UK health infrastructure can’t cope with people living longer, so what’s our plan B? asks Sara Benwell
Younger generations have been dealt another blow as research from HSBC shows they will need to save for nearly a decade longer than the previous generation before they can retire.
The study found that young people expect to save for a period of 30 years before they retire, compared to the current generation of retirees who saved for only 23 years. On average, pre-retirees expect to work until they are 63, compared to 59 for people who have already retired.
The first instinct is to think this is yet another example of the inherent intergenerational unfairness built into the pensions system, and it is. But actually these longer working lives may not come to pass, and that’s an even bigger problem.
There are obvious tranches of society where longer working is impractical. For instance, unless we find a way to retrain people in physically demanding jobs, it is unlikely that they will be able to work into their 60s or 70s. Equally people who suffer from dementia are unlikely to be able to continue working indefinitely.
The UK is going to struggle to get there because frankly our population is not healthy enough”
But actually it’s not just the obvious sections of society for whom working into old age is unlikely. The evidence suggests that it may be an unrealistic dream for the UK as whole.
Research into the international pensions landscape from the OECD found that people may not be able to lead longer working lives because of ill health. Mark Pearson, deputy director of the directorate for employment, labour and social affairs at the OECD said: “The UK is going to struggle to get there because frankly our population is not healthy enough.”
He argued that there was significant evidence to show that the decline in health is more rapid in the UK than other countries . He added that the UK health system was not prepared to deal with people living longer.
At the moment people are still buying into the myth that living longer will solve our problems”
This analysis shows that the UK is on the brink of a crisis. Consistently we are told that the answer to people not saving enough is for them to work longer. But this research suggests that this may not be plausible. We need a plan B – but at the moment people are still buying into the myth that living longer will solve our problems.
The obvious alternative is to get people saving more when they’re younger, but with auto-enrolment contributions rates low and young people trapped in an out-of-control renting environment we’re unlikely to see this happening anytime soon.
The HSBC research found that over one in five pre-retirees still have not started saving for their retirement. Meanwhile, of the 79% who have started saving, 28% have either had to stop or have faced financial difficulties.
Unless something is done quickly it will be too late for many people. We need employers to incentivise people to save through higher contributions and we need to start putting minimum rates for auto-enrolment up now.
Otherwise we’ll end up with a generation of people who are unable to continue working, but too poor to retire.