The Effectiveness of Flexible Retirement in Promoting Older Workers’ Employment: Evidence from Singapore

Abstract

Flexible retirement is made possible by an agreement between employers and their employees to allow older workers to continue working while withdrawing some of their pension benefits. This study uses data from the Singapore Life Panel to investigate the effectiveness of flexible retirement in promoting older workers’ employment. Singapore revised the Retirement and Re-employment Act (RRA) in 2017, mandating employers to renew contracts for older workers up until age 67, and increased pension eligibility age from 64 to 65 years in 2018. These reforms made flexible retirement possible from age 65 to up until age 67. We find that the extension of legal employment protection reduced older workers’ unemployment rate by 5.8 percentage points and increased the likelihood of their working in their longest-held job by 11.4 percentage points. Access to pension benefits reduced full-time employment by 8.2 percentage points and increased the probability of part-time employment by 5.7 percentage points. Combining the effects from these two reforms, we find that flexible retirement has positive effects on total labor supply in Singapore, with clear implications for other nations facing a shrinking labor force in an aging population.

Keywords: Flexible Retirement, Pension Reform, Older adult, Singapore