Tuesday, May 05, 2009

Retirement Age To Be Moved To 70?

I have just had a quick read over at the Telegraph and I see that it is being mooted that the retirement age may be put back to 70.

It is an interesting subject, because I suspect it is less likely that you will find consensus through political party allegiance, and more likely that your age will bind people to similar opinions.

I will be 30 in a few months, and as an aside, perfectly fine with that... my hair started retreating at 19 so there is nothing too terrifying about turning three-O. Anyway the idea of working to 70 is not one that I am scared of or would object to. In fact at 30, with no savings, loans and credit cards, and a poor mortgage market, I have not got onto the housing ladder yet. If I was to take a higher rate deal now, I may well have to look at a 30 or 35 year term. Now, of course it is unlikely that I would stay on one mortgage for that whole period, but if I did, I would be 65 by the time a house was potentially paid off. What scares me is not having gainful employment until I am 70.

Ask me again in 10 years to put back retirement I will probably not be happy as I will probably be balder, poorer and moodier. 10 years later still, and you have no chance.

I am guessing that any readers pushing passed 50 would be against putting their retirement back - And I would support your protest, as you will have spent many years working towards the goal of retirement and it would be cruel to add five or more years to that. I am not advocating that.

As a nearly thirty something I would not be against putting back my retirement now. But it would need to be now, before I have lifelong financial plans and have picked out a retirement fishing boat.

My problems are as follows. Firstly, the Chancellor recently admitted that the 50p tax bracket at £150k was plucked out of the air. Like so many Government numbers I have no trust of them or the calculations... So a public or independent review is needed - and fast. Secondly, my working longer does not address the pressures on the current pension demands. I see three big pressures on the current pension pot:

1. The baby boomers retiring. And they are retiring now. They are entitled to their pensions after a life of hard work. But many having worked 40 or so years could be drawing pensions for 40 or more years now. The current system was not designed to support so many for so long.

2. The EU. In a draft version of EU Constitution from 2003 that I recall reading, pensions were to be pooled across the whole of the EU. At the time [I think] the UK was the only country that was saving ahead of the baby-boom retirement period. Subsequently this 'competence' was dropped, but the EU looked once and may again look to "pool" the retirement funds of the EU at a later date.

3. The biggest of all, this Labour Governments spending and debt. Every house in the country is currently committed to service £24k in government debt. The size of Government has almost consistently grown since the end of World War 2, as have the costs. You want me to work longer, start putting political candidates in front of me, and the electorate, who are prepared to reverse this trend.

As mentioned, there is the case that people retiring today will live longer than people who retired when the current age limits were set, and as time goes by we will witness more and more advances in science, diets and medicine extending life expectancies further. I haven't done the maths, but where the baby-boom generation will eventually pass, there is also the future pension requirements from an increasing population of which is increasing through immigration. Today's shortfalls need to be met with reductions in state spending elsewhere.

It is hard to argue that a pension offers a livable amount of money, but this will get worse and worse as time goes on unless we put the retirement age up. I am instinctively for free-market solutions, but I still think that as a society we need to provide a decent pension and a decent health service via the state.

So, as long as it is not based on Alistair Darling's or Gordon Brown's sums, which neither I nor most people trust and if it is about helping other people, who are much closer and actually in retirement to get a livable pension I am open to the dialogue.

I am also for the idea that this needs to be debated as changes need to be phased in over a long period of time and will, or at least should affect people of different ages differently. I do not believe you can keep everybody happy with such a system; however, fail to engage with those it will affect and it will backfire and in 10 or 15 years the whole pension system could collapse.

What do others think?


subrosa said...

Don't forget Dan, us baby boomers paid into the pot for 40+ years and various governments used the money unwisely on occasion.

In my working life (I still work but in a different capacity), anyone over 40 stood little chance of a job, particularly women who had stayed at home to bring up children. Even after excellent retraining the magic 'no' was when employers were told they were 40 or older.

Now I have to work because Mr Brown has robbed me of the small luxuries which my savings interest used to buy plus of course one of my pensions is worth 33% than it was.

Please don't think I'm complaining because I know I'm so much better off than many but I do wonder who will employ 50+ year olds in the next 10-20 years. Maybe some will become motivated enough to start their own business - I've done that and don't regret it in the least. In fact it's fun and I only have myself to hold to account.

Daniel1979 said...

