Download STICERD 25TH Anniversary Lecture Can we afford our future

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!

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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