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I’m a millennial. Will I *ever* get to retire?

State Pensions
By Emily Church
08 February 2024
Financial & Professional Services
Life & Pensions

We were barely a week into February and yet another depressing piece of news hit the headlines: analysis from the International Longevity Centre (ILC) found the State Pension retirement age will need to increase to 71 by 2050 if the dependency ratio of workers to retirees is to remain sufficient to support the retired population. I can’t say this is much of a surprise since the State Pension age has been steadily creeping up throughout my lifetime anyway (remember when 60 was the standard retirement age for women? Me neither…) but the ‘official’ nature of a report such as this is nevertheless jolting for anyone looking ahead to their retirement plan.

Since the first pension was introduced in the UK a little over a century ago, population demographics have shifted massively. People are living much longer than anticipated when the original concept of the State Pension was cooked up. On the face of it, record levels of people reaching the age of 100 could be considered good news, but age-related illnesses are also on the rise, impacting quality of life and the ability of many to work full or part time in their 60s, 70s and beyond. On top of this, living costs (housing would be an obvious one) have spiralled to a much heftier proportion of the average annual income. The PLSA this week reported that the annual income needed to accommodate a ‘minimum,’ ‘moderate,’ or ‘comfortable’ retirement has also risen by approx. £8k per year. Needless to say, the amount of savings required to produce the range of retirement incomes forecast by the PLSA seem completely out of reach for all but the top 1% of earners.

Change is badly needed, but successive political parties over the years have responded by kicking the can down the road, favouring policies which appease the ever-growing, politically valuable voting cohort of pensioners. The structure of our state pension system – with working-age citizens paying national insurance contributions which are then redistributed in part to older pensioners as a regular income – was a cornerstone of the so-called ‘social contract’ between young and old, the haves and the have-nots. Whilst I still firmly believe in this principal, even I have to acknowledge that a rebalance is probably needed.

The UK is not alone in the challenges it faces, which is why it is so disappointing that stronger progress has not been made. Last year France saw a wave of unrest over the mere suggestion that the state pension age be increased by 2 years to 64. Back in the UK, each time a solution is tentatively voiced, it is quickly shouted down by opportunists with scant insight of their own to impart, but plenty of appetite for the column inches gained from a pessimistic soundbite.

In the background, the clock continues to tick away. It seems naïve now, but I remember a time when I assumed someone ‘incredibly clever’ would have fixed the system by the time I got there. A variety of tactics have been mooted over the years – for example, ‘gifting’ every newborn baby a nest egg which goes directly into a pension fund to be invested from birth, benefitting from the miraculous effect of compound returns. Or alternatively, initiatives which get retirees working again in relatively easy-going jobs to supplement their existing pension income, albeit potentially in roles they may not necessarily wish to perform – whilst I wouldn’t mind serving up coffees one day, I can’t see myself sat all day at a checkout (just as well really, the checkouts are all but vanishing to be replaced by self-service!)

A solution will certainly not be found unless parties on all sides of the retirement question are prepared to make concessions to find something that works for the majority. Whether that is means-testing, socialising a significant change to one’s living standards, or a retirement model which involves moving to another country altogether, I can only hope a path can be found which will actually allow me to retire, however briefly.