Expenditure on Pensions

[LNW-GW Joint]

mod note - split from :

More Delay for HS2, and how should we proceed?

It may only be in the Sun, reported by the BBC, but pressure is mounting to cap spend on HS2 because of high cost inflation. Delay to the Euston section or to the whole project, is in the air, to keep within present annual budgets. I'm not sure I believe the possibility of axing the Euston...

www.railforums.co.uk

Funding for pensions and infrastructure projects is not interchangeable (though the interest on the latter is).

 

[HSTEd]

The same treasury whose budget has swollen from £800B to £1.1T in 3 short years, that treasury? Pull the other one.

£800bn in 2020 is £960bn now, add to that the huge sums of money blown on various free money schemes over the last couple of years........

Have you ever asked yourself, where its all going?

Primarily into pensions and into hilariously expensive schemes like the free money handed out like candy for energy bills.

Funding for pensions and infrastructure projects is not interchangeable (though the interest on the latter is).

It is interchangeable this year and next.

It is not over 30 years, but that is a problem for the young to worry about.

 

[Meole]

Pension spend is 11.5% of government expenditure, about 5% of GDP, obviously it rises each year when there are more recipients excepting those years when the qualifying age rises. Suggesting this where the money goes is rather silly.

 

[HSTEd]

Pension spend is 11.5% of government expenditure, about 5% of GDP, obviously it rises each year when there are more recipients excepting those years when the qualifying age rises. Suggesting this where the money goes is rather silly.

OBR has pensioner benefit spending at 11.5% of government expenditure and 5.3% of GDP.

It's up from 10.5% of government expenditure (and 4.9% of GDP) last financial year, which is an increase of 0.4% of GDP.

0.4% of GDP swallowed in just a year! And even the OBR's optimistic projections have it growing another ~0.2% next year!

You can't sustain spending increases like that without crippling the rest of the government budget.

Cutting HS2, which is constantly in the news over spiralling costs and schedule disasters, is the easy way out of this mess, at least for a while.
Especially now more money is going to be needed to replace RAAC schools that will be empty by 2040 regardless.

EDIT:

Cleaned up the numbers with reads direct from the graphs.

 

[Meole]

As the numbers of elders rises each year the obvious answer is to increase the age of retirement substantially and also to increase the numbers of years that are required for paying in for state and occupational pensions, stopping early retirement in all sectors of the economy.

 

[Mogster]

As the numbers of elders rises each year the obvious answer is to increase the age of retirement substantially and also to increase the numbers of years that are required for paying in for state and occupational pensions, stopping early retirement in all sectors of the economy.

Aye, it’s the only way. People are living longer and staying active and healthy to an older age. There’s a labour shortage also.

 

[ld0595]

As the numbers of elders rises each year the obvious answer is to increase the age of retirement substantially and also to increase the numbers of years that are required for paying in for state and occupational pensions, stopping early retirement in all sectors of the economy.

Out of interest, how would you prevent people from retiring early? I understand you could raise the age at which you can start accessing a private pension but surely there's nothing stopping people living off other savings/investments beforehand?

 

[Merle Haggard]

snip/..

Primarily into pensions and into hilariously expensive schemes like the free money handed out like candy for energy bills.


/snip

Absolutely

This was based on giving everyone money.

But that money comes from everyone.

The money you received can only have come out of your own pocket through taxation.

How can anyone think this makes sense; on a variation to the norm, it's robbing Peter to pay Peter?

 

[Busaholic]

As the numbers of elders rises each year the obvious answer is to increase the age of retirement substantially and also to increase the numbers of years that are required for paying in for state and occupational pensions, stopping early retirement in all sectors of the economy.

I note that the French, with a similar size population, have come to a rather different conclusion.

 

[davehsug]

Aye, it’s the only way. People are living longer and staying active and healthy to an older age. There’s a labour shortage also.

