Western governments refuses to admit the old-age pensions are unaffordable. By Daniel Hannan, in Britain.
In 1908, the new chancellor of the Exchequer, David Lloyd George, announced plans to “provide an honourable sustenance to deserving old age”. The government would pay a state pension of five shillings a week to every citizen over the age of 70, excluding only drunks, criminals, lunatics and people earning more than £26 a year. …
When Lloyd George introduced his budget, life expectancy was 49 for men and 53 for women. Now, those numbers are 79 and 83 respectively, yet the state pension age has fallen to 66 for both sexes …
Bismarck was the first to introduce old-age pensions, in 1889. He chose 70 as the retirement age, subsequently reduced to 65 in 1916. In 1889, the life expectancy in Bavaria was 37.7 years for newborn males and 41.4 years for newborn females.
No one would design such a system today. If we had stuck to the actuarial formula of Lloyd George’s time, our retirement age could now be around 100. As late as 1945, the average man claimed his state pension for less than two years (the average woman slightly longer).
It is not just the span of our days that has lengthened. We are more active in old age, partly because of advances in medicine, and partly because we do less brutalising jobs. …
My maternal grandfather, who worked on the shipyards on the Clyde, never made it into his late 60s. Not untypically for a working man of his generation, he smoked heavily, and did a job that wore him out. My job, by contrast, involves sitting in front of computer screens. …
The arithmetic is dismal:
On current projections, our main state agencies — in healthcare, education, policing, local government — may cease to be service providers and become pension providers. Their budgets will be swallowed up by obligations to long-retired workers. …
Solutions?
One option is to give the state pension age a hefty initial lift, and then let it rise in line with longevity.
Sweden has a committee of actuaries who push the retirement age up automatically through a formula linked to life expectancy. It was recently reported there that, exceptionally, the age may fall fractionally, reflecting the small dent that accompanied Covid.
But few people want to depend on the state in retirement. A wiser approach is to encourage private provision, giving people control over their pension pots. … When Peter Lilley was secretary of state for social security, he devised a scheme that would allow people to opt out of the state pension.
Knowing that anything he proposed was liable to be caricatured, he bent over backwards to emphasise that people could stay in the existing system if they preferred. It made no difference. Labour claimed that the Tories were planning to “abolish your state pension”, and duly won a landslide.
Raising the retirement age is just as unpopular. …
It is a global problem. Emmanuel Macron has been trying to reform France’s impossibly generous arrangements, but has no support in the national assembly, and faces mass protests backed by three quarters of the public.
The closest Vladimir Putin came to defeat was in 2018 when, hoping to use the distraction of Russia’s five-nil victory over Saudi Arabia in the World Cup, he sneaked out an announcement that the retirement age would rise to 63 for women and 65 for men. Putinite candidates were trounced in election after election until the strongman was forced to back down.
If a dictator who had, up until that moment, enjoyed 80 per cent approval ratings could not make the change, what hope have our politicians?
So debt rises and our paper money system gets ever more corrupted by governments needing more money. It is not sustainable, something has to give.
