Fancy Working Until You're 66?

By the year 2020, UK residents will have to wait until their 66th Birthdays to claim their State Pensions. Meanwhile, in the land of our closest neighbours, France, general strikes are enveloping the nation, civil unrest is at large, and resources are being stretched to the limit - because of proposals to lift their retirement age to a seemingly measly 62! Well, they are French.

Undoubtedly, a rise in the state retirement age is not, and certainly will not prove to be, one of the most popular moves of the Spending cuts in the UK. However, can it be justified?

Almost certainly.

Demograhic trends are set to experience seismic shifts as baby-boomers (people born between 1946 and 1964) retire over the next two decades. The consequent rise in older Adults will add huge amounts of stress not only to the already sizeable pension burden, but also to the NHS and infrastructure costs, as more long-term care (ie. Nursing Homes) facilities will need to be created to cope with surging demand as people live longer lives.

It really is a serious concern for current Governments. In fact, six European economies - Germany, France, Ukraine, Belgium, Luxembourg and Greece estimate that by 2050, at least 30% of their spending will be dedicated to age-related expenditure. And for the rest of the advanced global economies, their median spend will be around 27% of their state income. Such huge proportions of spending are clearly unsustainable, so the case for reform is clear. But what reform exactly?

Well, a crude method could be to try and stop people from living longer, lingering, burdensome lives, but that's not ethical. One may try and generate a second 'baby-boom' to pay for the original boom, but that's not practical, marketable or easy to do. Tax raises could pay for it; but there's no chance in today's climate. An increase in Government Fiscal Deficits could be permitted, surely one could pay it off in the future; well, that would certainly contradict other current Government policies. Or, even easier, one could allow immigration to bump up the number of taxpayers in the country; again not easily marketable politically, particularly during a time of unemployment.

Hence, the only sensible option left it would seem, in this climate at least, is to raise the retirement age. As life expectancies increase steadily, it is generally viewed as reasonable to increase retirement ages at a similar rate. If this happens, the potential size of the workforce will grow, and so will it's potential to produce, pay taxes and enhance the long-run growth of the economy. There will of course be winners, those who just about qualify to retire early, and losers, especially the young, who would have filled the gaps of those who retired but now stay in employment for longer. However, in the long-run such unfairness caused by an increase is likely to be ironed out, i.e. when those who would have retired at 65 retire at 66 instead, the young will then be able to take the vacancies a year later than previously, restoring the young-old cycle as before, and then the positives really will outweigh the negatives.

In conclusion, raising the retirement age certainly will not be celebrated. It is simply a policy that will be hated less than its alternatives.