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YOU may well die of starvation & almost certainly your children will, due to the failure of our Politicians to act responsibly & resolve the problems caused by Lloyd George’s 1908 Pension Act! …
Greg Lance – Watkins
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This May Well Be
the outcome of the UK’s 1908 Pension Act!
In 1908, the new chancellor of the Exchequer, David Lloyd George, announced plans to “provide an honourable sustenance to deserving old age”. The government would pay a state pension of five shillings a week to every citizen over the age of 70, excluding only drunks, criminals, lunatics and people earning more than £26 a year.
Five shillings, argued the energetic Welshman, would allow the elderly to contribute to the household budgets of relatives who took them in. It was not a great sum; but it would “lift the shadow of the workhouse from the homes of the poor”.
The fledgling Labour Party was furious. It protested that people would not live long enough to make a claim, and demanded that payments start at 60.
But Lloyd George knew how expensive even his more limited plan would be. It would cost £16 million a year, a colossal sum in that frugal age, and there was bound to be resistance. Sure enough, the ensuing budget was so controversial that it took a general election and a formal limitation of the powers of the House of Lords for it to take effect.
The numbers are worth pondering. When Lloyd George introduced his budget, life expectancy was 49 for men and 53 for women. Now, those numbers are 79 and 83 respectively, yet the state pension age has fallen to 66 for both sexes, equalisation having been demanded by the EU.
No one would design such a system today. If we had stuck to the actuarial formula of Lloyd George’s time, our retirement age could now be around 100. As late as 1945, the average man claimed his state pension for less than two years (the average woman slightly longer).
It is not just the span of our days that has lengthened. We are more active in old age, partly because of advances in medicine, and partly because we do less brutalising jobs.
Britain, like most countries, has so far tried to tackle the problem in two ways: either by hiking contributions or by hiking the retirement age. The state pension age will rise to 67 by 2028, and it is now reported that it will rise to 68 in 2035, earlier than originally scheduled.
I am in the age cohort that will be most directly affected by the change – that is, people in their early 50s. So let me say this loud and clear. The proposed rise is far too timid.
Most of us in our early 50s reasonably expect to be active for at least another 20 years. My maternal grandfather, who worked on the shipyards on the Clyde, never made it into his late 60s. Not untypically for a working man of his generation, he smoked heavily, and did a job that wore him out. My job, by contrast, involves sitting in front of computer screens.
As for my six-year-old son, who is gleefully pointing his nerf gun at me as I type these words, he might easily make it past 100 – possibly by many decades. True, the upper limit of the human lifespan has so far not risen with overall life expectancy. Those who hold the record as the world’s oldest person typically die at around 115 or 116. But that could very well change.
The venture capitalist Jim Mellon has studied the technologies that approach ageing, not as an inescapable condition, but as a disease susceptible to treatment. Why, he asks, should senescence be seen as inevitable? All of us are descended from single-cell organisms that were functionally immortal.
The private sector is currently investing billions of pounds into researching ways to slow or halt physical decline, including by preventing cell decay, the ultimate cause of all ageing.
Those clever investors might be wrong, of course. But even if we carry on with our current, more modest, increases in longevity, the existing model is unaffordable. A sharp decline in our birthrate from around 1970 means that the ratio of pensioners to workers will keep rising. The only way for the government to remain solvent is to bring its pension obligations into line with how we live now.
I am not talking only of the basic state pension. Public sector pensions, too, will need to reflect reality. On current projections, our main state agencies – in healthcare, education, policing, local government – may cease to be service providers and become pension providers. Their budgets will be swallowed up by obligations to long-retired workers.
What, then, is the solution? One option is to give the state pension age a hefty initial lift, and then let it rise in line with longevity. Sweden has a committee of actuaries who push the retirement age up automatically through a formula linked to life expectancy.
It was recently reported there that, exceptionally, the age may fall fractionally, reflecting the small dent that accompanied Covid.
But few people want to depend on the state in retirement. A wiser approach is to encourage private provision, giving people control over their pension pots.
This can be done either through incentivised savings or through mandatory contributions into competing pension schemes. Either way, the result is bound to be happier than the current system. If a private pension provider took as much in contributions as the state does, and paid out as little, its directors would be behind bars.
The trouble is that such a reform, though it would make both individual retirees and the nation as a whole better off, is hard to sell. When Peter Lilley was secretary of state for social security, he devised a scheme that would allow people to opt out of the state pension.
Knowing that anything he proposed was liable to be caricatured, he bent over backwards to emphasise that people could stay in the existing system if they preferred. It made no difference. Labour claimed that the Tories were planning to “abolish your state pension”, and duly won a landslide.
Raising the retirement age is just as unpopular. That EU-mandated equalisation of retirement ages led to the protest of the Waspi women.
What they were asking for was unaffordable – the equalisation had been the single biggest saving the British state had ever made – and the women had had since 1995 to get used to the change. But that did not stop Labour from promising to meet them half way in 2017 and, by 2019, pledging to give them their demands in full.
It is a global problem. Emmanuel Macron has been trying to reform France’s impossibly generous arrangements, but has no support in the national assembly, and faces mass protests backed by three quarters of the public.
The closest Vladimir Putin came to defeat was in 2018 when, hoping to use the distraction of Russia’s five-nil victory over Saudi Arabia in the World Cup, he sneaked out an announcement that the retirement age would rise to 63 for women and 65 for men. Putinite candidates were trounced in election after election until the strongman was forced to back down.
If a dictator who had, up until that moment, enjoyed 80 per cent approval ratings could not make the change, what hope have our politicians?
No, we seem determined to carry on with our intergenerational unfairness. Young people, who suffered most from the lockdown despite being least at risk, have been stuck with the bill for the whole thing. Unable to get onto the housing ladder, they face decades of higher tax to pay for what we did after 2020.
Might older people also be expected to make some contribution, perhaps by losing the triple lock on state pensions? Perish the thought! Old people vote.
This is an area, like NHS reform, where Labour could do what the Conservatives cannot, if only because they would be free to undertake reforms with the support of the main opposition.
But, looking at Sir Keir Starmer’s front bench, I see no readiness to risk even the mildest short-term unpopularity. And so Britain will keep taxing and spending itself into indigence, its people resisting any cuts while wondering, all the while, why they are getting poorer.
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Britain faces destitution because it refuses to admit the state pension is unaffordable
The current plans to raise the pension age are too timid. If we had stuck with Lloyd George’s approach, it would be approaching 100