Like most young people, I don't often think about being old. When I do squint into my distant future, I imagine that, sure, years of freelance online journalism will somehow have paid off heartily. One in five 18- to 30-year-olds don't think that there'll be that weekly £155 state pension for them when they retire, though, and every few months we seem to read another story about the retirement age creeping up, presumably in line with life expectancy rising. But we don't tend to hear about what would happen if there wasn't any actual retirement towards the end of working life.
On a recent episode of BBC podcast The Inquiry, economist David Blake said that the western world's huge promises of comfortable retirements to successive generations has made US and UK governments "insolvent". Even as they push back the retirement age to keep people paying in for longer, the root of the problem is an aging population. "The growing population of pensioners is being funded by a relatively shrinking number of people in employment", says Paul Sweeting, a University of Kent actuarial science professor. "Something will have to give, and ultimately it's likely to be the universal nature of the state pension."
The idea of retirement, invented in Germany in the 19th century, is a relatively new one compared to how long old people have just been expected to break their backs in the fields until they drop. We don't have any legal right to retirement, Sweeting says. "State pensions are just like any other benefit, which means the terms can be changed. Whether there's a moral right for retirement and a state pension is another matter."
So where does that leave those of us who are in their early days of work now? With an overwhelmed state pension, people may still be able to rely somewhat on their workplace pensions, which are being encouraged by the government through the current auto-enrolment scheme. But this may not be enough to retire on alone. The current minimum investment is just 3 percent, shared by employer and employee. According to one calculation by the Chartered Institute for Securities, young people will have to set aside £800 a month over 40 years to retire with £30,000 income a year. To do that, you'd need to be paying in 5 percent of your salary, matched by ten percent from your employer, with a salary of 60 grand. A reach.
Are we all just arrogantly indifferent to the idea, like that FT article suggests, spending our money on iPhones and holidays instead of looking ahead? It's not so simple. As well as having more pressing financial concerns that previous generations haven't had to face – student debt, an inaccessible and inflated housing market, relatively lower wages for skilled work – pensions just don't appear to be a trustworthy option. The problem may have started with George Osborne exploiting pensions as political ammunition, making grandiose claims to current older voters with little thought to the long-term consequences for everyone else. While pensions are still the most sound way to look after your future, Leeds University associate finance professor Iain Clacker says that tabloid coverage of the fall-out means that "people have been hearing that pensions are bad value for money for a long time, and so this becomes the prevailing view. It is really quite a complex system when trust is added: you have to trust your employer, the government, and also the people who manage your money."
If none of us are paying in enough, and our state pension seems like a pingpong ball in a political war, what is going to happen when we turn 65 and have peanuts to our names? One answer is that we are all simply just going to have to keep on going. "I think increasingly what we're going to see is an expectation that people will work longer," says Dr Liam Foster, a senior social policy lecturer at University of Sheffield. "There's going to have to be an emphasis on retraining and new skills and providing more opportunities for old people to work. The population over 65 is going to grow twice as fast as the working population, according to the Office for National Statistics, so it'll account for 24 percent of the UK population by 2027."
That will translate into a whole lot of 70-year-olds hanging onto jobs further down the line. What that would mean for future graduates entering the workforce relies on unpicking something called the "labour lump" – an economic myth, where we're told there are only a certain amount of jobs to go around. "The reality is very different," says Nicholas Barr , a professor of public economics at LSE. "If a country has a well-functioning labour market, the effect of a gradual increase in pension age leads to a gradual increase in the size of the labour force." In short, more people in work could be a good thing. While this might be true, Clacker says this expansion "isn't always a smooth or quick process. So in the short-run, there are going to be some distortions and these have consequences, and younger workers are probably a group that will experience some of the pain of this".
And for those who just can't work any longer, what happens then? "No government in a rich, or even middle-income, country can countenance serious and widespread elderly poverty," says Barr. Every expert I talked to spoke about the possible shift of the burden of pensions away from National Insurance payments to the welfare system. This ultimately means using means-testing to make sure that tax money goes to the elderly people that need it, whether they've saved enough or not.
But, given the overwhelming pressure on the welfare system at the moment, it may not be wise to entrust our fate in the hands of a government that doesn't seem willing or able to provide for everyone. "What I've found," says Foster, "is that many younger people in lower-paid jobs are saying, 'Well, the state are going to have to provide something for me aren't they? They aren't going to let me starve. There has to be something.' But goodness knows how much it'll be or when you'll get it."
You've got to trust someone to look after you when you're old and grey, and if you don't want to put your faith in career politicians making pension policies fit for a five-year term, then put a little faith in yourself. Pensions don't make for the most exciting chat, but if we don't set our own money aside, there may be nothing else to help.
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