A population roughly the size of London – that is the number of additional people aged 65 and over estimated to be living in the UK by 2066, bringing the total figure up to 20.4m, according to the latest official data.
At current rates, over a quarter of the population will be past retirement age in 50 years’ time. Using today’s state pension – which amounts to around £8,500 a year – the annual cost (not accounting for inflation) would come to £174bn – and that’s before factoring in social care, health costs, or subsidies such as the winter fuel allowance and free transport.
Of course, longer life expectancy is to be celebrated. But it brings with it significant challenges that must be acknowledged if we are to realise the opportunities it can bring. For example, PwC research published in June found that the UK could increase GDP by £180bn a year by keeping more over-55s in work.
Increasing the state pension age, or reducing or means-testing the amount to encourage more personal saving, may be a political landmine, but it’s a debate that needs to happen if we want strong public services and a thriving economy in the future.
Unfortunately, that’s a conversation that politicians across the developed world seem determined to avoid at all costs. On the left, the likes of Canada’s Justin Trudeau, Italy’s Five Star Movement, and the UK Labour party under Jeremy Corbyn have all challenged key pension reforms in their countries, fighting against increases to the age threshold that would help the retirement model become more sustainable.
For all their rhetoric about “fairness”, these politicians seem unable – or unwilling – to admit that maintaining the expensive status quo amounts to robbing younger generations to pay for the extended retirements of their parents and grandparents, while skimping on the resources and public services that would help young people and working families.
Centre-right parties are not much more realistic. With the average Conservative member aged around 57, and over-65s favouring Theresa May in the last election by a staggering 35 percentage points, the Tories are unlikely to penalise their most supportive demographic, even at the cost of alienating younger generations.
But intergenerational inequality isn’t going away. One in six people aged 55-65 now own a second property, while a third of millennials will never own a home.
The government cannot continue to transfer wealth from the young to the old. An honest conversation about the economics of retirement is long overdue.