Transcript 1214487452 - Scotland`s Futures Forum

The Ageing Population, Pensions and Wealth Creation
A report by Tomorrow’s Company
There is no ageing crisis
 As a society we can afford to grow old.
 At a mere 1.75 per cent productivity growth per
year by 2045, an average British worker will be
about twice as productive as today. In other words,
a doubling of new value and resources being
produced, while the ratio of over 64s to the rest of
the population grows by less than 20 per cent.
Support ratios
 The particular demographic statistic that has helped
create a sense of crisis is the old age support ratio.
 This is the ratio between the population of working
age (16-64) and the numbers 65 or over.
 In 2003 there were 4.1 people of working age for
every person over state pensionable age; by 2041
there will be only 2.36 people of working age for
every pensioner – a fall of 42%.
The economic support ratio
 The key variable is not so much the old age support
ratio as the balance between economically active
and inactive persons – the economic support ratio.
 This ratio was 0.92 of a worker for every dependent
in 2003 and is projected to be 0.80 by 2041 - a fall
of only 13%.
 Incidentally the ratio was less favourable in the
past. It was 0.72 in 1981.
Not all old people need ‘support’
In 2002/3 the top 20 per cent of retired households
in terms of disposable income paid £8,392 in taxes
and received £7,557 in pension and benefits from
the taxpayer (some of which, such as the disability
living allowance were not age related).
The savings gap
 Another factor creating a sense of crisis has been
the references to a huge savings gap – a ‘black hole’
variously estimated at £27billion and some £50
billion.
 However, the problem is not so much that as a
nation we are not saving enough. It is rather that
half the population have substantial savings and the
other half have very little. Only 44% of 16 to 64 year
olds have a private pension.
Why people are not saving
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Low incomes leave no margin for saving
Means testing
Commission and charges
Debt
Loss of trust in financial services
Cultural factors
Decline in company schemes.
Savings and investment
 Savings do not ensure an adequate level of
investment in the future of the economy. Their main
impact is to drive up the prices of shares and bonds
– to levels that ultimately prove unsustainable.
 The only savings that will help pay for future
pensions are those that are channelled into
productive investments in capital goods or in R and
D and skills development.
Later retirement
 As longevity and health improve many people will
both wish and be able to work longer.
 Many older workers have skills, experience and
attributes that are beneficial to an employer and to
the economy as a whole.
 What is uncertain is what the level of demand for
older workers will be.
 There would be little point in raising state
pensionable age to 67 if most people were unable to
find employment up to that age.
A citizen’s pension
 Tomorrow’s Company supports the idea of a
universal taxpayer-funded state pension based on
residency.
 This would remove the deterrent to saving created
by means testing, would improve the position of
women, would give the poorest people in our
society a firm promise of a degree of security in old
age. It would have the virtue of simplicity, both in
administration, and in terms of being understood by
the public.