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Monday, August 16, 2010

The cost of aging

This morning's Telegraph outlines some of the stark choices facing government over the next few years as they seek to curb growing spending pressures and cut back on the £800 billion debt inherited from Labour.

A Pensions Policy Institute report has concluded that the pension age will have to rise from 65 to 72 in order to keep Government costs at levels experienced a generation ago. The think tank believe that it is unfair and expensive for workers to retire at the same age as those born decades before them, as life expectancy is increasing substantially. But it also warns that poor people do not live as long as the rich, and suggests that they should therefore receive more in their state pensions:

The independent think-tank recommends that ministers highlight the increased longevity of Britons rather than cost savings when trying to sell the policy.

It says that because people are now living much longer while the pensionable age has remained the same, they spend a far greater proportion of their lives in retirement than previous generations.

In 1950 men spent just 18 per cent of their adult lives in retirement, leaving the workforce at 67.2 and likely to live another 10.8 years.

By 1980, however, men were spending 23.5 per cent of their adult lives receiving a pension and the figure is now close to 33 per cent.

The PPI says that to keep costs down to 2000 levels, the pension age would have to rise to 68 by 2030 and to return expenditure to 1981 levels it would have to go up to 72.

“This would represent a substantial increase in the SPA over a relatively short time-frame.”

Some interesting ideas here, especially with regards to paying a higher pension to unskilled male workers. I am not sure though, whether such a regime would pass muster under current anti-discrimination laws.
Doesn't taxation deliver differential benefits to the poor anyway. A high personal allowance (Lib Dem policy) is of greater proportionate benefit to the poor, not just manual workers.
The problem has been that previous administrations haven;t highered the retirement age with increased life expectancy. Unfortunately, this would disadvantage the Welsh People since they have a much lower life expectancy than our English cousins across Offa's Dyke.
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