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STICERD 25th Anniversary Lecture
Can We Afford our Future?
Emeritus Professor Howard Glennerster FBA
ESRC
Professor John Hills
LSE, Chair
Conference and Events Office
www.lse.ac.uk/events
Population structure, 2001 and 2051
9
2001 population
Percentage of population in age range
8
2051 population
7
6
5
4
3
2
1
0
0
5
10
15
20
25
30
35
40
45
50
Age range (lower limit)
55
60
65
70
75
80
85
90
Age distribution of welfare spending, 2001
16
Education
2001 spending (£000s per person)
14
Health
12
Social Security
10
8
6
4
2
0
0
5
10
15
20
25
30
35
40
45
50
Age range (lower limit)
55
60
65
70
75
80
85
90
No Problem!



Demography has a small impact
The UK has already taken the steps
necessary on pensions
The problem is self correcting
Treasury projections, age related spending
(% GDP)
Health
Education
Pensions L-T
care
Other
Total
2001/2
6.3
4.6
5.0
0.9
21.7
38.6
2011/1
2
8.2
5.9
5.0
1.2
20.3
40.6
2031/2
9.3
5.8
5.2
1.2
20.0
41.3
2051/2
9.8
5.7
4.8
1.2
19.3
40.8
Age related spending, % GDP
2001/2
2051
additional
Health
6.3
9.8
+ 3.5
Education
4.6
5.7
+ 1.1
Long Term Care
0.9
1.4
+ 0.5
Pensions and
other 65+benefits
Total +
5.5
9.1
+ 3.6
+ 8.7
Our future?




Paying more in tax
Reducing mid life consumption patterns
Working longer
Getting used to lower incomes in
retirement
A Feasible Future





Private saving based on a secure state
platform
Base line above means test
Higher full pension age
Secure against private system and
personal risks
Redress gender inequalities in private
schemes
Dutch citizens’ pension





Drawn at 65 (women earlier if not working)
Entitlement over 50 years of residence
Contributions as a percentage income tax
Pension takes virtually all off means tests
Adjusted as wages rise – linked to minimum
wage
Advantages





Incentive to join funded schemes
Simple
No complex contribution records
Does not disadvantage women and
those with limited lifetime work records
Progressive funding
Modifications





Generosity linked to political feasibility
Employer contributions could be kept
Age at which get pension could be 68
Years to qualify negotiable
Pensions needed for those incapable of
full work