Pensioners make no extra call on the state

Click to follow
The Independent Online
Britain is going grey - like every other advanced country except the United States. But the rate at which we are ageing and the problems of pensions and care that brings are often exaggerated by opponents of the welfare state.

The majority of old people make no special calls on government support beyond their state pension. They either fend for themselves or are looked after perfectly satisfactorily by friends and family - and experts say there is no reason why this should not be as true in 2020, or even 2040 when the "demographic crisis" will be at its peak (and when today's 19- year-olds will be retiring). Britain meanwhile is ageing at a far more comfortable rate than nearly every other country in the western world - or Japan, where within two decades one in three of the entire population will be over 65.

At the turn of the century just over 9 million people will be over 65 - out of a total United Kingdom population of just under 60 million. A half century later, in 2051, total population will have fallen slightly to about 56.6 million while the number of older people will be up to just under 14 million. Recently the trend of the revisions regularly made in these figures by official statisticians has been downward.

For the first 30 years of the new century there will be a small increase in the very old, those aged over 85, who have the most need for health and social care. The critical decades will be 2030 to 2050 when their numbers rise by nearly 1 million.

Behind this great-granny bulge lies a dip in the number of those aged between 40 and 70, who do most of the caring. The number of very old people needing long-term care is now about 1.5 million and will grow to 2 million by the end of the first decade next century then to about 2.7 million by 2031. That points to a need for increased care outside the home, which somebody is going to have to pay for.

According to the Joseph Rowntree Foundation, a payroll tax of 1.5 per cent of average earnings, instituted now, would provide more than enough to meet the extra costs of care.

State pensions currently cost about pounds 26bn a year and their cost is projected to rise at about pounds 1.5bn a year. But, according to the authoritative Institute of Fiscal Studies, the real cost of state pensions is going to fall - from 4.3 per cent of GDP now to 3.5 per cent by 2030.

The reason is that in 1980 the Government cut the link between the state pension and earnings which means pensions are increased each year only in line with inflation.

Currently a state pension is worth about 32 per cent of a male worker's average earnings. By 2040 that is predicted to fall to 22 per cent - which means, relatively speaking, that the day after tomorrow's pensioners will be poorer if they rely on the state alone.

David Walker

Comments