PENSIONS? Just don’t go there. If you want to buy a pension delivering a modest £20,000 a year, index-linked, you would need to save well over £600,000 at present annuity rates. That’s more than someone on average earnings of £26,000 earns in 20 years – all of it. No-one tells the truth about personal pensions because the numbers are so frightening, most people are put off saving for one.
And of course, if you are aged 47 or younger, you won’t now get your less-than-generous state pension of £155 (that’s if you have 35 solid years of NIC contributions) until you are 68, following last week’s announcement, by which time you will be dead if you live in many west of Scotland postcodes. And it’s not just in Scotland that many will be cheated out of a state pension to which they have contributed throughout their working lives.
In Kensington and Chelsea, scene of the Grenfell Tower inferno, life expectancy among disadvantaged groups is 14 years less than among the well-off. And guess which group tended to be disproportionately represented in the fire? Talk about insult to injury: even if you survive the life-threatening accommodation, you are likely to lose 14 years’ pension payments for the sin of being poor. (Women born in the 1950s can add another six lost pension years as a penalty for being female.)
Such is the background to the latest astonishing own-goal by the May Government: raising the pension age to 68 seven years earlier than scheduled – hitting everyone born since 1970 hard in the pocket. This was announced in the very week it emerged that the rise in life expectancy in the UK has stalled since 2010. Austerity can seriously damage your health, according to Professor Sir Michael Marmot of UCL, a former Government adviser, who suggested that public spending cuts must have played a role here. Other factors include the astonishing rise in male suicide – now the main cause of death for men under age of 45, three times the female rate.
Britain has achieved the remarkable distinction of being the only advanced country in the world in which longevity is in danger of going backwards. Life expectancy had been increasing, year on year, for most of the last century in Britain, but something has thrown a spanner in the demographic works. The greying of society has halted. Forget all those dystopic projections of a Britain populated entirely by crumbling geriatrics sucking the life out of the handful of working-age people. No doubt Government bean-counters are rubbing their hands in glee at the thought that they can cut NHS and social care spending even further because we’re all pegging it earlier than expected.
This longevity slowdown is not because we are reaching some natural limit to human life span. While rising life expectancy has stalled in the UK, it is continuing apace elsewhere – and not just in those well-heeled, wellbeing-friendly countries like Norway. Even in crowded, hectic Hong Kong life expectancy is continuing to rise, and is now two years higher on average than in the UK. It defies belief that the teeming thousands in those grim tower blocks on that tiny island, under constant threat of being embraced by communist China, are actually living longer than people in the fifth-richest country in the world.
Of all the inequities inflicted on the millennial generation I think pensions are the most insidious because the theft is hidden from view. You need a degree in accountancy to understand the complexities of pensions – annuity rates, indexation, national insurance contributions RPI, income draw-down. But the bottom line is that, in the private sector, you probably need to need save nearly quarter of what you earn after tax to be comfortable in retirement. Yet students graduating in England this year are emerging with debts of £57,000, face an uncertain and insecure job market and have been priced out of owning a home. They’re squeezed dry by rents and rising food costs long before they think about pensions.
Their parents, many of them, never had to face this responsibility because the companies for which they worked, and the state, shared the burden of pension costs. But quietly that has all been swept away by a series of discreet reforms and fiddles that eroded collective provision and placed the risk of retirement firmly on the shoulders of the individual. Previous generations of workers could reasonably expect that if they stuck at a job, they would be looked after when they retired. But the structure of occupational pensions has been systematically dismantled over the past 30 years. The final salary pension, indeed any kind of occupational pension, is a thing of the past except in the public sector.
This is the grain of truth in the daft comment from the Chancellor Phillip Hammond, that public sector workers don’t deserve to have the 1 per cent cap on their incomes raised. Yes, many do still have final salary pensions. But they aren’t living the life of Riley on an average of around £7,000 a year upon retirement. It is just that workers in the private sector, the vast majority, have virtually zero prospect of an index-linked pension even of half this level. The average pension for a private sector worker on retirement is just over £3,000 and doesn’t rise with inflation.
It is hard not to conclude that young people are being robbed at both ends of the life cycle. Intergenerational inequality is one of those difficult issues, like gender discrimination, that creates unhelpful divisions among the disadvantaged. It’s not older people who planned this, but successive governments who’ve allowed the rich to appropriate an ever larger share of the wealth of society. It is wrong to accuse today’s (relatively) comfortable pensioners of being responsible for stealing the security of the under-40s. Baby boomers, like everyone else, believed that pensions and living standards, like longevity, were on a permanently upward trend. It seemed like some kind of natural law that every generation would be better of than the previous one. Until now.
Nevertheless, it is to the eternal shame of my older generation that we collectively became so complacent that we allowed Tory governments (and New Labour ones) to rip apart the society that our parents created after the Second World War. Living standards had been rising inexorably since then because of the National Health Service, the welfare state, free education, improved housing and secure incomes. Since the 1980s, the NHS has been systematically undermined, council housing has been privatised, benefits (such as the state pension) have been eroded and trades union collective bargaining has all but disappeared.
In place of the all-in-it-together society that I grew up in, when taxation was high and the state was expected to make the economy work for all, we have a devil-take-the-hindmost society of insecure individualists. This is most striking in the emerging gig economy of phoney self-employment, where all the risk is on the “dependent contractor”; financial security is dependent on the vagaries of the stock market; and government sees its role as protecting the obscene wealth of the 1 per cent.
And that’s before the robots take over. Remember, machines don’t need pensions, or salaries or a health service – which is why companies are so keen on installing them.