‘No pensions crisis’, study finds
Fears about a pensions crisis caused by an ageing population are largely unfounded, an independent think-tank argues today.
Increased life expectancy means that while there are currently four people of working age for each person aged over 65, this is predicted to fall to two people by 2050.
Most analysts believe this will create a pensions shortfall, which can only be addressed by making people work longer, save more for themselves or simply accept smaller pensions when they retire.
But a new report from Tomorrow’s Company rejects this analysis, insisting that Britain can cope with its ageing population as long as those people still working are being productive.
“There is no ageing crisis. As a society we can afford to grow old. Rising productivity will outweigh any negative influence on living standards from an ageing population,” said report co-author Philip Sadler.
Chancellor Gordon Brown has called for a “national debate” on the expected pensions crisis, while the government’s pension commission is due to publish recommendations next month on how Britain can meet this deficit.
But today’s report finds that rather than comparing the number of people aged over 65 with the number of people of working age, it is more useful to compare those in work with those who are not working.
This “total economic support ratio” is likely to be similar in 2041 to what it was in 1961, it finds.
The Tomorrow’s Company report also questions the wisdom of two of the most touted solutions to the perceived pensions crisis – saving more and working longer.
Increasing saving for retirement could make the situation worse, not better, as excess saving can reduce the economic growth needed to finance pensions, the think tank argues.
In addition, while the report’s authors say people should be able to work longer if they want, there is no certainty there will be jobs or demand for all older people.
Instead, Tomorrow’s Company finds that the key issue will be productivity. Alan Pickering, who wrote the foreword to the report, said: “Wealth creation is far more important than wealth distribution.
“We need a modern labour market which provides lifelong access to learning, which is the key to lifelong earning opportunities. As it is, we are still pensioning people off in their prime.”
