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Can We Afford our Future?

STICERD 25th Anniversary Lecture. Can We Afford our Future?. Emeritus Professor Howard Glennerster FBA ESRC Professor John Hills LSE, Chair. Conference and Events Office. www.lse.ac.uk/events. Population structure, 2001 and 2051. Age distribution of welfare spending, 2001. No Problem!.

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Can We Afford our Future?

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  1. STICERD 25th Anniversary Lecture Can We Afford our Future? Emeritus Professor Howard Glennerster FBAESRC Professor John HillsLSE, Chair Conference and Events Office www.lse.ac.uk/events

  2. Population structure, 2001 and 2051

  3. Age distribution of welfare spending, 2001

  4. No Problem! • Demography has a small impact • The UK has already taken the steps necessary on pensions • The problem is self correcting

  5. Treasury projections, age related spending(% GDP)

  6. Age related spending, % GDP

  7. Our future? • Paying more in tax • Reducing mid life consumption patterns • Working longer • Getting used to lower incomes in retirement

  8. A Feasible Future • Private saving based on a secure state platform • Base line above means test • Higher full pension age • Secure against private system and personal risks • Redress gender inequalities in private schemes

  9. Dutch citizens’ pension • Drawn at 65 (women earlier if not working) • Entitlement over 50 years of residence • Contributions as a percentage income tax • Pension takes virtually all off means tests • Adjusted as wages rise – linked to minimum wage

  10. Advantages • Incentive to join funded schemes • Simple • No complex contribution records • Does not disadvantage women and those with limited lifetime work records • Progressive funding

  11. Modifications • Generosity linked to political feasibility • Employer contributions could be kept • Age at which get pension could be 68 • Years to qualify negotiable • Pensions needed for those incapable of full work

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