Retirement is a concept of the past

Opponents to the UK public sector strikes today are arguing that the public-sector workers all have fairly safe and secure jobs and get gold-plated pensions far higher than anything anyone in the private sector can expect. I heard on the radio this morning someone arguing that a teacher on £30k can expect a pension pot of over half a million pounds.

Supporters of the strike argue that there is a vast difference between the pension agreements of MPs and Whitehall mandarins and a frontline worker in a Job Centre. Also, they find it unfair that they signed up to a contract – that includes an agreed pension – and it is now being changed so they need to pay in more and work longer before seeing a penny. Public sector workers often argue that their pension is ‘deferred pay’ – they earn less in the present because they can get a greater pension.

There are examples supporting both arguments. It seems that never the twain shall meet. If you argue for reform, you are uncaring and not supporting the right of the public sector to expect the nice retirement they deserve for years of toil. If you support the public sector workers, you just fail to see the need for reform.

But isn’t the reality that retirement is no longer an option. It’s a dated concept. It’s something planned back in the post Second-World War era.

A male born in the UK in 1945 had a life expectancy of 63 years. A male born in 2001 had a life expectancy of 75. A male or female born today has a life expectancy of over 80 years (World Bank and UK Statistics Agency figures.)

With a retirement age of 65 in the UK, the state pension was designed to pay out a couple of years *after* the average male would have already died. Disregarding any tinkering with the retirement age and assuming it remains at 65 means the *average* person will have a couple of decades on state pension before they die.

If the state pension age had risen in line with life expectancy, people would not be able to claim a state pension until they are about 82 years old.

The unions don’t like this, and the employers (especially public sector) can’t face up to it either. The bottom line is that the post-war concept of retirement is not sustainable using the same methods to pay for it that worked 50 years ago. The entire system needs a top-to-bottom revision in both the public and private sector.

So the teachers can go on strike, and the government can hector them about needing to do something to help the reform, but the real reform is to wake up to the fact that we will all need to be working until later in life – unless you get rich early on and invest your wealth in paying for a future of leisure…
Car dumped in cemetery

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2 responses to “Retirement is a concept of the past

  1. Hi good post, surprised about the life expectancy jump from 2001 to 2011, that would indicate that the increase in life expectancy is increasing. Wow, i.e. the problem is getting worse and worse, unless we put the retirement age on a sliding scale as well.

    • Hi Rob, yes we are all getting healthier and living longer – on average. I have a lot of sympathy with those in the public sector who feel they are getting stitched up by the government… the coalition is certainly trying to force change faster than the previous administration. But then the government would argue in response that we all have our heads in the sand if we think it can just carry on as it is… really a difficult situation and one echoed across the wealth, developed, European nations.

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