Absolutely Subrosa - My mum crossed the 60 mark this year and to be honest my parents have been misfortunate in life with a failed business and an endowment mortgage that promised something that could not be delivered. They cannot afford to retire before they are 70 to ensure their house gets paid off.

They did try late in life to get a pension built up, but what they did have was shattered when the markets dipped as my mum turned 60 in October when the markets had bottomed out.

I cringe when I think of their combined toil and the poor rates of pension payments that they get in return... I really do appreciate how hard people approaching retirement have worked. I was trying to convey that because of that I am happy to work longer for a better pension pot and to help others. But as you have succinctly described a huge problem; the unwise use of funds by successive governments and inevitably of future governments.

It is big issues like this that I think should be debated much more openly, because that way opinions get heard. I fear we will all end up with a prescribed, patched up pension system that does not come close to helping people as much as it could.

You might not need to be employed much longer - If your blog gets any more popular, you might find a few advertisers wanting to buy some space!

Tarquin said...

It's unlikely the baby boomers will be affected

As I understand it the retirement age already has been raised to 68 for those born after 1981 (I'm not 100% on the date)

Of course this system, while fairer, does not address the more pressing issue that baby boomers massively outnumber the under 40s and will increase dependency levels in about 10 years

Also interesting what Subrosa said - in my experience in applying for jobs a lot of office roles are off limits to younger people because the market is full of older workers who are experienced and a fairly mobile workforce

subrosa said...

Tarquin, I'm speaking about 25 years ago when I was responsible for the first ever pilot scheme in the UK for women returning to work so I was speaking mainly about women. Just a wee bit out of date aren't I?

That's interesting you find offices etc with middle aged people although, thinking back, that possibly was the case then. No point in running a business with youngsters straight out of school or university, it would be bankrupt within no time through their lack of experience I should think. Many office jobs are part-time so employers can save on NHI you could find.

Dan, I appreciate your parents predicament as I also lost £16,000 on endowment policies and haven't paid my mortgage off either. It's now on a interest only basis so really I rent a part of my home but it's worth it.

I'm pleased you feel you can work until you're 70 Dan, I certainly would have thought that when I was your age but I know now that working to that age would drive me to an early grave. I'd had enough at the age of 60 and was pleased to get out and continue my own business the past couple of years.

Tarquin I think the age was raised to 65 for women born after 1981 and 68 for men but I could well be wrong.

What I would say to the two of you, plan your pensions carefully, very carefully, but I expect you do that already.

Tarquin, I'm sure Gordon Brown was hoping this swine flu would clear half of us post war children off the face of the earth. He must be so disappointed his pandemic hasn't happened.

scunnert said...

Many of my contemporaries retired at 50 under thirty years and out pension schemes. I couldn't stand staying in one job that long so I missed out. I do have a couple of pension plans - one's doing alright but the other lost a lot of money in the last year. When I add on my state pension it would still be a pretty miserable retirement. Looks like I'll be working 'till seventy.

Letters From A Tory said...

I think we are screwed, well and truly screwed. The public sector has got to be massively cut down not just for annual spending decreases but also to shave the size of the pension pot that is already out of control.

Tarquin said...

ah fair enough

I think Gordon really wanted swine flu to actually become something - foot and mouth worked for him back n 07, got all excited with 'how to cover your nose' leaflets

tbh I doubt anything would save him now, but I'm sure he doesn't feel that way

Personally I am not concerned about my pension - considering the massive deficits now involved, I think the system won't survive the next 40 years anyway, oh and I'm unemployed...and in Australia

Actually, I don't think much will be around by then

Still, I feel we should abolish compulsory retirement ages now

Tommyboyjedi said...

I always figured I would die while holding a job, and that i would have no need for a pension. that may be short sighted, but with people living a more active life for longer is it really that suprising that the pensions are being looked at in this way?

I still dont really see the need for a pension tbh. I dont think i would want to stop working, sure I might want to setup my own business at some point, and probably will; but to stop working altogether? no, i dont think thats something i would want to do.

But who knows, im only 30. Either way, this government talking about pensions is like Homer Simpson talkinbg about doing a hard days work.. its all just hot air, with the debt they have given us, noone will have a pension.

Thats News said...

I met a formwr work colleague not long back. He took early retirement (good works pension) at 50 and now drives a taxi for 'pocket money' as he called it.

Had I been able to continue with that employer. I'd have bene able to do something similar, had my department not been closed down.