Many dispute that raising the retirement age is the best response to an ageing population. Or should the economy be there to work for people? At a basic level, an ageing population creates a fiscal problem, as the government needs to pay more in pensions and old age benefits. People pay a smaller proportion of tax on their income, but public funds, including welfare and pensions, are starved of cash relative to countries with higher taxes.
He advocates economy-based rather than people-based solutions, such as a more progressive taxation model that taxes capital at the same rates as labour. The UK provides the lowest state pension in the developed world, accounting for a mere 16 per cent of the income made during work. The UK also differs in the proportion of public transfers state pension and benefits that make up the average source of income for older people.
In the UK, this is about 40 per cent , whereas in Spain, France, and Germany this is around per cent. Instead, occupational pensions make up a larger proportion of income for older person, at around 30 per cent. Among the developed countries making up the OECD, the average is 63 per cent, while the average for EU member states is 71 per cent. In the Netherlands, Turkey and Croatia, pensioners receive more than per cent of their salary in retirement. There are two political science models that form the basis of pension systems: Beveridgean and Bismarckian.
Bismarckian models are adopted in countries that generally have high taxes, and more supportive welfare state systems. In these countries, there is not much private sector provision contained in pensions. This model dictates that the state should provide a minimum level of support to prevent people falling into poverty.
This, he says, is the primary difference between the two models. Both systems have issues: Bismarckian setups are heavily reliant on state spending. Some of the most successful pension systems in the world are a mixture of the two. The Melbourne Mercer Global Pension Index ranks the pensions systems in the Netherlands, Denmark and Finland — countries with some of the highest taxes and mixed pension models — as the best in the world. Important indices reflect the inadequacy of the system.
In the UK, people over 65 suffer the worst poverty rates in Western Europe. This is down to a meagre state pension and means-tested supplements, according to the report Pension Reforms and Old Age Inequalities in Europe, published this month by academics at the University of Oxford. The lowest poverty rates among the elderly are found in the Netherlands, where there are generous basic pensions and the Nordic welfare states. But why has poverty among the elderly increased fivefold since the s?
The research found that, overall, those European countries that had made private pensions an important source of income for the elderly had seen a rise in financial inequality. A UN report noted the "systematic immiseration [economic impoverishment]" of a significant part of the UK population, which explains the fifth of the populace 14 million people who live in poverty, with another four million trapped in deep poverty defined as having an income at least 50 per cent below the official breadline. That sentiment is more understandable when one takes into account that real wages in the UK are lower than they were ten years ago, and are increasing slower than all of the G20 countries.
Alternative solutions include tapering off working life more slowly, with incremental steps down in the number of working hours or responsibilities, along with greater flexibility and less punishing work schedules during our working lives. By Chris Stokel-Walker. By Lynda Gratton. By Sabrina Weiss. Published: David A. Wise, editor. Topics in the Economics of Aging. Chicago: The University of Chicago Press, pp. Published: David Wise, ed. Summers, pp. Published: The Economic Journal , Vol. Published: Journal of Political Economy , Vol.
Published: Tax Policy and the Economy. Summers, vol. Wise, Published: The Economics of Aging, ed. Published: Journal of Economic Perspectives , Vol. Published: Boskin, Michael J. Kotlikoff, Douglas J. Puffert and John B. XL, No. Auerbach and Martin Feldstein, , pp.
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