Don't abolish the pension, abolish the pension age

Once, when I was on the radio during the autumn’s public sector trouble, a teacher representing the trade union activists who were due to go on strike at midnight that night countered one of my arguments by saying that he was striking for “people like me”. By this he meant ‘young people who are going to have to work longer than us for smaller pensions.’ The thing is, I couldn’t see any injustice in my generation having to work longer. We’re going to live longer, too. It is absurd to suggest that the generation graduating university in 2011 should be expected to retire at the same age as people who entered the job market in the Sixties and Seventies.

Yet that is precisely what this man was proposing: regardless of advances in life expectancy and medical science, each generation should demand to spend no more time in work than the preceding one and each should enjoy a longer and longer retirement. With life expectancy increasing, it is likely that most people my age will never be able to afford a worthwhile annuity and will be working into our seventies and eighties, maybe our nineties.

Will that be so terrible? In the half century between now and then medical science will have advanced in leaps and bounds. In all likelihood our seventies will be as unrecognisable to the baby boomer generation as their fifties and sixties are to their own parents. The fact is that science is keeping us younger longer, yet we cling to a model of social provision that was designed in the late Forties. The pension was designed to be a small boon to carry people from the end of their working lives to the grave; less a safety net than a stretcher.  It was pitched at roughly the age when people of that era who survived that long were physically incapable of work.

Yet as our life expectancy grew and employment patterns shifted away from manual labour, we invented the concept of a long retirement as our lifespans came to rapidly outstrip the pension age we refused to change. Such pensions are vanishing from the private sector, and as financial reality bites their public sector equivalents will go the same way. We’re living too long to afford them.
The solution is that the government must fundamentally rethink its approach to pensions. It should shift from being seen as an entitlement you reach at a certain fixed age and become a benefit tested against an individual’s personal circumstances.

In short, the very idea of ‘the pension age’ should be abolished. State pensions should become a benefit and be seen as such – when age renders you unable to work, you receive the pension as an out-of-work benefit if you cannot get by on your own means. People would still be free to contribute towards a pension, but with increasing life expectancy annuities are only going to get more prohibitively expensive.

This will hurt. But the era when the British public could use borrowed funds to bridge the gap between acceptable taxation and expectation is over.