Friday, 25 June 2010

Grasping the retirement nettle

It looks as if the Government is going to tackle the state pensions timebomb by bringing forward the increase of the retirement age to 66 to 2016. After that it seems that the plan is to increase the retirement age every five years on through a link with life expectancy on the Swedish model.

So far we have dealt with the increase in the pensionable population by holding the pension down at a level below most comparable countries. No one could live on it and it has to be topped up by means tested benefits for some but those are not always claimed.

The unions have objected that it is not possible for people to carry on undertaking strenuous manual work beyond their mid-sixties and that a lot of people will be effectively transferred to the unemployment register. What one needs, however, is a labour market that will make other sorts of jobs available, particularly part-time work. We need to move byeond the 'falling off a cliff' fixed retirement age.

As it is, a lot of people cease being economically active, or at least stop working full-time, before the state retirement age, although economic activity rates in the pre-retirement group have been increasing. Raising the retirement age means that some of these early retirements would take place somewhat later.

As for the argument that extending working life denies younger people jobs, that is to subscribe to the 'lump of labour' fallacy. For many younger people there are still problems with skill deficiencies and attitudes to work.

Some grumbles about raising the retirement age have come from the holiday industry as apparently the early retired are important customers for the 'shoulder' season. Certainly travelling the world is a preoccupation for many of the early retired. I am looking forward to spend less time in airports and on lomg-distance flights.

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