Retirement Age Explained
Once upon a time, when the concept of a state pension was introduced, men retired at 65 and died at 70 and women retired at 60 and died at 75.
As standards of living and medical care and medicines get more effective, this is no longer the case and it is causing headaches for legislators as well as private individuals.
Planning for retirement is a challenge for everyone. Company retirement schemes used to provide a level of financial comfort that complemented state pensions.
But neither scheme can now take the strain of a population that is aging and living longer.
Predictions for the future look grim on pretty much all accounts. Average life expectancy in developed countries is increasing, but people are saving less for their retirement as the current cost of living is sucking funds out of their asset base.
Soaring unemployment and escalating property prices mean that more parents are supporting their offspring’s needs for housing and day to day living.
That is depleting their own capital base when once this would have provided some income for their own later lives.
The desire to raise cash or save money on household budgets has given growth to a number of valuable comparison websites such as moneysupermarket.com. These one stop sources for advice, tips and investment ideas have helped revolutionize the way individuals can take control of their own finances.
But the heart of the matter is that even the state is struggling to find the funds to support pensions and healthcare programs for the population. With fewer younger people in work having to support the costs, taxation has to rise or significant rationing of services introduced.
So here is the current dilemma: how to afford what we had in the past for the growing elderly population. No one yet has the solution. Even as the government announced plans to increase the UK state retirement age to 66 years and four months, affected workers look set to protest at the change.
Not only are the demographics working against us, but the financial markets have also entered a period of uncertainty. The long tailed recession means that investments in property, stocks and shares have not yielded the returns that once fuelled corporate or personal pension plans.
Also governments, with ever an eye on the next election, have failed to grasp the long term shortfalls in pension plans or state coffers. Indeed, many actions taken to raise short term funds for public spending have actually increased the long term problems of the future.
Changes to public civil servant employee benefits are hard to implement. Historically, public servants have received reduced income in return for excellent pension and/or early retirement benefits.
Phasing these out or reducing them to affordable levels will not be an easy task for any government. Even public servants have a vote.
Progressively, those that can afford to pay are being made to pay. That leads to inequalities and claims of unfairness between those that have saved and been thrifty throughout their lives compared to those that have done little or nothing to aid their cause.
Increasingly, people are recognising that there are choices to be made. It is likely to be the middle classes that will be most severely disadvantaged by any solution implemented by any government of any political persuasion.
By Sam, a financial expert based in the UK
