Hurrah, Hurrah!

Finally, something really eminently sensible from politicians:

The age for retirement will rise every five years under radical moves by the coalition to curb the £55 billion-a-year state pension bill.

New laws are expected to be introduced in this Parliament that will link pension payments to life expectancy for the first time, senior government sources told The Times.

It would mean that in just 25 years time the pension age will have risen to 70, affecting all workers now aged 40.

And it should probably be higher than that too: 75 perhaps.

The state pension is a form of social insurance: insurance against outliving your rational savings. Not a form of assurance, a way of saving for something which is likely (or certain) to happen. As such it should be paid at around and about the average lifespan.

You can retire when you want to, entirely up to you: but the state pension kicks in as a form of insurance, at around the average life span.

They\’re getting there…..

10 thoughts on “Hurrah, Hurrah!”

  1. BTW, this is just going back towards the roots. When Bismarck’s “Staatssozialismus” introduced the world’s first Old Age Pension program, the retirement age was set at 70 years. The life expectancy for the average Prussian was 45 years.

    Now, modern productivity improvements enable us to close this gap, but still, there needs to be a link between life expectancy and retirement age. Or a corresponding increase in productivity. Trying to deny this is just fooling ourselves.

    Yeah, I’m trying to get used to the idea that I was fooled when I was 20 or 30; now at the age of over-40, I’ll need to stay alive yet about 30 more years before I can retire.

  2. One thing the State could do is make the payout actuarially sounder, so that people can choose to retire later in exchange for a higher State pension. Get the sums right, and it should be possible to cheapen the bill as well as encouraging people to stay in some form of work for longer.

  3. “One thing the State could do is make the payout actuarially sounder, so that people can choose to retire later in exchange for a higher State pension.”

    Phil, it already does. Every year of postponement of the claiming the State Retirement Pension secures something like a 10% increase when you do claim it.

  4. As someone who hopes to collect his state pension next year, I’m rather hoping that they don’t up the retirement age too soon.

    Last year I did the exercise of finding out how much my various pensions would be worth and part of the information I turned up was that I had been paying into my state pension for well over forty years.

    Now if I’d paid the same percentage of my salary into a private pension I would almost certainly be better off, but because the managers of the state pension ran it as a ponzi scheme and totally mismanaged the assets, I am being both blamed and penalised for their criminal negligence.

    I feel some sympathy for those younger people who will have to pay extra to pay back the money I have invested in the system but my sympathy is tempered by my desire for justice.

    If politicians and civil servants have squandered the money that I was forced to invest then they should be treated like Madoff or any other swindler. Jail them.

  5. Entitlement to the full state pension should also be more closely coupled to the record of National Insurance contributions. A very patchy contributions record still gets you pretty much all of the full state pension at 65. It never should have.

    Now, if the state have to make difficult choices, the politicians need to admit that for many decades they have been lying to all of us, and now they are not going to meet some of their previous promises. Some of us will have to be disappointed.

    Should they disappoint those who were reliable contributors, or those who were freeloaders?

  6. No one seems to realise what the Institute of Directors is trying to do. They want the pension age to rise – to what? 90? This will make all the people who would have retired try to crawl into non-existent jobs, which will lower the jobs market generally until we all have to accept starvation wages or jobseekers allowance of £65 a week. They have of course stitched up their own pensions so that they can retire at 50 onto their luxury yachts. The best hope for future would-be pensioners is to commit some offence which will get them a prison sentence – not hard in view of all the new laws passed by the last government. There is little to choose between jail and a modern care home; the only difference being that one is free and the other costs up ton £700 per week.

  7. Reading some of the comments here it seems that some people don’t understand the pensions system.

    pjt: At least you can be happy that you are living longer. If you are thinking that far ahead to your retirement either you are a super planner or you are pissed off with your job. Anything can happen in 30 years.

    Kevin_B: Seems like you haven’t heard the news. The retirement is still going up slowly. An increase of a year long every 5 years. It won’t affect you at all.

    Monty: It’s not your money that you put into the pension pot which you get out at the end. It’s the current taxes of the younger workers who are paying for your pension now. Part of the increase in retirement age is because all you baby boomers are coming up to retirement and living longer and there aren’t enough young people to keep paying the taxes required to pay for your pensions. Look at the population age chart

  8. If you actually do the sums, you will see that this proposal is just another stealth tax and totally unnecessary at this point in time – we are already experiencing the phased introduction of a retirement age for women that will put both sexes on an equal footing at 65 years.

    The requirement for pension age increases can arise for a variety of demographic reasons; this apparent crisis – as usual – is blamed on that large greedy immediate post-war generation that is about to age into retirement (how dare it!), coupled with the normal trend of increasing life expectancy which has been with us for over a century now.

    But if you examine the current dependency ratios for the UK you will find that they are far lower than should be expected from a well balanced population experiencing the current UK age specific mortality rates. This is because the large number of ‘baby boomers’ are mostly still in employment and still contributing wads of cash to the Treasury through National Insurance at a time when the pension outlay is comparatively small – if this surplus money were to be ring-fenced for pensions there would be no cash shortfall for pension provision for at least another 14 years (and maybe not at all afterwards); but there could be a potential problem until 2053, as those born between 1960 and 90 age into retirement. But the dependency ratio will fall back again in time – will the Government also give an undertaking to reduce the retirement at this stage?

    Increasing life expectancy will require an increase in retirement age during the Century. Raising it early on in the next decade to 67 for both sexes would more than likely take the sting out of both these problems.

    So let’s have more balance and less wild estimates of a retirement age of 75. Nor should the Government see those approaching retirement as a potential source of revenue. They have dutifully paid their contributions during their working lives; it is for the Government now to fulfil its side of the bargain.

  9. This is one of those “works in theory, but not in practice” ideas.

    Many of those between 65 and 75 would not easily be able to re-enter the workforce. Many have chronic medical conditions likely to be made worse by the stress of a job, others would simply suffer from age discrimination, and having been out of the workplace for too long. So you’d only end up transfering the money given to them by the state from the “pensions” budget to the “benefits” budget, and in the process add to the administration required as well as probably ruining lives through stress. At the same time you are also going to deprive numerous voluntary organisations of volunteers and take away a large group of people providing child care

    If you do it gradually you can smooth things over a bit but you are still faced with the main dilemna; people between 65 and 75 are quite likely to develop chronic conditions that rule out some particular jobs.

    So the only way you can do it in a sane manner is via a long term transition process that gradually raises the age for eligibility, and at the same time prepares those in work for the change by promoting private pensions, income protection insurance (for those who develop medical conditions) and explicitly making it clear that this is what you are doing. You also need to eamine what changes in employment law and taxation are necessary to encourage part-time vacancies and change the benefits system to allow far greater flexibility for those who can’t work full time, but are more than capable of some part time work.

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