Posted on 11/30/2005 5:51:37 PM PST by libertarianPA
LONDON - The British government said Wednesday it will consider raising the retirement age as high as 69 as recommended by a panel commissioned to avert a looming funding crisis in the state pension system as people live longer and have fewer children.
The Pensions Commission, appointed by Prime Minister Tony Blair in 2002, also said the state pension should be increased and proposed creating a National Pension Savings System in which every worker would be enrolled automatically.
"There are significant problems in our pensions system. There is a major demographic challenge," said Lord Turner, head of the commission.
Work and Pensions Secretary John Hutton agreed reform is needed and said "the broad framework" outlined by the commission would be used as the basis for a public debate in the coming months before the government decides how to proceed.
Funding state pension systems is becoming a problem for many industrial nations. Italy has raised the age for a full pension to 60 from 57, Belgium is boosting the earliest retirement age from 58 to 60, and German lawmakers have agreed the retirement age should rise from 65 to 67 between 2012 and 2035. The United States already is gradually raising the age toward 67.
The commission's report quickly drew criticism from Britain's biggest labor confederation, which objected to a higher retirement age, and from a leading industry group, which said matching employer contributions for the proposed savings plan would burden small businesses.
But Hutton said changes have to be made. He noted there will be 50 percent more pensioners by 2050 and said nearly 10 million people of working age are not saving enough for their retirement.
"We are ruling nothing in and nothing out on pensions," he said.
Hutton added that any solutions must be sustainable and affordable to avoid jeopardizing the government's long-term finances.
Several aspects of the commission's report were leaked ahead of time and reportedly strained relations between the prime minister, who agrees all the recommendations should be considered, and Treasury chief Gordon Brown, said to consider the ideas too costly.
Britain now has a retirement system based on a small state pension paid to everyone who has worked, supplemented by more lucrative private pensions. The state pension has been losing value because it increases in line with prices rather than average pay, while private pensions are being eroded by higher taxes, stock market underperformance and mismanagement.
It is predicted that by 2050, the state pension will have declined from less than 20 percent of average pay to less than 10 percent.
Turner said the state pension, which is now about $138 a week, should rise in line with earnings rather than inflation. He said that would push government spending on pensions from the current 6.2 percent of gross domestic product to between 7.5 percent and 8 percent in 2050.
The rise in pensions will have to be accompanied by an increase in retirement age, he said.
"On the basis of the present life expectancy forecast we believe that we will need to be in the range of 67 to 69 in 2050 to have an effective state pension system," Turner said.
In 1955, a 65-year-old British man could expect to live to 77 and a woman to 81. But by 2055, a 65-year-old man could expect to live to nearly 87 and a woman to 89, the commission said.
Men can now retire at 65 and women at 60, but the women's retirement age will rise to 65 as of April 2020.
Under the proposed National Pension Savings System, employees would pay a minimum 5 percent of their wages into the program. Tax relief from the government would cover a fifth of that contribution.
Employees would be able to opt out of the system, but the commission said a matching contribution by employers on 60 percent of a worker's payment would encourage most to stay in.
The commission wants the program to begin in 2010.
Currently, employees contribute to their state pension through a payment that also covers state health insurance and varies from 1 percent to 11 percent of wages, depending on family circumstances and salary.
The report drew a mixed response.
The Trades Union Congress, Britain's largest labor organization, welcomed it as "bold and hardheaded" despite objecting to a higher retirement age.
The Institute of Directors and the British Chambers of Commerce criticized the compulsory employer contribution, saying it would be burdensome on small businesses.
The National Pensioners Convention criticized the commission for not doing enough to meet the needs of older people, while the Equal Opportunities Commission welcomed reforms to improve pensions for women, who often do not accrue as large a pension as men because they are not in the work force as long.
Yes. One day, we too shall put a band aid over our fatal gunshot wound.
It won't be long before Soylent Green becomes a popular dish while watching Monty Python reruns.
To truly reform these welfare programs, accepting benefits should come with the loss of voting rights. Let charity be charity, not money voted from the pockets of a minority into the pockets of the majority backed by the coercive force of the state.
FINE. And raise the age of birth to 3, while you're at it.
One of the things these European countries have done in order to produce workers to support the aging population (since the birth rate is declining), is to import Muslim labor. Now look where they are. A lot of old people, a failing pension system, and foreign workers at their invitation who blow up bombs on their subways.
I agree with you totally. And we need to do it here too - ween our people off welfare and social security and set up privately run charities that are more efficient and accountable than the government could ever hope to be.
Eurosocialism isn't my problem since I am an admitted nationalist and that nation is the good ole USA. If by doing your part, you mean you''re funding your own retirement like I have been doing for many years, then I'm with you all the way.
If you are going to run on a platform of robbing Peter to pay Paul, you can always count on the vote of Paul.
>>>"Eurosocialism isn't my problem since I am an admitted nationalist and that nation is the good ole USA. If by doing your part, you mean you''re funding your own retirement like I have been doing for many years, then I'm with you all the way"<<<
I left the Military 3 years ago with nothing but 5 maxed out Credit Cards... three years later...I will own my Home within Five Years along with 3 other properties and I now have ZERO credit card debt, (Dave Ramsey worked for me), the three properties of which I speak are leased long term and represent my Retirement (positive income), I may never see a Social Security Check... so I don't count on them at all, hell I may not live to be 65 anyway. I want to RETIRE ASAP not in 15 years...
TT
That statement seems oxymoronic.
It just means the UK is an a low-inflation sweet spot like the US is. Wage gains are outpacing price gains. Since the fund is indexed to prices, it is smaller than it would have been in a high inflation environment.
And here I thought it was purchasing power that mattered. Silly me.
In principle, you're right. But I suspect that most people tend to compare the value of their pension against what they were earning before retirement, rather than against prices. If pensions are linked to prices, then the more the gap widens between wages and prices the greater the drop in income at retirement. Thus, even though it's clear from an objective standpoint that people will be no worse off, a lot of people will feel worse off. And most people out there are not doing the calculations, it's what they feel that guides their opinions.
Insightful post. Economic relativism writ large. For myself, I just say no. But what I think is irrelevant. Your point stands.
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