80 the new 65? Retirement age needs radical adjustment, says AIG boss

American International Group Inc. Chief Executive Officer Robert Benmosche said Europe’s debt crisis shows governments worldwide must accept that people will have to work more years as life expectancies increase.

“Retirement ages will have to move to 70, 80 years old,” Benmosche, who turned 68 last week, said during a weekend interview at his seaside villa in Dubrovnik, Croatia. “That would make pensions, medical services more affordable. They will keep people working longer and will take that burden off of the youth.”

The crisis, now in its third year, threatens to destroy Europe’s 17-nation currency union as Greece contemplates exiting the euro and Spain sees its bond yields rise and banking industry falter. German Chancellor Angela Merkel hardened her opposition to joint debt sharing in the euro region as U.S. President Barack Obama singled out Europe’s leaders for not doing enough to arrest the crisis.

Greece abandoning the euro could be a disaster for the country and Europe must work to keep that from happening, said Benmosche, whose company was the world’s biggest insurer before it took a U.S. bailout.

“People in Greece have to see there is no easy way out of this” and the government must get them to work longer, he said in the June 2 interview on the Adriatic coast. “If not, and if they go to their own currency, I think they will see huge inflation and it will be devastating for people on fixed incomes.”

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Greece, where the average life expectancy is 81.3 years, has an effective retirement age of 59.6, among the lowest in Europe, according to data compiled by Bloomberg. French President Francois Hollande, the Socialist who was sworn in last month, has pledged to cut the retirement age to 60 from 62 while increasing corporate and bank taxes and introducing a 75 percent levy on earnings of more than 1 million euros ($1.2 million).

Peter Hancock, CEO of AIG’s Chartis property-casualty unit, said last week the insurer has assigned staff from Argentina to advise their counterparts in Athens as the company prepares for a possible Greek exit from the euro, with the common currency at its lowest against the U.S. dollar since June 2010. Argentina defaulted on a record $95 billion of debt in 2001 and later abandoned a decade-long 1-to-1 peso peg to the greenback.

“We have gone through the crisis in Argentina and other countries over time, so we have experience there,” Benmosche said.
—Bloomberg News–

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