The most problematic of all public provision is what to do about the old. The value of actuarial calculations – the statistical analysis of risk based on instances of the risk occurring – made sense for pension calculations when life spans from generation to generation were fairly stable. Because of our ever increasing ability to cure and prevent disease and to provide a more materially certain livelihood for the majority, life expectancy in the future is no longer easily predicted. Even if the wilder extremes of SF are avoided, it is reasonable to assume a significant rise in life expectancy in the next forty years. The rise does not have to be dramatic to make a nonsense of pension provision made today – even a five year rise in the average would have dramatic consequences for pension planning.
A substantial rise in the average lifespan does not necessarily imply some major scientific breakthrough to slow or even reverse ageing. All that would be required is for scientific advances to reduce the diseases which kill many before they reach the average age of death. In other words, more people survive to the ages which are now the average lifespans. It is quite conceivable that within the next 40 years simply reducing early death could extend the average lifespan by ten years.
More dramatically, it is conceivable that science may extend human lifespans substantially beyond their current limits. Work on animals such as mice have resulted in greatly extended lifespans simply by restricting food intake from early in life. If human lifespans are extended greatly all pension bets are off. In such circumstances no meaningful actuarial prediction for pensions could be made for the odds would be that further, unforeseeable increases in life span would occur continuously after the initial scientific breakthrough was made. The fact that such scientific advances are possible in itself makes current pension planning hideously uncertain.
What should we do as a society to plan for the future lives of the old? Let us assume that average lifespans are extended simply through the diminution of early death rather than from any radical scientific discovery, what then? If the average lifespan of Britons rises to, say, 90, over the next 40 years, an obvious move would be to delay retirement. But that raises a problem. Most people could probably work to 70, but beyond that the incidence of severe but non-fatal disease rises steeply. Keeping people alive longer does not at present equal keeping them fitter. More 70+ year-olds means more people suffering from various forms of dementia, crippling diseases such as arthritis and people simply too physically weak to undertake work which could provide an income to support them. Hence, extending the retirement age, for both state and private pensions, is only a partial answer unless science advances enough to massively reduce the infirmities of old age.
It is also true that many people are struggling to cope with their job long before the current age of retirement. People in manual jobs cannot be expected to work to 70 and those in heavy manual jobs or those in jobs which require physical strength and fitness such as grassroots policing, are probably past useful employment by the age of 50, certainly by 55. In principle they can retrain to lighter work, but in practice this is very difficult. People who have spent their lives working with their hands in a workshop or in the open air often do not take easily to working in an office or shop. Moreover, the pay they will get from such “second career” jobs is likely to be low, which is both a disincentive to work and may leave the person unable to support themselves fully.
But even if a person can adapt to new ways or has been throughout their lives in the type of employment which can be carried on into old age, the odds are that they will struggle to remain in employment as they reach late middle age. Employers are prejudiced against the older worker for various reasons. Part of that reason is financial – the cost of employing them is high compared with a youngster – but it is also in large part to do with the adaptability and energy of the young compared with the old. In a time of ever increasing technological change the natural resistance to change and learning becomes ever more of a handicap than it was in the past. Government can pass whatever age-discrimination laws it wants but employers will still find ways to employ who they want to employ without falling foul of the law (short of a law which insists that a percentage of people in an organization had to be in various age categories).
However much as we may like to believe – and I write as a budding wrinkly myself – that experience compensates for youthful enthusiasm, the truth is that all of us become much less receptive to new ideas as we get older, energy falls, physical strength fails, our memory diminishes and concentration becomes harder. Consequently, employers have good cause for employing younger people in most jobs. Of course experience does count and in some jobs can be valuable well into old age, but in most jobs it does not count for much after the age of 60. Even in “people” related employment, which the older person is supposedly better equipped to handle, experience may be a positive disadvantage. For example, suppose an employer wants to employ someone serving the public. It may well be that the average customer for the business prefers to be served by someone young and employing the old would be the kiss of death for the business.
The position of the older worker is being further undermined at present by the high levels of immigration, both official and unofficial. Most of this immigration is of the young, much of it young males. These young workers will tend to take much of the work which would otherwise be available for the older Briton. Stop the immigration and employers will be forced to turn to British workers. It is as simple as that.
Even in the most benign likely circumstances – an extension of the average lifespan by five or ten years through the deduction of early death, it is clear that many people will require support for a very long period of retirement or reduced employment. Some of that may well come from private pensions and savings. But clearly for a very large part of the population adequate private resources guaranteed to support someone for 30 odd years will be beyond their grasp. Hence, state provision sufficient to allow people to live in old age is a must.
If great scientific advances are made which greatly extend life we shall simply have to start planning again from scratch. Obviously if average lifespan was increased to, say, 150, the whole perspective of a life would have to change. There are any number of exciting or disturbing possibilities. For example, it might be that only the newly conceived or newborn children could have their lives increased by a new treatment. We would then be in a position where that generation and succeeding generations had the increased life span while anyone born before the treatment became available lived to an average age of 90.
The other great concern about pensions is demographic. The population is ageing and the British birthrate is substantially below (around 1.7 children per woman) the replacement level (roughly 2.1 children per woman). The doomsday scenario is insufficient working people to pay the pensions of the old in the future. If we were talking about a demographic change which was going to take place overnight I would be worried. However, we are not. Rather, the demographic effects will be worked out over thirty or forty years. Past experience suggests that society will evolve to make the necessary arrangements. We cannot foresee what the birthrate will be in five years let alone twenty or thirty.
The currently fashionable solution for the future pension bottleneck – importing large numbers of young immigrants – would be no answer in the long term. The young people who arrived in this generation would eventually grow old and would need people of working age to support them which would mean more immigration which would mean more old people to support in the next generation and so on ad infinitum, a literal absurdity because any territory has a limit to the number of people it can support. In other words, confronting the problem of a demographic imbalance would merely be delayed for a generation or two by immigration.
The most important thing is that we do not put all of our eggs in basket. It would be wise now for the Government to begin a state pension fund into which one per cent of GDP (currently around £11 billion) was put each year. This fund would not be touched for 20 years at least and would be used to ease any future pension problem arising from a tax shortfall due to a smaller working population.