A growing problem in Pensions is the projected increases in the over 65’s compared with the rest of the population thus outstripping the capability of those in work to support the older generation, which is critical in the State unfunded “pay as you go” schemes.
There is an almost panic approach to increased life expectancy in the over 65’s, leading to delayed retirement, increases in NI and other contributions, benefit reductions and care problems. Yet little study has been made of the actual basis of these projections.
Life expectancy is a particularly vague term, it is in fact the average time a person may live, the halfway house, which half the population may expect to survive to and is based on statistical Life Tables. These track the progress of 100,000 persons from birth to age 100 giving the number surviving at each age and the mortality rate of decline. They are dependent on birth, migration and death rates.
More relevant are population figures, particularly the comparison of working to over 65 populations, the age dependency factor, currently at 3 to 1 and projected to change to 2 to1. Population reminds me of the old exam question on filling a bath or garden pond, with the hose flow (births) and leakage or overflow rates (deaths), with the odd bucketful poured in or scooped out (migration).
Current medical advances means the population numbers are increasing, although we all do our best to reduce them with smoking, drink, drugs, traffic accidents and now obesity. However the medics are winning and current figures are 90% of births survive to age 65, although they reduce rapidly thereafter, the rate is decreasing.
Sixty five years or even one hundred is a long time and therefore changes tend to happen more slowly than projections suggest, which need to take account of what is happening on the ground, i.e. the head count.
In the UK
Population figures for the over 65’s, however show a more rapid decline at a rate four times those derived from Life Tables, with life expectancy halved, this gives time to adapt and stresses the urgency for the latest Census results to be released.
The major discrepancy does not mean that the figures are wrong only the timescale interpretation; death rates are less than 1% of population, giving up to 100 years for effects to feed through. Life Tables indicate the trends and the population numbers the rate at which changes are happening.
The main problem is that the higher figures are being accepted as fact and drastic action is being taken on this basis. Large State costs are predicted, the miserly pension will become less affordable, illustrated by the present monetary attacks on pensioners. Although running contributory schemes the State fails to put the money aside to meet future pensions as in normal husbandry, losing all the benefits of Fund growth.
We are all living longer and need to adapt to meet these changes. Age 55 or 60 is an opportune time to take a break, before old age sets in proper; there are so many things to do, places readily accessible to visit, hobbies to pursue. Work and career become less important, children and financial demands reduce, making it a good time to enjoy, relax and forget the daily stresses of work, allow the younger generation the chance of work.
Is the time to enjoy this retirement the 18 to 20 or even 25 years of Life table projections or 8 to10 years of the population projections ? We need to know urgently before we throw half of our retirement away !
The over 65 population is increasing but how fast, is it at 2% per year or ½% the rate of the past 20 years, there appears to be no sound reasons why this rate should change fourfold so suddenly. We have not found the elixir of life or an anti ageing drug, even though rapid medical advances are occurring.
Annuities, Public Sector, NHS, Teachers, Police, Local Government, Hutton, State Pensions, Transport, Comment
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