How about those people who are just worn out? You really can't expect many people doing heavy manual work to carry on much longer than the current age? I work in an office, and approaching my 66th & retirement next year, I am becoming increasingly tired & wrung out by the work. I wouldn't be able to carry on mentally or physically.
You can't just keep raising the retirement age repeatedly, when those people will be neither physically or mentally able to carry on.

 

[Herefordian]

£800bn in 2020 is £960bn now, add to that the huge sums of money blown on various free money schemes over the last couple of years........

Primarily into pensions and into hilariously expensive schemes like the free money handed out like candy for energy bills.

I bet you weren't complaining when you received said free money.

 

[Snow1964]

Out of interest, how would you prevent people from retiring early? I understand you could raise the age at which you can start accessing a private pension but surely there's nothing stopping people living off other savings/investments beforehand?

They are raising the age you can draw private pension, from 55 upto 57, then 58 when state pension raise rises from 67 to 68. Not much you can do about those with other funds.

Could make it can't get state pension until have worked enough years (at the moment only need to get 10 qualifying years to get something), probably should push minimum up for those without certain level of assets or company/private pension pot value below say £100k. Stop people retiring when they need state benefits to top up because haven't saved enough for retirement.

A more controversial approach would be to accept that modern medicine can keep people alive, even if they haven't got any real life going forward and in certain circumstances allow dignified euthanasia. There is a cost of both pensions and extra health/care for some terminally ill that will spiral if doesn't accept modern medicine is expensively keeping some alive but can't restore their health. Not suggesting it should become widespread, but if number of circumstances are met then should be an option.

 

[JonathanH]

People are living longer and staying active and healthy to an older age.

Strictly life expectancy has been falling recently, and at this point in the year, the standardised rate of mortality in 2023 is higher than it was in 2019.

To some extent, that reduction in life expectancy should result in less money needing to be set aside in budgets for the pensions for the future.

Clearly it doesn't change the extra costs resulting from pension increases.

 

[Busaholic]

A more controversial approach would be to accept that modern medicine can keep people alive, even if they haven't got any real life going forward and in certain circumstances allow dignified euthanasia. There is a cost of both pensions and extra health/care for some terminally ill that will spiral if doesn't accept modern medicine is expensively keeping some alive but can't restore their health. Not suggesting it should become widespread, but if number of circumstances are met then should be an option.

I very much agree, but suspect this thread isn't the most appropriate place to discuss this.

 

[Bald Rick]

It’s pretty simple.

For most of the last 300 years (arguably 1000) we in the U.K. have lived off the principle that there are a lot more younger, working people than old, non working people. For the last 30-40 years or so, we have imported younger working people to offset the fact that we have been producing fewer of our own. However that strategy is now seen as a problem by many.

So there’s four choices:

1) everyone, on average, works longer
2) everyone, on average, accepts a lower standard of living
3) we start accepting significant numbers of young immigrant workers
4) we accept euthanasia for those who need high levels of care / medical help

In practice we are currently going down the road of 1) and 2). Sooner or later we will have to accept 3) and 4) If we want a better standard of living.

 

[Hadders]

It’s pretty simple.

For most of the last 300 years (arguably 1000) we in the U.K. have lived off the principle that there are a lot more younger, working people than old, non working people. For the last 30-40 years or so, we have imported younger working people to offset the fact that we have been producing fewer of our own. However that strategy is now seen as a problem by many.

So there’s four choices:

1) everyone, on average, works longer
2) everyone, on average, accepts a lower standard of living
3) we start accepting significant numbers of young immigrant workers
4) we accept euthanasia for those who need high levels of care / medical help

In practice we are currently going down the road of 1) and 2). Sooner or later we will have to accept 3) and 4) If we want a better standard of living.

Absolutely this!

A couple of days after the Brexit referendum we had a behavioural economist give a 'lunch and learn' talk at work on the how the economy works. The date was pure coincidence.

