individual Program Design Aspects Vary

		Selected Countries Employ Various Strategies to Encourage Phased Retirement

The national policies implemented in our four case study countries— Canada, Germany, Sweden, and the U.K.—currently, are mainly  designed to encourage older workers to remain in the labor force and  continue to earn and contribute to their pensions, and often, share their  institutional knowledge with younger workers, according to the officials,  experts, and employers we interviewed. As shown in table 2, the four countries reported having made efforts at  the national level to encourage phased retirement, including implementing  national policies and programs that involve public subsidies, tax  incentives, or changing pension rules to allow individuals to receive partial  pension benefits while continuing to accrue benefits in the same pension  plan. Role of collective bargaining. For example, German  experts told us that, in Germany, workers participating in the national ATZ  program can reduce their work hours by 50 percent. Workers in Sweden can also  supplement any reduced income with national pension benefits. Even with Unique Considerations for the United States, the Experiences of Other Countries with Phased Retirement Could Inform U.S. Efforts Differences in Institutional and Employer-Specific Factors May Affect How U.S. Efforts to Provide Phased Retirement Can Be Informed by Other Countries’ Experiences

Institutional and employer-specific factors in other countries, which shape  the design of phased retirement programs, typically differ from the  institutional environment experienced by many U.S. private sector  employers, although they may be similar to those common in U.S. public  sector employment. Challenges identified by the programs in our case study countries can  provide helpful insights into areas of concern in designing phased  retirement programs in the U.S.
A Unique Consideration for U.S.  Companies Wishing to Offer Phased  Retirement: Nondiscrimination Laws  In June 2017, we found that U.S. industries  with skilled workers or with labor shortages  also have motivation to offer phased  retirement programs, in part because their  workers are hard to replace. A union representative in Germany noted that employers there  may set restrictions or caps on participation, such as 3 percent of the  workforce, or an employer may effectively cap the extent of participation  by restricting the program to a budgeted amount of funds. Employers in  the U.S. could explore whether using a similar approach regarding the  scope of a phased retirement program, taking into consideration any legal  concerns or other practical challenges, could help them to control the  number of workers participating in phased retirement programs. For example, one said that phased retirement  provides more choice for workers, another noted that phased retirement  allows workers to continue to work at reduced hours until they reach the  statutory age to receive a national pension, and a third mentioned that  such programs reduce the burden for workers who cannot or do not want  to work full time. In addition, the U.K. allows workers to draw a portion  of their plan benefits—with 25 percent being tax-free—and one U.K.  employer we spoke to allows continued contributions to those plans. Appendix I: Objectives, Scope, and Methodology

This report examines (1) the extent to which phased retirement exists in  other countries with aging populations, (2) the key aspects of phased  retirement programs in selected countries, and (3) the experiences that  other countries have had in providing phased retirement and how that can  inform the U.S. experience. In addition, we conducted  literature searches and reviews to identify countries with phased  retirement programs aimed at extending working lives of older workers as  well as to assist with knowledge transfer from older workers to younger  workers. For the case  studies, we conducted interviews with government officials, program  administrators, employer associations, unions, and employers to obtain  in-depth program information and to learn about their experiences with  phased retirement. United Kingdom (cont.)
Why GAO Did This Study

In response to an aging workforce, countries around the world have developed policies to encourage older workers to work longer to improve the financial sustainability of national pension systems and address shortages of skilled workers. Phased retirement is one option that can be used to encourage older workers to stay in the workforce. GAO was asked to look at phased retirement programs in the United States and other countries. In June 2017, GAO issued a report (GAO-17-536) that looked at phased retirement in the United States, where formal phased retirement programs are as yet uncommon. This report looks at phased retirement in other countries.
Specifically, GAO examined (1) the extent to which phased retirement exists in other countries with aging populations, (2) the key aspects of phased retirement programs in selected countries, and (3) the experiences of other countries in providing phased retirement and how their experiences can inform policies in the United States.
GAO analyzed relevant data, reviewed academic research, and conducted interviews to identify countries with phased retirement, and selected four countries with national policies permitting phased retirement programs with broad coverage for case studies. GAO also conducted interviews with government officials, unions, employer associations, and other experts.

What GAO Found

GAO's review of studies and interviews with employment and retirement experts identified 17 countries with aging populations and national pension systems similar to the Social Security program in the United States. These countries also have arrangements that allow workers to reduce their working hours as they transition into retirement, referred to as “phased retirement.” Phased retirement arrangements encourage older workers who might otherwise retire immediately to continue working, which could help alleviate pressures on national pension systems as well as address labor shortages of skilled workers. The17 countries had established phased retirement programs in different ways: at the national level via broad policy that sets a framework for employers; at the industry or sector level; or by single employers, often through the collective bargaining process.
GAO's four case study countries—Canada, Germany, Sweden, and the United Kingdom (UK)—were described as employing various strategies at the national level to encourage phased retirement, and specific programs differed with respect to design specifics and sources of supplemental income for participants. Canada and the U.K. were described as having national policies that make it easier for workers to reduce their hours and receive a portion of their pension benefits from employer-sponsored pension plans while continuing to accrue pension benefits in the same plan. Experts described two national programs available to employers and workers in Germany, with one program using tax preferences. Experts also said Sweden implemented a policy in 2010 that allows partial retirement and access to partial pension benefits to encourage workers to stay in the labor force longer.
Even with unique considerations in the United States, other countries' experiences with phased retirement could inform U.S. efforts. Some employer-specific conditions, such as employers offering employee-directed retirement plans and not being covered by collective bargaining are more common in the United States, but the case study countries included examples of designs for phased retirement programs in such settings. Certain programs allow access to employer-sponsored or national pension benefits while working part-time. For example, experts said the U.K. allows workers to draw a portion of their account based pension tax-free, and one U.K. employer GAO spoke to also allows concurrent contributions to those plans. In addition, experts said that certain program design elements help determine the success of some programs. Such elements could inform the United States experience. For instance, U.S. employers told us that while offering phased retirement to specific groups of workers may be challenging because of employment discrimination laws, a union representative in Germany noted that they reached an agreement where employers may set restrictions or caps on participation, such as 3 percent of the workforce, to manage the number of workers in the program. Employers in the U.S. could explore whether using a similar approach, taking into consideration any legal concerns or other practical challenges, could help them to control the number of workers participating in phased retirement programs.

What GAO Recommends

GAO is not making recommendations in this report.