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Home > Legal & Financial > We’re not getting any younger -Phill McCoffers

We’re not getting any younger -Phill McCoffers


According to a recent report, UK pensioners have a higher monthly income than the average working household in the UK, only by £20 admittedly, but it is a trend heading in the wrong direction if long term growth and prosperity are your goal. In 2001 workers out earned pensioners by £70 per week so the turnaround has been rapid, and is likely to speed up. It is explained largely by the accumulation of property, state pensions and relatively generous defined benefit pensions schemes amassed during long careers…benefits that are unlikely to be available to the generations that follow.

Large parts of the world, primarily the developed Western countries, China and Japan, have a significant problem looming not so very far over the horizon. People are not breeding anywhere near enough to cope with an ageing population with longer life expectancies. There is a demographic sweet spot that keeps economies ticking along nicely that has a large number of workers, who both contribute and consume, and a lower number of retired workers who, in the main contribute little in terms of productivity and consume a great deal. The post WWII economies had, more by luck than judgement got this balance exactly right. A baby boom of well educated, healthy, productive workers, and a smaller number of pensioners with life expectancies just a few years beyond retirement age. The prosperity generated by that generation built a welfare state, and facilitated home ownership for the masses for the first time in history, and it wasn’t just the UK, it was replicated across the Western world and the odd Asian tiger economy.

Experts calculate that the minimum required birth rate to maintain a healthy demographic that ensures a healthy economy is 2.1 kids per woman, the developed world is nowhere near this. Spain has 1.3, Germany 1.5, UK & US 1.8 and China 1.6. Modern parents are having to struggle with the economic realities of recession, rising housing costs, rising costs of education and the burden of student debt, less secure jobs, and much less generous pension schemes. As a result people are choosing to have fewer kids, or waiting until their mid 30’s before being in a position to start a family. Couple this with the rapid rise in life expectancy, and the increasing costs of modern medical treatments to keep the elderly healthy and you start to see a dangerous bubble with a large aging population consuming more than they produce, reliant on a diminishing working age population available to pay for it all. Germany for example has the world’s second oldest population with 21% of the population over 65, while Japan holds the top spot with more than a quarter over retirement age.

This problem has the potential to gather its own momentum and snowball downhill rapidly. Parents who feel the pinch economically speaking have fewer kids, so the next generation will be pinched even harder, so they will have fewer kids, and so on.

So how do you fix it? It is tough to see how you can encourage the birth rate up, so you can move more people into the working sector by raising the retirement age. This seems almost inevitable and has been mooted in a few European countries, with considerable resistance from pensioners who see the goalposts move just as they are thinking of spending a little more time on the golf course.

You could always try to fix it at the other end of the graph. If you can’t breed them, import them. It seems like an obvious solution to the problem, the developing world is still producing much higher birth rates than the developed world, a population with increasingly improved education, and a strong desire to improve their lot in life. Well, that’s also been tried and recently appears to have been a disaster. In 2015 Germany opened its borders to 800,000 immigrants (equating to roughly 1% of the population), many fleeing conflict in the Middle East with the aim of both helping the immigrants and boosting the working population at a stroke. Other Western nations may not have been quite so welcoming, but have still seen increasing inward migration. The result, appears to have been a lurch to the right in global politics as populations recoil from the cultural dilution and misperceptions of ‘lazy’ or ‘dangerous’ migrants, and effectively pull up the drawbridge by voting for Brexit, Donald Trump, and in the next year possibly Marine LePen and Geert Wilders. We are going to have to learn to welcome migration as a good thing, and find ourselves something productive to do until our 70th birthdays if we want to keep granny in bingo and buspasses, or hang gliding lessons and yoga until her 100th birthday.