26 May 2006
In this special article, the PM reflects on the Government’s Pensions White Paper.
I can understand why the under-30s turn over or switch off every time they read or hear the word pensions.
There’s enough happening in life and enough problems without worrying about money forty years down the track.
But with the number of pensioners set to increase as we live longer and the number of people in work set to fall as fewer children are born, there is a real danger for your generation.
The risk is that while those in work fund the retirement of pensioners today, there won’t be enough people in work to do the same for you when you retire.
The fact that the number of people over 100 years old is expected to increase from 9,000 today to 160,000 by 2050 gives some insight into the challenges ahead.
And while there are now four people in work for every one in retirement, it’s estimated that number will have halved to two workers for every pensioner by 2050.
So that’s why the pension reforms we announced yesterday put your generation at their heart.
They are a blueprint for the next 50 years for a fair, simple, affordable and long-term pension system which balances the needs of pensioners today with pensioners in the future.
Our goal is a basic state pension in the future which is a strong foundation for security in old age for everyone.
So from 2012, we want the basic state pension to rise in line with earnings so it will better reflect our country’s rising prosperity.
And we’ll make sure mothers and carers don’t lose out on pensions as they do now if they take time off from work to look after children or elderly relatives.
All this costs money - as has lifting two million existing pensioners out of poverty over the last nine years.
Which is why we have to phase in the changes and balance them with other pension reforms to ensure they stay affordable.
But while it will mean a bigger basic state pension, it’s still not going to fund luxury in retirement.
If you want, for example, to continue travel widely when you have all the time in the world to enjoy it, you’ll have to save on top of the basic state pension. And the sooner you start the better.
Even small sums saved now in a pension will make a difference. And the longer you put it off, the more you’ll have to save later or spend your retirement worrying about money.
So we’ll help by making it easier and more attractive for all - and particularly those not now in occupational or private pensions - to save more.
It’s not Britain alone which is facing these difficult challenges. All developed countries are. And in many ways, we are much better placed than most.
But it will require hard decisions for everyone - for Government, for business and for individuals.
As we are living longer and healthier than ever before, it will mean having to wait slightly longer before you get the state pension.
The changes will come in gradually so by 2050, the basic state pension won’t be paid until you reach 68.
This reflects the fact that we are living much longer than when the pension age was first fixed at 65.
Back in 1951, for instance, men at 65 only lived on average 12 more years compared with 19 years now and an estimated 21 years by 2051.
So if this step wasn’t taken, it would be very hard for the country to afford the long-term pensions bill.
If you want to retire earlier, you can. But it’s another reason why you will have to put more money aside in your occupational or private pension to fund it.
One of the great achievements of the last century has been that we are all living longer and more healthier than ever before.
But, because of the challenges of funding old age, this fact is often seen as a problem rather than the success it is.
By putting in place a sustainable, affordable and trusted pension system which encourages people to save, we can celebrate this success by making sure you can look forward to a long and happy retirement.
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