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Sustainable Pensions: Securing our Future Amidst Demographic Changes

Addressing the future affordability of pensions, this lecture explores demographic impacts on welfare spending and proposes solutions such as adjusting tax rates, altering consumption patterns, and working longer. It discusses the feasibility of a sustainable pension system through private savings on a secure state platform, base-line eligibility criteria, and redressing gender inequalities in schemes. The Dutch pension system is examined for its simplicity, inclusivity, and progressive funding model. Modifications are suggested to align pension generosity with political feasibility and cater to diverse working populations, ensuring financial protection for all.

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Sustainable Pensions: Securing our Future Amidst Demographic Changes

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  1. STICERD 25th Anniversary Lecture Can We Afford our Future? Emeritus Professor Howard Glennerster FBAESRC Professor John HillsLSE, Chair Conference and Events Office www.lse.ac.uk/events

  2. Population structure, 2001 and 2051

  3. Age distribution of welfare spending, 2001

  4. No Problem! • Demography has a small impact • The UK has already taken the steps necessary on pensions • The problem is self correcting

  5. Treasury projections, age related spending(% GDP)

  6. Age related spending, % GDP

  7. Our future? • Paying more in tax • Reducing mid life consumption patterns • Working longer • Getting used to lower incomes in retirement

  8. A Feasible Future • Private saving based on a secure state platform • Base line above means test • Higher full pension age • Secure against private system and personal risks • Redress gender inequalities in private schemes

  9. Dutch citizens’ pension • Drawn at 65 (women earlier if not working) • Entitlement over 50 years of residence • Contributions as a percentage income tax • Pension takes virtually all off means tests • Adjusted as wages rise – linked to minimum wage

  10. Advantages • Incentive to join funded schemes • Simple • No complex contribution records • Does not disadvantage women and those with limited lifetime work records • Progressive funding

  11. Modifications • Generosity linked to political feasibility • Employer contributions could be kept • Age at which get pension could be 68 • Years to qualify negotiable • Pensions needed for those incapable of full work

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