Wednesday, June 3, 2009

Working Life and Pensions

Even before this recession and remarkably quick deterioration in government finances, there was a compelling argument to increase the retirement age.

The reason for increasing the retirement age was:
  • Increase in life expectancy. Current retirement ages were set many decades ago, when life expectancy was much lower.
  • Demographic changes that increase the proportion of retired people. See: Demographic Time Bomb
  • Increasing retirement age and maintaining reasonable state pension is more attractive than the alternative of increasing taxes or cutting spending.
In the next few decades there is every chance that life expectancy will continue to rise. If in a few decades people are living to 110, 120, how can we afford a retirement age of 65?

The government need to automatically set the retirement age against changes in life expectancy. As life expectancy rises, the retirement age should automatically rise. The current state of government finances only increase the urgency of this.

The government may be emboldened by A Financial Times/Harris survey of 1,126 adults in Britain which found that 60 per cent of respondents would support working beyond the current state pension age in order to receive a bigger pension. (opinions shift to working longer at FT)

Other issues
  • We may need to change our attitudes to a cut off point moving from working full time to being full time retired. Many there is more scope for older workers working part time.
  • The government also need to deal with the current means tested pension credit which is a disincentive to save for a private pension

1 comment:

James said...

It has become an axiomatic statement that "people are living longer" and whilst this may be statistically true, I'm not sure that it is functionally as simple as that.

Perceived shorter lifespans in the past are to a certain extent due to higher infant mortality in the past.

Secondly modern high age expectations are skewed by the number of people being kept alive way beyond their natural, in care homes: people with long term degenerative illnesses such as dementia or even just extreme frailty.

I am keen to know whether people really ARE living longer FUNCTIONAL lives. Or is the average being skewed upward for the above two reasons?