The fall and fall of the state pension

The welfare state in its most ambitious form simply could not be afforded. So bits of the building have been quietly allowed to fall off. NHS dentistry has been in decline for a long time. So have NHS spectacle. Council housing is gradually declining as a proportion of total housing stock. And another thing that has been found to cost too much is a relatively high level of state pension from the age of 65. It has steadily declined in relation to average incomes (and been replaced, to a large extent, by the disastrous means-tested pension credit).
The papers today have a story that the state pension age could be raised to 67. This will be a long overdue acceptance of vastly increased longevity. It is an example of the way the state is very slow to respond to changes in reality, in marked contrast to mutual or commercial providers. Even now, the the proposal is only that. It is not an act of parliament. More concrete are the figures that came out in yesterday’s papers:

During 2003-04 the state pension accounted for 51p of every pound a pensioner received, but by next year this is set to fall to just 46.9p, according to research carried out by Datamonitor, the market analysts, for Prudential, the financial services group. The report predicts that, based on current trends, the state could be providing just 44 per cent of people’s pension by 2013-14.
People will, instead, become increasingly reliant on private provision to support them during retirement, such as personal and occupational pensions, savings and investments and unlocking money from their homes.
The shift is a far cry from 1908 when the Old Age Pension Act was set up by Lloyd George’s Liberal Government to provide the majority of retirement income for people over 70 on low incomes.
Even in 1979 state benefits still accounted for nearly two-thirds of the average pensioner’s income.

That is from the Daily Telegraph coverage.
It is quite a change. State pensions provided nearly two-thirds of pensioners’ incomes in 1979 and are now expected to be down to 44 per cent by 2013-14.
It is a shame that people have been misled by politicians – notably Gordon Brown – about what pensions they could expect.
A decent government would tell people frankly “the state will not provide – get saving”. But that would amount to politicians not promising to give money away. So don’t hold your breath.

  1. Why don’t people save?
  2. The scandal of public servant pensions
  3. Mr Brown taxes the poor (another angle)
  4. Taxpayers’ money wasted on excessive public sector pensions
  5. The war orphan’s pension in ancient Athens
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