tax incentivised savings association Malcolm Small Director of Policy “Financing Retirement – History and the Policy Agenda”

What Will We Cover In This Lecture? The Current UK Pensions Landscape A Short History of Retirement Some international Perspectives Life Expectancy And Healthy Ageing: The Scale Of The Challenge in the UK The Implications Possible Policy Responses Create An Understanding Of The Macro- Policy Impacts For Retirement

But First, A Story About Steam Engines And A Watch…

The Current Landscape in the UK The Pension Tsunami The Forward Outlook For Generations “X” And “Y” Is Not Good Group Personal Pensions Baby Boomers D.B. Schemes Generation “X” YOU ARE HERE - Have A Nice Day!

A Short History of Retirement The idea of “retirement” is relatively recent; Bismarck Crystallised in the UK post-war; Beveridge Report Developed world typically has a 2 or 3 tier system – state and private State systems typically Social Insurance or Contributory – allegedly Typically “paygo” – sustainable?

Some International Perspectives State Retirement Benefit systems under pressure..... Where they exist at all Entitlement vs. Means Tested benefits Private saving patchy across the planet But some successes; Australia and China Workplace pension schemes on the march in Europe, but in decline in the UK

The UK Savings Landscape Occupational Schemes Down: , , Million Non-Joiners 10 Million Plus Not Saving In A Pension Switch To Group Personal Pension Plans: 3 Million Saving £6.7 Bn P.A. Self Invested Personal Pensions: 500,000 Accounts, £250 Bn But £350 Bn In Individual Savings Accounts £400 Bn In Occupational Defined Contribution The Pensions Market Is In Flux

Life Expectancy And Healthy Ageing: The Scale Of The Problem Projected Principal Period Life Expectancy (ONS) Is this projection credible? Years

Life Expectancy 2 Average Male Life Expectancy Now 80 – Was 66 In 1948 Male Age 65 = 17 Years Life Expectancy Female Age 65 = 20 Year Life Expectancy But Healthy Life Expectancy Just 13 Years And 15 Years Respectively Life Expectancy Varies By Social Class/Location Life Expectancy And Healthy Life Expectancy Are Separate Issues

Life Expectancy 3 Male 65 Cohort Life Expectancy Forecast To Be 25 Years By 2051 Females 28 Years Population Aged 80(+) To Grow From 2.8 Million In 2008 * To 5.8 Million In 2033 * To 10.6 Million In 2083 Number Of People Over S.P.A. Will Increase 32% By 2033 But Number Of Under 16s Will Only Increase By 10% Who Is Going To Pay?

Life Expectancy 4 DWP research suggests male life expectancy increased by 44 days in the last year 939,000 people over State Pension Age today will live to be 100 (currently 12,400) In 2081 there will be 22,000 adults aged 110 or over Nearly 30% of today’s children will live to 100

Life Expectancy 5 And It Could Get Even More Interesting Who Would Want To Take A Bet? Life Expectancy Assumptions Could Go Seriously Wrong

The Implications 1 In 2 Men And 2 In 3 Women Will Need Higher Dependency “Care” Long-Term Care “The Elephant In The Room” Public And Private Pension Systems Cannot Support A 30 Year “Retirement” From An, Effective, 35 Year Working Life – They Were Not Designed To Do So We Need To Re-Think “Retirement”

Policy Responses Raise State Pension Age To 70, Then Index To Life Expectancy Current Proposals To Little, Too Slowly We’ll All Need To Work Longer......And Employer Attitudes Will Need To Change: How Do We Support Older Employees? State Retirement Benefit System Requires Reform... To Provide Real Incentives To Save Employees Will Use A “Mix” Of Retirement Funding Solutions

Policy Responses 2 Auto-enrolment into pension saving Will 8% be enough? Will employees opt out in numbers? Flat rate future state pensions – but what about today’s pensioners? The battle to make pension saving attractive again – a tarnished “brand”? Abolition of Default Retirement Age

Conclusions Employers Moving Away From Pensions, for now Towards Other Reward Structures Long-Term Care: How Do We Pay? Tax? Auto-enrolment; compulsion soon? How Much Longer For Tax Relief on Pension Saving? But it’s not all doom and gloom; we are all living longer, healthier, more active lives than ever before, But we do need to re-think “retirement”.

Thank You