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Pension Crisis in Scotland?

U.S. states aren’t the only places facing pension crises at the moment: Underfunded and unsustainable pensions are wreaking havoc in Europe too. The Scotsman, in particular, is up in arms over new rules tying retirement to life expectancy; the paper describes the future under the rule changes as “a grim picture of aged toil.”

The gradual ratcheting up of life expectancy means that future retirees in the UK may be forced to continue working well into their seventies. And within the next decade, retirement age will rise from 65 today to 67. These changes will become more drastic as time goes on. Today’s toddlers may work until they turn 77, and their children are projected to work until they are 85.

The Scotsman (and others) shouldn’t forget the rather shiny silver lining to this supposedly ominous forecast: People may be forced to work longer, but that’s only because they are living longer too, and the new pension plan guarantees 20 years of coverage. Today’s youth may have to work until they are 77, but they can also expect to reach the ripe old age of 97 on average.

Via Meadia has long believed that work is an essential part of a healthy and happy life, so we find it hard to see this as bad news. The ability to continue working into later years is an important, life-affirming advance, and it’s no tragedy if pension policies reflect that truth.

What would be much, much worse is for 60 year olds to retire and then discover 20 years later that their retirement plans have gone bankrupt and that they face 17 more years of scraping by on what little is left. Rising life expectancy is a good thing, but like everything else it comes at a price. In this case, the price is more work.

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  • Jim.

    The Scots of today are a disgrace to their forebears, whose legendary capacity for ‘toil’ propelled Great Britain to heights never before seen by human endeavor.

    The Scotsman should change its title — it no longer deserves to bear that honorable name.

  • EvilBuzzard

    What actuarial tables were the original plans based on? Tacking 5 or 6 additional benefit years onto the end will cost some major scratch.

  • Kris

    I am reminded of this passage by David Warren: “My Gaelic, Calvinist ancestors (on my mama’s side), were very clear about the meaning of Labour Day. As they said, that is the day when we work especially hard, to prove how much our efficiency has improved over the last year.”

    Sure, I’d love to enjoy a 2-3 decade vacation at the tail-end of my life. But I have no right to that.

  • Kenny

    “Via Meadia has long believed that work is an essential part of a healthy and happy life,”

    That’s because Mead has had only soft jobs in his life.

  • Walter Sobchak

    I had thought that the Scots, who were formerly canny, hard working, and thrifty, had invented actuarial science. Sadly, it appears that when socialism turns your brain into mush, you forget absolutely everything you once knew.

  • Corlyss

    “Rising life expectancy is a good thing, but like everything else it comes at a price.”

    The Europeans have been dodging the price for their policies for so long they don’t know how to face up to reality.

    They dabbled at fratricidal world war, not once but twice, floundering around until the Americans came in to straighten things out. They couldn’t deal with the mess they made for themselves after peace finally arrived, so the Americans had to feed and clothe and stand guard over them while they recovered. Then by the time they were on their feet again, they had promised their posterity to make life easy for them with the cradle-to-grave welfare, which consummed all their birthright such that America was still standing guard over them 70 years later.

    Most assuredly America did this as much out of self-interest as altruism for our fellow Western nations. But my point is, when is Europe going to start learning from the consequences of their stupidity? Are they going to go on forever being spendthrift juveniles living in the basement of their richer relatives, never accountable for their own mistakes?

    Not to put too fine a point on it, but How Long O Lord?

  • Jim Blaisdell

    Via Meadia makes very telling points but forgets that as one get old one does indeed age even if one has lived a healthy lifestyle.

    Yes, folks maybe be working well into their later lives, but will they be up to the sixty hour work weeks I once endured. Of course not. Adjustments will have to be made.

    • Walter Russell Mead

      @Jim Blaisdell: You are right about the adjustments. I’ve blogged in other posts about the need to think about disability pay, retraining and other changes that make sense as the workforce ages. But it’s important to remember that life isn’t just getting longer; more people are staying healthy and active longer.

  • Hubbub

    Increasing the working life of the average individual may have a sobering effect on the longevity of persons. It may be that years of added stress that many jobs will put on a person may well lead to a shorter life span in the years ahead. Many jobs in our society today are high stress and not conducive to a healthful and productive life in the long run.

    In other words, a longer work life may be counter productive to a long life. We may end up with people living shorter lives.

  • Kris

    Hubbub@9: But if we support long retirements by increasing taxes on workers, that makes their own life more stressful, and decreases their ability to retire earlier…

  • Jeff77450

    Mr. Mead, I’m a fan and I almost always agree with you, but related to what Jim Blaisdel, Hubbub and Kris wrote I think that you know darn well that there are a whole lot of jobs that can’t be done from the mid-sixties on.

    I’m 53 and my wife is 43 and we both have very stressful “desk” jobs. Just the other day we were talking about how our brains/minds just don’t work as well as they once did and how much harder certain mental tasks are. A problem involving Excel that would’ve taken my wife at least half a day to resolve was solved in an hour (or less) by her 25-yr-old subordinate.

    As Mick Jagger used to sing, “What a drag it is growing old.” Figuratively speaking I’m crawling on my hands-and-knees to 62.

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