Fear of a political fallout means that over 65s like me are getting an easy ride
Thank you, that is, if you are under 65 and have a job. You are truly generous to my generation. Your taxes and national insurance contributions fund our state pensions, bus passes, winter fuel allowances, free prescriptions and, when we need them, our NHS operations, social care and income support. Thank you, too, for not kicking up a fuss when the politicians of all parties say that, whoever has to pay for bringing down the government deficit, it won’t be us. Your kindness is remarkable.
My question is, why have we silver surfers been allowed to escape unscathed? Some elements are well-known and often mentioned. A growing number of older people mean not only bigger costs but more voters. And we are far more likely than those in their twenties to turn out on Election Day, so politicians are scared of offending us. What is more, few things tug at the heart strings of people of all ages more than the thought of pensioners having too little money to buy food or keep warm. Handing out cash to the elderly is far more popular than giving it to unemployed workers or single mothers.
There is, though, another factor. It may well be bigger, if less-known, than those. It emerges from the latest YouGov data for the Sunday Times, alongside fresh research by Hymans Robertson, an independent pensions consultancy. Here are two key facts.
1. Only one in three workers told YouGov last week that they have a clue how much they are likely to have when they retire. Not surprisingly, the youngest workers know least, but even among workers in their forties and fifties, the proportion with much idea rises to only 38%. Most people fear that they won’t have enough to live on when they retire; many expect to have to sell their home. But the picture that emerges is not one of fear, panic or resentment at the enforced transfer of money towards those who have retired. It’s more of a subconscious worry about the distant future, combined with a vague hope that, somehow, things will be OK.
2. Hymans Robertson’s research indicates why so many people should worry more intensely than they do. It analysed 90,000 employees paying into workplace pensions and concluded that 70% were unlikely to have saved enough to enjoy the minimum necessary retirement income, as assessed by the Department of Work and Pensions. Typically, employees are paying around 10% into workplace schemes (including employer contributions), when they ought to be saving 20%.
Of course, pensions consultancies have a vested interest in talking up the problem. The more fear they spread, the more business they attract. However, I’m sure their basic point is valid. Millions of working people are drifting towards a big cut in their living standards when they retire. If they knew the truth and were compelled to tackle it, would they be so relaxed about the taxes they pay to support my generation?
Here’s the political problem. Any sharp move to reduce retirement benefits would hurt not only my generation: it would also damage the future prospects of today’s workers. The more that they fret about their life when they retire, the less likely they are to want governments to withdraw benefits that they themselves hope to receive.
What, then, is to be done? The first answer is the easiest to state but the hardest to enact. We need a more honest public debate about the scale of the problem and alternative options. David Willetts is one of the few current ministers to have addressed the subject head on. Before the last election he wrote The Pinch: How the Baby Boomers Took Their Children's Future - And Why They Should Give it Back. Otherwise, politicians of all parties have been reluctant to make clear the stark choices ought to be made now. Here are three areas in which candour is vital, as a precursor to radical action:
1. Retirement age. This is currently set to rise, but too slowly. The state pension age is currently planned to rise to 66 in 2020 and 67 in 2028. However, life expectancy is rising faster than that. Sooner or later, some government will have to confront today’s workers with the price of them living until they are 90 or 100. Politicians seldom worry about fiscal headaches that may be ten or 15 years away; yet if we had a braver, more honest political discourse, people who are now in their twenties and thirties would be told that they can forget any notion of retiring before they are 70. (Our Sunday Times poll shows that only one in four workers under 40 currently accepts this.)
This would not only help the public finances in the long run; it would transform the calculations for workplace pensions. If today’s workers ought to save 20% of their income to enjoy a decent pension at 65, the prospect of working (and saving) five years longer and needing a pension for five years less, would bring the percentage down.
2. Universality. This is always contentious. Should bus passes, winter fuel allowances and free prescriptions be available to every older person, no matter how rich they are? Supporters of the present system say that means-testing them would breach a vital social principle and save little money. Maybe the answer is linked to point 1 above: exploit the fact that eligibility is linked to the state retirement age, so that in due course nobody in their sixties can receive these benefits – and then, for the people who do still receive them, treat them as taxable income.
3. Housing. As the recent controversy over paying for social care has demonstrated, few issues provoke as much anger as the suggestion that elderly home-owners should be required to sell up and move to somewhere smaller and cheaper. As Sir Humphrey Appleby would have warned in Yes Minister, the politician who suggested any such thing would be suicidally courageous. Yet our tax system encourages us to use home-owning as a way of growing our financial assets, so it should not be ridiculous to include those assets in our retirement planning.
Given how tricky these issues are, and the need for very long-term policies, radical change will almost certainly need cross-party agreement. Perhaps the starting point would be a cross-party pact to stop pretending that the solutions will be anything but painful – except, perhaps, for those of us who are currently old enough to gain from the current, expensive system. If we had to, we baby-boomers would fight hard to prevent our benefits from being withdrawn. But such is the failure of you under-65s to challenge the way we older folk empty your pockets, we won’t have to. Thank you for being so feeble.
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