The Dependency Trap - are we fit enough to face the future?
L. Mayhew · City Research Online (City University London) · 2018
A cynic might say that we would be lucky to live long enough to face the problems identified in this report.Maybe, but the problems of financing old age in an era of increasing longevity, less security of employment and the decline/disappearance of the old defined benefit pension plan are enormous.Governments (of whatever hue) are not unaware of the problem, and are making efforts to tackle it -inter alia by auto-enrolment of workers into pension schemes (eg Nest), by removing the burdensome annuitisation requirement, by eliminating the mandatory retirement age, and (most controversial of all) by nudging the State Pension Age up.But is that enough?This report -written by Professor Les Mayhew of the Cass Business School, at City University (and a former senior civil servant in the DHSS, DSS, Treasury and ONS) -suggests that it is not.And that even the report produced by John Cridland in March 2017 may have been too optimistic in its recommendations as to what needs to be done to maintain the sustainability of the present pension promise.Prof Mayhew's contribution is to focus not simply on longevity, but on what he calls 'active ageing'.Raising the SPA will not, by itself, resolve the problem unless it is accompanied by measures to reduce disability (physical or mental), to encourage older workers to remain employed, and (linked to that) to shift the point of peak earnings towards older workers.If, by a combination of education and preventative health care, we can increase the percentage of older workers (whether or not they define themselves as disabled) in work, the government's goal of providing a state pension that is roughly onethird of average earnings to fund a retirement that is up to one third of a person's adult life is realistic.Otherwise, the future looks pretty bleak.This is an important report, using new tools that cast a cold eye on one of the biggest challenges facing any government -a challenge that cannot be wished away.I am very grateful to Prof Mayhew for all his work -and for letting us publish the results.I am also very grateful to Schroders and Cass for their support, and to my colleague, Jane Fuller, whose interest in pensions is wellknown and who