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Summary
When the UK welfare state was created in the immediate post-war period it was
designed to support those at the low end of the social scale, those who were
literally starving and living on the streets. It soon expanded to take care of
the mainstream population though, and this is when the problems started to
begin. Taxes had to increase in order to pay for the ever increasing welfare
payments, including those to people who were now officially deemed as 'retired'
- a relatively recent concept in society.
With tax as a % of total UK production now rising to a historic high of around
40%, the strain on the working population is starting to show. More people than
ever before are in serious debt, due in part to the government's higher tax
burden as necessary to fund the higher welfare bill.
Further, with the population time-bomb set to explode sometime in the next 25-40
years. The question is this, what is going to be done about the looming crisis?
So far no Government in recent times has seriously addressed the Pension issue,
even though everyone seems to agree it is going to happen.
Introduction
When the first Pensions were issued to people who were retired early in the
20'th century it was a great moment for society. No longer were the old going to
be ignored and left to beg for help. Instead, a fairly efficient system was set
up where people paid in monthly contributions to a fund, and when they retired
they were guarenteed some level of state pension.
The problem is that people are not dying fast enough ! If today's average age of
death was the same as a century ago, there would be no Pensions crisis at all.
With longevity rates generally increasing across all social classes, the problem
of all these retired people is going to get worse in the next 25-40 years.
Contary to what many believe, the
Government have no savings of ANY kind. All those National Insurance
contributions that people of working age have been paying for decades, are not
'saved' in some mythical trillian pound bank account. Instead, todays N.I
contributions are going to the pensioners already retired, there is simply no
pot of money...never has been.
The Pensions crisis must be dealt
with soon. The following are some proposals which aim to at least forestall the
problem for a few decades, and attempt to change the overall population trend
which is primarily responsible for the problem.
There is no UK Treasure Chest for tomorrows Pensioners
Social Policy
One primary reason there is going to be Pensions crisis is due to the
demographic situation. There are too few children, compared to the number of
people who are already retired.
The problem is not only confined to the UK, but to most of western society.
Italy is a classic case of where the birth rate is now so low, that entire towns
and villages are literally dying away due to lack of young families.
The best long term strategy to reduce the overall financial problem that the
Government will face is to entice the general population to have more children.
At the very least, the Government should be aiming to at least balance the
population birth/death rate.
Taxation Policy
A 3-9% scaled tax on income. All revenue would be secured (untouchable by any
future government) on a permanent basis, and devoted to being invested in
Capital Projects across the UK and the planet. The concept is that a 'National
account' would be created, the long term aim being to secure a regular income
from investments, which would go towards paying the Pensions of all those
involved.
This scheme is something that would not work for people who are already in there
40s-50s'. The target would be to have all younger people contribute
Conclusion
To solve the long term Pensions problem, the most beneficial measure that could
be attempted would be population measures, which would aim to boost the birth
rate to at least the 'replenishment' rate of 2.1 children per couple.
For anyone already retired, the issues raised here are of little concern.
However, for anyone below the age of around 40, such people will need to seriously
consider the fact that they will probably be working (part time at least) into
their 70's - even if they do choose to save a 'reasonable' amount into a pension scheme.
With many people working into their 70's, maintaining good health will be more important than ever before for the
older members of society.
The question everyone needs to ask themselves is this, are you saving enough for your own personal retirement, or
are you resigned to the fact that you will probably work until your dying day ?
Pensions Crisis : BBC special section, detailing the long term problems facing the UK
The Pension Service :
Official UK Govt. site, Dept. of work and pensions
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Page last updated :
23/07/2004
