Issue: 166
Sent: 23-06-2009 12:25:02
In this issue:

Microsoft to Enter Bankruptcy Protection!Email Marketing Business Opportunity - Helen BairstowLonger Working LivesThe Easiest way to do a Client NewsletterWhy Warren Buffett won't buy a NewspaperThe Structure of Financial Services
Return to full article list
HomeFree weekly newsletterSelf Managed Super Fund ArticlesContact usLogin

Longer Working Lives

Click here to buy - A How To Book of SMSF's by Tony Negline
Lester Wills

Having put together a series of 3 articles around people working longer, I discovered research on the concept which formed part 4 of the series. Low & behold I then discovered some new material published in the Financial Times entitled "Opinions shift towards longer working lives" by Norma Cohen

What the pierce revealed was that a majority of Britons now actually favour longer working lives, providing it means that are likely to end up with a more generous pension in retirement. As Cohen points out, this is a significant shift of opinion in 4 years because when the subject was raised by the Pensions Commission in 2005, opinion was anything but favourable.

A Financial Times study by Harris survey in May 2009, found that 60 per cent of respondents would support working beyond the current state pension age (65) in order to receive a bigger pension. Of perhaps more significance was the fact that only 13 per cent of respondents described themselves as "strongly opposed" to such a policy. As Cohen argues, perhaps Brits are finally ready to debate one of its long-cherished pillars of the social safety net, namely retirement at age 65. The results in other parts of Europe are very mixed. I somehow doubt Aussie is ready for that debate, despite the recent moves by the Rudd Government. I point towards the snail's pace of reform raising the retirement age to 67 over the number of years. Hardly radical you must admit.

If this is really a tipping point in public opinion in the UK, it would be good news for a government whose like many at the moment is rapidly expanding the level of public debt. In the UK the government has estimated it needs to borrow £175bn this year alone resulting in a negative outlook from Standard & Poor's. This was a clear warning that the country's triple A rating is now under threat.

To illustrate just how important the issue of extending working lives is, recent research from the National Institute for Economic & Social Research estimated that adding five years to working lives by raising state social security ages could help the UK return to a level of debt below the "golden rule" of 40 per cent of gross domestic product by 2023.

But of course, things are never quite as simple as they appear (see the previous articles in this series for examples of what I mean). As retirement experts point out, there is much more at stake. Ros Altmann, a specialist in pension economics, argues that Britain needed a rethink that goes well beyond the state pension. As she so rightly points out, pensions alone cannot solve the pensions crisis, we need to rethink retirement.

As with many countries today (including Australia), current demographics point towards the path of economic decline unless older people can be kept in the workforce. This is because a country with an ageing population quite simply does not produce enough young workers to keep the nation economically productive.

As Altman notes, part of the problem is that the concept of retirement was viewed far too rigidly, with the expectation people go from full employment on a Friday to zero employment on the following Monday. It is what I called the 'entitlement' approach, i.e. I have paid my taxes and so have earned the right to put my feet up (regardless of any economic reality). This may well have been the case for my parents generation but it is simply not realistic for the Boomer generation.

Not surprisingly Altman argues that reforms are badly needed to make it easier for older workers to slip into part-time from full-time employment and to retrain. She went on to claim that age and retirement policies are stuck in the 1940s, not something I would actually fully agree with. More like the early 1900's in my mind but that is splitting hairs.

As I pointed out in a recent piece, the economic downturn may be forcing people to rethink their retirement plans, which given the unsustainable nature of present practices in no bad thing. This is important as I just have a feeling that this is going to be a little like global warming. We all knew about it but no one really paid much attention and then suddenly it was front and center. Kind of crept up on us, a little like the movie stars that have taken years to become an 'overnight sensation', it was always there but we just did not pay much attention.

When asked if they would support or oppose working beyond their country's state pension/social security age in order to receive a bigger pension, the results supporting the move were:

UK 60%
France 45%
Italy 59%
Spain 45%
Germany 30%
USA 65%

It seems to pertinent to ask where Aussie is in this debate?

Share this article
Click to share this article on Facebook Click to share this article on Twitter

Previous article         Next article

If you liked this article and would like more by email, subscribe! It's free.

[Bold fields are required]

Your details

Your alternate email address is used only if messages to your primary email address are returned to us.


Do you work in the financial services industry?

This email is general in nature only and does not constitute or convey specific or professional advice. Legislation changes may occur quickly. Formal advice should be sought before acting in any of the areas discussed. Be aware that the information in these articles may become innaccurate with time. Responsibility is disclaimed for any inaccuracies, errors or omissions. Particular investments are neither invited nor recommended and hence this publication is not "financial product advice" as defined in Section 766B of the above legislation. All expressions of opinion by contributors are published on the basis that they are not to be regarded as expressing the official opinion of any other person or entity unless expressly stated. No responsibility for the accuracy of the opinions or information contained in the contributor's articles is accepted by any other person or entity. Copyright: This publication is copyright. If you wish to reproduce this article you require a license, which can be purchased here, to do so.

Site design by Raycon