It was an excellent session and one of the things he did was put up a population pyramid graph of the UK (and several other countries) to demonstrate why we need a level of controlled immigration. The room went eerily silent as everyone realised what the majority of the country had just voted for......

ISTR Germany is staring down the barrell of an even bigger problem than the UK.

 

[HSTEd]

I bet you weren't complaining when you received said free money.

Actually I was, since I work in energy policy, and understood what an insane plan this was.

And I got no furlough since I had to continue doing my PhD as before, or trying to teach lab over Zoom.

3) we start accepting significant numbers of young immigrant workers

This won't be tenable for much longer if demographic projections in the rest of the world are anything to go by.
By 2050 there is likely to be a global shortage of workers, and it will become very difficult to find anyone to immigrate.

Even before Brexit the "traditional" Eastern European countries were more or less played out. Global population is going to go almost flat after 2050 and start falling again, and every time they revise the projection the peak gets nearer and smaller.

 

[Magdalia]

So there’s four choices:

1) everyone, on average, works longer
2) everyone, on average, accepts a lower standard of living
3) we start accepting significant numbers of young immigrant workers
4) we accept euthanasia for those who need high levels of care / medical help

Those are not the only choices.

A far better option than any of these is to improve productivity and economic growth, so that the population of working age earns more money, pays more taxes and can fund more pensions.

Part of this is improving the economic participation rate of the working age population. The UK has a particular problem with low rates of participation. The quick win here is to invest in the NHS to reduce the number of people not working due to ill health, both physical and mental.

It was an excellent session and one of the things he did was put up a population pyramid graph of the UK

If you only ever look at one graph in your life it should be this one! See section 4 of the results of the 2021 census here:

Population and household estimates, England and Wales - Office for National Statistics

Census 2021 rounded population and household estimates for local authorities in England and Wales, by sex and five-year age group.

www.ons.gov.uk

Overall, there were 30,420,100 women (51.0% of the overall population) and 29,177,200 men (49.0%) in England and Wales in 2021. This is similar to 2011, when 50.8% of the population were female and 49.2% were male.

The trend of population ageing has continued, with more people than ever before in the older age groups. Over one-sixth (18.6%, 11.1 million) of the population in 2021 were aged 65 years and over, up from 16.4% (9.2 million) in 2011. The size of the population aged 90 years and over (527,900, 0.9% of the population) has increased since 2011, when 429,017, 0.8%, were aged 90 years and over.

Nearly two-thirds (64.1%) of the population in 2021 (38.2 million) were aged 15 to 64 years. There are more people in this age group compared with 2011 (when 37.0 million people were aged 15 to 64 years), but as a proportion of the overall population there has been a slight decrease in the size of this group (65.9% in 2011).

The remaining 17.4% of the population (10.4 million) were aged under 15 years. There are more people in this age group compared with 2011, however, as a proportion of the overall population, the size of the group has decreased (9.9 million, 17.6%, in 2011).

 

[Yew]

Those are not the only choices.

A far better option than any of these is to improve productivity and economic growth, so that the population of working age earns more money, pays more taxes and can fund more pensions.

That would require a government and corporate structure that rewards long term returns, rather than asset-stripping the economy to make a quick buck for shareholders.

Part of this is improving the economic participation rate of the working age population. The UK has a particular problem with low rates of participation. The quick win here is to invest in the NHS to reduce the number of people not working due to ill health, both physical and mental.

But all that money could be given as kickbacks to the Conservative Party donors instead...

 

[SynthD]

How about those people who are just worn out? You really can't expect many people doing heavy manual work to carry on much longer than the current age? I work in an office, and approaching my 66th & retirement next year, I am becoming increasingly tired & wrung out by the work. I wouldn't be able to carry on mentally or physically.
You can't just keep raising the retirement age repeatedly, when those people will be neither physically or mentally able to carry on.

People who have spent their whole career in an office are considerably less worn out by their job than manual workers. If the term worn out applies to you, it feels meaningless. However, there are the burdens from the rest of life, such as paying off excessive house prices and caring for children and parents.

