British Pensions Crisis

Sand

Surprised not to see this mentioned yet, despite the insatiable appetite for the US election. Time to get pro-active I guess....


As you probably already know the Labour government in Britain has confessed that the pensions system in Britain is in dire straits, and this with British pensions being probably the least generous in Europe. Basically, people arent saving enough to sustain themselves in their retirement, instead theyre relying on state pensions which the government is waking up to the fact it actually wont be able to pay in a few decades time. If unchecked this will mean pensioners wealth will fall 30% relative to the rest of Britons. This of course wont be allowed to happen, as pensioners are a major political voting bloc that is only going to become more powerful as time goes on and more and more people become pensioners.

Everbody and their dog is weighing in with ideas of how to rescue the welfare state from the mess it is but it effectively comes down to forcing people to work till they drop dead, jacking up taxes on people, or privatising pensions. Pensioners wont like the first one, everyone else wont like the second and socialists wont like the third. Blairs held off on stating how hes going to deal with this, wise on one hand - but on the other it says to me hes scared of stating the facts to the public. That the system is broken, and it will require a complete overhaul not a quick fix to stave off the problem for another decade. It could conceivably see the dismantling of the welfare state established after WW2 in favour of mandatory private solutions, and a move to consumption taxation rather than income taxation to encourage saving. He certainly doesnt want to be the grinch before an election.

If Britain is in bad shape with one of the least generous welfare systems and a strong economy, welfare Europe must be heading for a serious crisis. Ireland boasted of having a young population, with more than half under the age of 25 a few years ago. Combined with falling fertility rates across Europe ( Ireland is apparently the only western european state still above the replacement rate ) were now looking at a worker to pensioner ratio of less than 1 for 1 in about 30-40 years time. 30-40 years to do away with a flawed system I think.

A Dub in Glasgo

There are a multitude of reasons for the impeding pensions crisis. The main ones IMO are:

1. The break between average earnings and the state pension (Government backed and government implemented)
2. The new accounting law which states that a companys future liability for pensions must be shown in the current balance sheets. This has caused enourmous problems for companies with final salary pension schemes.
3. The raiding of the pension pot by Gordon Brown
4. The raiding of the rainy day pension pot when times were good by companies and now they say they cannot afford it when times are bad

mike65

The UK "Pensions Crisis" is nothing compared to whats afoot in Italy Germany and esp the United States (gah can't escape Uncle Sam!) where the federal finances are heading for meltdown (and coporate bankruptcy looming) unless taxes and private contributions are raised for the long term either that or ppl will have to be willing to work for more years. Which seems sensible to me. after all for years ppl retired at 65/66 and then dropped dead about 4 years later so retirement was cheap to fund, now we live in the age of longer life and healthier life too so it really should be exploited for all our benefits.

Mike.