Wednesday 30 September 2009

Andrew Harrop: "We need to have the average age of people retiring rising with life expectancy"

Andrew Harrop, Head of public policy at Age Concern and Help the Aged, stated that the average age of retirement should rise in step with life expectancy, at the 'Tackling Worklessness in an Ageing Society' Fabian Fringe event.

"We've had rapid growth, but we need to continue growing the over fifty work force at that rapid rate," explained Harrop. "We need to have, over time, the average age of people retiring rising with life expectancy each year."

Angela Eagle MP Minister for Pensions and an Ageing Society said that increasing life expectancies created by industrialised nations should be celebrated, instead of being viewed as a "demographic time bomb":

"When the Beveridge report created pensions, a man could expect to claim his entitlement to a pension for a year before shuffling off the mortal coil, now it's 20 and for women it's greater. We're expecting life expectancy to be going up even more, so this fact should be celebrated, and gets us away from regarding this as a demographic time bomb. We need to change our language on this, so we get away from it being a problem."

1 comment:

Cantab83 said...

The problem with raising the retirement age is that it is a difficult sell to the electorate. The only way you can garner support for such a measure is if you demonstrate that the rise is based on an objective statistic, and that there is some extra benefit that will accrue for the voter.

The first issue can be addressed by setting a target ratio for the average number of years a person works compared to the number they spend retired. Then ensure that as life expectancy increases this ratio remains unchanged. As this article suggests, this would mean that as life expectancy increases, so will the retirement age, but not necessarily by the same amount.

Currently life expectancy in this country is just under 80, and most people retire at 65, so the ratio is about 3:1. In other words, there are about three workers for every retired person. Most actuaries and economists think this is too low and is unsustainable. Raising the retirement age to 70 would increase this ratio to 5:1 which is closer to what is was in the 60s and 70s.

However, if the voters are to support this they need some sort of payoff in return. That means either higher state pensions or lower taxes. A hypothecated tax (National Insurance) then becomes the obvious vehicle to pay for it, and a doubling of the state pension the carrot.

By having a fixed ratio you also demonstrate to the electorate that the retirement age is set in an objective fashion that is free from government interference, and so also will be the pension provision.