Retirement is billed as something to look forward to – a time to relax, travel and do as you please after years of working hard. For many, especially homeowners with generous private pensions, it is just that, but with nearly two million pensioners living in relative poverty, it is far from a universal experience.
Rising life expectancy, increased care costs and shifting government policies – including speculation that the triple lock state pension is now unaffordable and that the pension age will rise to 70 – are forcing people to work longer.
So is Britain’s retirement dream over? Nigel Kendall, Callum Mason and Hamish McRae offer their perspective.
It’s widely accepted that the baby boomers – those currently aged between around 63 and 79 – are the richest generation in history.
Making sweeping generalisations about demographics clearly doesn’t tell the whole story – there are always exceptions – but broadly speaking, current retirees are enjoying some of the most lavish retirements on record.
There are a few key reasons for this. Firstly, almost three-quarters of people aged 65 years and over in England own their home outright, meaning they have no housing costs to contend with in their later years. This has soared in recent years – the figure was just 56 per cent in 1993.
Secondly, many from this generation are now enjoying the fruits of a once common, but now scarce, type of retirement income – the defined benefit (DB) pension.
This type of pension guarantees a set annual income for life based on your salary, regardless of how long you live for. Once offered widely across the private sector, they became less and less common as firms realised the costs of providing them were becoming higher and higher.
Finally, there is the state pension. I am not going to argue that the state pension alone is enough to live off. It is a small amount and those who rely on it struggle to make ends meet, but for those who see it as a bonus on top of their private income, it is a strong earner.
Over the past 15 years, the triple lock mechanism has ensured the state pension has risen faster than both wages and inflation, giving pensioners an extra boost to their take-home pay at a rate not seen by most of the working population.
All of the above have contributed to a feeling among some younger people – the millennials and Gen Zs of the world – that their older relatives are enjoying lives of luxury.
If you mention the above to the retirees, they often get unsurprisingly defensive. There is a sense that they are being accused of being handed their wealth on a plate, and that they are undeserving. That’s obviously not the case. Most enjoying their retirements will have worked hard.
But the honest truth is that it’s possible we have reached “peak retirement” – the generations of the future are far less likely to enjoy a similar standard of living in their later years, no matter how hard they work.
The triple lock did not exist before 2011 and politicians privately admit that continuing it for much longer is not sustainable. It seems a case of when, not if, it goes. We can also assume that the pensioners of the future will also not benefit from many of the other financial advantages that today’s retirees do.
Perks for over-60s – free travel, discounted sports events and other freebies – feel increasingly like relics of a bygone era when pensioners struggled for cash in their later years, rather than something to hand out to a generation that are statistically 33 times richer than their younger counterparts.
It’s reasonable to assume they will slowly disappear as society comes to terms with this over the next few decades. And what about the tax benefits that pensioners currently enjoy? They can pull a quarter of their pensions from their pots without paying income tax under current rules, and pay lower tax on their other income because of their exemption from national insurance.
Rumours about changes to both these tax rules have been rife ahead of November’s Budget, but even if they don’t occur next month, experts say that changes in some form seem inevitable if growing social care, defence and welfare costs are to be funded properly in the decades ahead.
Ultimately, this generation of pensioners has hit the jackpot. For younger people like me, we can’t begrudge them. They should enjoy it while they have it – but they should be aware of how lucky they are.