A far better option than any of these is to improve productivity and economic growth, so that the population of working age earns more money, pays more taxes and can fund more pensions.

Part of this is improving the economic participation rate of the working age population. The UK has a particular problem with low rates of participation. The quick win here is to invest in the NHS to reduce the number of people not working due to ill health, both physical and mental.

Increased productivity doesn't trickle down to higher wages. I think this is a goal promoted by the 1% for the 1%'s benefit.

 

[Snow1964]

It’s pretty simple.

For most of the last 300 years (arguably 1000) we in the U.K. have lived off the principle that there are a lot more younger, working people than old, non working people. For the last 30-40 years or so, we have imported younger working people to offset the fact that we have been producing fewer of our own.

If you look at the population pyramid, the diagram is 3 years old. But basically numbers reduce from about age 60 (the post war baby boom with people now in mid 70s is historic but clearly shows).

The largest age group, now early 60s (from early 1960s baby boom) are now approaching retirement. There are 3 noticeable dips in births, reflecting those now in late 40s, around 20 and last few years. You could say UK population profile is fairly stable, currently not really far fewer in working years than at pensionable age

InstantAtlas Durham – Population – Related Factsheets – Population – Population Estimates – ONS Population Estimate Pyramids

If change drop downs, there is however noticeable lack of working age in Wales and Scotland compared to pensioners, conversely London has loads of 20-40 year olds and fewer pensioners, so London is propping up the regions pension cost.

 

[Magdalia]

People who have spent their whole career in an office are considerably less worn out by their job than manual workers.

That's a sweeping and incorrect assumption. Being worn out isn't just about physical effort. Ill health can be mental, not just physical. And mental health issues, such as anxiety and stress, often have a knock on effect onto physical health.

Furthermore, a lot of non manual workers are now suffering from back and neck pain through not using laptops properly.

Increased productivity doesn't trickle down to higher wages.

That may have been the case in the past, but it not correct now, because of the tightness of the labour market. That's going to continue, as a result of what's in the population pyramid.

And from an economic point of view, whether higher productivity feeds into higher wages or not doesn't matter. What matters is whether the additional economic activity gets taxed, but that's another story.

conversely London has loads of 20-40 year olds and fewer pensioners, so London is propping up the regions pension cost.

That's not new, it is a life cycle thing. Many young people move to London, and other big cities, for work, then move out and become commuters as they get older, or move out when they retire.

 

[Bald Rick]

Those are not the only choices.

A far better option than any of these is to improve productivity and economic growth, so that the population of working age earns more money, pays more taxes and can fund more pensions.

You are quite right, and on reflection this morning I realised that. Productivity is key.

However in some parts of the economy the population (and sometimes politicians!) are very reluctant to improve productivity. At risk of setting off a few klaxons in Moderator Towers; in the railway world we find it very, very difficult to improve productivity, for example by culling management processes, implementing DOO or closing ticket offices…

This won't be tenable for much longer if demographic projections in the rest of the world are anything to go by.
By 2050 there is likely to be a global shortage of workers, and it will become very difficult to find anyone to immigrate.

That’s on the assumption that the U.K. isn’t a more attractive place for young workers than their home country. In my view, we won’t have a problem, so long as we choose to have immigration friendly policies and other nations don‘t restrict emigration.

Global population is going to go almost flat after 2050 and start falling again, and every time they revise the projection the peak gets nearer and smaller.

I agree, I have a hunch that global population will peak in the early 2030s.

 

[Magdalia]

You are quite right, and on reflection this morning I realised that. Productivity is key.

However in some parts of the economy the population (and sometimes politicians!) are very reluctant to improve productivity. At risk of setting off a few klaxons in Moderator Towers; in the railway world we find it very, very difficult to improve productivity, for example by culling management processes, implementing DOO or closing ticket offices…

On the other hand, projects such as Thameslink and the Elizabeth Line have been very effective at improving productivity, though they have needed a lot of investment.

