We Have to Face Up to the End of Retirement

Written by Henry Hill | 11 December 2011
Posted in Comment - Britain

Photography: Nick AtkinsThe other week, I was invited to be part of the panel on BBC 5 Live’s Tony Livesey show. The panel comprised a mixture of public and private sector workers, a couple of students, jobseekers, and me.

There was one point in the show that really irked me. A teacher representing the trade union activists who were due to go on strike at midnight that night countered one of my arguments by saying that he was striking for “people like me”. By this he meant ‘young people who are going to have to work longer than us for smaller pensions.’

Thing is, I couldn’t see any injustice in my generation having to work longer. We’re going to live longer, too. It is absurd to suggest that the generation graduating university in 2011 should be expected to retire at the same age as people who entered the job market in the Sixties and Seventies.

Yet that is precisely what this man was proposing: regardless of advances in life expectancy and medical science, each generation should demand to spend no more time in work than the preceding one and each should enjoy a longer and longer retirement.

That is a dangerous fantasy. One thing that myself and several other young members of the panel agreed on was that most of our generation is not going to get to retire. It is going to become increasingly impossible to save up enough over the course of a current working life to retire in your sixties with an annuity worth a damn.

Instead, most of us will be working into our seventies and eighties, maybe our nineties. Will that be so terrible? In the half century between now and then medical science will have advanced in leaps and bounds. In all likelihood our seventies will be as unrecognisable to the baby boomer generation as their fifties and sixties are to their own parents.

The fact is that science is keeping us younger longer. That’s progress, and a great thing. Yet we cling to a model of social provision that was designed in the late Forties. For all that unions and parties of the left may call themselves ‘progressive’, there are few sights more conservative than watching them ferociously resist updates to post-war legislation. But it has to happen.

The pension was designed to be a small boon to carry people from the end of their working lives to the grave; less a safety net than a stretcher. When it was implemented the number of people reaching it was relatively low and few people claimed it for many years. It was pitched at roughly the age when people of that era who survived that long were physically incapable of work.

Yet as our life expectancy grew, we refused to modify this plan accordingly. Instead, the pension mutated from a small boon to the elderly into a huge entitlement. We practically invented the concept of a long retirement as our lifespans came to rapidly outstrip the retirement age.

This is compounded by the fact that any changes to new pension provision will take decades to filter through the system. Any government that tries to undertake necessary pension reform without hitting current policy holders will face all the political difficulties (you can count on the unions to strike for their would-be colleagues) while implementing a partial solution that could take fifty years or more to implement.

The solution is that the government must fundamentally rethink its approach to pensions. It should shift from being seen as an entitlement you reach at a certain fixed age and become a benefit tested against an individual’s personal circumstances.

In short, the very idea of ‘the pension age’ should be abolished. State pensions should become a benefit and be seen as such – when age renders you unable to work, you receive the pension as an out-of-work benefit if you cannot get by on your own means (the idea of universal benefits will probably not survive the arrival of economic reality either).

This fundamental reform will be tough. Tougher still will be getting it past the unions, but that will have to happen. If the country is to avoid going under completely then there are currently millions of public sector workers holding generous pension schemes they won’t end up receiving. Most likely the schemes will be pared down and employee contributions will rise to something close to parity with the private sector.

That will hurt. But the era when the British public could use borrowed funds to bridge the gap between acceptable taxation and expectation is over. Key to creating a long-term sustainable future for this country will be weaning younger generations off of supposed entitlements that the post-war generations ended up taking for granted. The idea that we should be entitled to stop working after an arbitrary point and enjoy decades out of work at the taxpayers’ expense is just one of them.