A curious thing has been happening with regard to retirement patterns in developed countries: we have been living longer and retiring earlier. Between 1968 and 1999, employment amongst 60-64 year old men fell from 80 per cent to 50 per cent – although it has picked up a little since. In Italy, an incredible 80 per cent of 60-64 year olds are not in employment. This has all happened during a period when life expectation has increased dramatically. In many EU countries, a significant number of people could well spend more time in retirement than working.
Of course, as we get more prosperous we would expect to have more leisure. But there comes a point when financing a longer retirement from a shorter working life becomes unsustainable. Most EU countries, with their state pension schemes designed so that the taxes of the declining working generation pay the pensions of the older generation, have reached the point where huge financial burdens are likely to fall on the next generation of workers. One way to square the circle is to promote more private and funded pension provision. However, one of the few countries that was pursuing this policy – the UK – has now decided to change tack and increase state pensions whilst reducing incentives for private provision.
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