Making a significant improvement to productivity isn't about squeezing marginal gains out of things we are doing already. It is about getting out of low productivity activities and into high productivity activities. The UK economy has a huge opportunity to do this right now with renewable energy and life sciences.

I agree, I have a hunch that global population will peak in the early 2030s.

I'm not as optimistic as that, because population is still increasing rapidly in Africa. It will be when China and India outsource their low end manufacturing to Africa that population growth there will slow.

 

[eldomtom2]

It’s pretty simple.

For most of the last 300 years (arguably 1000) we in the U.K. have lived off the principle that there are a lot more younger, working people than old, non working people. For the last 30-40 years or so, we have imported younger working people to offset the fact that we have been producing fewer of our own. However that strategy is now seen as a problem by many.

So there’s four choices:

1) everyone, on average, works longer
2) everyone, on average, accepts a lower standard of living
3) we start accepting significant numbers of young immigrant workers
4) we accept euthanasia for those who need high levels of care / medical help

In practice we are currently going down the road of 1) and 2). Sooner or later we will have to accept 3) and 4) If we want a better standard of living.

5) the government enacts measure to provide significant support to parents to raise the birth rate

For some reason this option isn't considered politically correct even though it's the only sensible option.

 

[SynthD]

5) the government enacts measure to provide significant support to parents to raise the birth rate

For some reason this option isn't considered politically correct even though it's the only sensible option.

It takes too long, it increases the problems of house prices and care costs for children and elderly parents. It's not popular with the pensioner voting bloc, because the policy requires diverting funding from those who have five spare rooms to those that can't afford a second bedroom for their child.

 

[birchesgreen]

5) the government enacts measure to provide significant support to parents to raise the birth rate

For some reason this option isn't considered politically correct even though it's the only sensible option.

It is difficult to achieve. There are a number of examples around the world of countries trying this but the birth rate continues to drop. I believe France did have some success though.

 

[Bald Rick]

It is about getting out of low productivity activities and into high productivity activities.

I agree, but there’s nothing very productive about sitting in a ticket office selling about tickets in a shift.
(*Klaxon sounds*)

For some reason this option isn't considered politically correct even though it's the only sensible option.

It’s not at all sustainable either.

 

[ainsworth74]

5) the government enacts measure to provide significant support to parents to raise the birth rate

For some reason this option isn't considered politically correct even though it's the only sensible option.

Is it due to it not being "politically correct" (whatever that means) or it being something which a) has not shown all that much sign of being something that's easy to achieve even when you do throw money at people to have kids and b) even if it does work it taking at least two decades, probably more like three, before it will have any real effect on the economics of the country (well, other than costing a lot in the meantime!).

I don't particularly object to the idea of making things easier for people to have children, it does seem quite remarkable we've gotten ourselves to the point whereby people are actively avoiding having children due to the feeling that they cannot afford them. But I'm not convinced that it's a particular solution to the issues staring us in the face. We need more young working people now not in twenty years. If we had wanted to use this option we'd have needed to start back in the 1980s or 1990s.

 

[eldomtom2]

It is difficult to achieve. There are a number of examples around the world of countries trying this but the birth rate continues to drop. I believe France did have some success though.

I don't believe any country has made a really serious attempt to dig down into the causes of people not having children and attempted to correct them.

It’s not at all sustainable either.

How do you work that out? To my mind it's the only sustainable solution.

I don't particularly object to the idea of making things easier for people to have children, it does seem quite remarkable we've gotten ourselves to the point whereby people are actively avoiding having children due to the feeling that they cannot afford them. But I'm not convinced that it's a particular solution to the issues staring us in the face. We need more young working people now not in twenty years. If we had wanted to use this option we'd have needed to start back in the 1980s or 1990s.

I did not say it was a complete solution. But it is the only long-term one, and short-term solutions cannot be used as an excuse to delay it.