Year of the pensions CRUNCH: 2027 apocalypse

BACKFRMTHEEDGE

Britain’s ticking pensions timebomb will finally explode in 2027.

Disaster beckons in 2027, Mr McPhail says: ‘Fifteen years from now, the number of people alive over the age of 80 will have increased from three million to 4.7 million.

‘The working-age population will have increased, but a significant proportion will be between 30 and 44 and struggling with student debts, and housing and family costs.’

Read more: http://www.thisismoney.co.uk/money/pensions/article-2117755/If-youre-50-planning-retirement-beware-2027-pension-apocalypse.html#ixzz1ppeZK76U

Generali

This is why I describe myself as a secular bear. I don't believe that asset prices can survive being transferred from baby boomer retirees to Generation X at current valuations. That particularly includes houses.

HAMISH_MCTAVISH

Generali wrote: »

This is why I describe myself as a secular bear. I don't believe that asset prices can survive being transferred from baby boomer retirees to Generation X at current valuations. That particularly includes houses.

Most of those houses will pass down to Gen X through inheritance though Generali.

And most Gen X already have a smaller/cheaper house than their parents current one to sell on to the biggest demographic bulge of FTB age people in history, bigger even than the boomers, who will all be reaching house buying age over the next 25 years.

Besides, any government can fix the problem of demographic imbalance relatively quickly and easily by simply ramping up immigration.

Which of course we have done over the last decade, and is why the UK is now forecast to have the biggest and least demographically imbalanced economy in Europe by 2050.

Graham_Devon

HAMISH_MCTAVISH wrote: »

Besides, any government can fix the problem of demographic imbalance relatively quickly and easily by simply ramping up immigration.

That's called a pyramid scheme Hamish.

Ramp up the immigration to cover those at the top of the pyramid today, and you have a bigger group at the top of the pyramid tommorow (the ones you bought in) who will need servicing.

Generali

HAMISH_MCTAVISH wrote: »

Most of those houses will pass down to Gen X through inheritance though Generali...

...if they haven't had to be sold or had all the equity borrowed in the meantime of course.

Many Baby Boomers are going to end up getting stiffed for the pension that they think they're going to get.

Generali

Graham_Devon wrote: »

That's called a pyramid scheme Hamish.

Ramp up the immigration to cover those at the top of the pyramid today, and you have a bigger group at the top of the pyramid tommorow (the ones you bought in) who will need servicing.

Spot on...


...and the biggest pyramid scheme is the state pension.

HAMISH_MCTAVISH

Graham_Devon wrote: »

That's called a pyramid scheme Hamish.

Then all of human history has been a pyramid scheme.

Ramp up the immigration to cover those at the top of the pyramid today, and you have a bigger group at the top of the pyramid tommorow (the ones you bought in) who will need servicing.

True.

But you have also bought yourself 50 years to pass down the retirement burden between generations.

As it stands today, a 25 year old is not paying for the costs of his retirement, he is paying for the retirement of today's 75 year old.

You can't change that overnight. It will take a couple of generations to achieve a situation where everyone is paying for only their own retirement and not that of the preceding generation if it's to be done without tanking the economy.

But given enough time, it can be done, and done in a way as to be relatively painless economically.

So when we have the choice of doing it painlessly, or doing it with a lot of pain, why would you want to choose the latter?

More to the point, what on earth makes you think the painful solution would ever be politically possible?

What Graham frequently fails to understand, and Generali you almost as frequently seem to forget, is that politics is the art of the possible.

And passing down a retirement burden across 3 generations in anything less than 40-50 years is politically impossible to achieve.

Graham_Devon

Well it's not really a game of choices, is it.

You suggest the government can ramp up immigration to plug the gap.

But can they? If we ramp up immigration at a time when we have little or no growth, increasing unemployment, a public sector undertaking a programme of job cuts over the next few years....just how are these new immigrants going to find the employment to pay the taxes and plug the gap?

Secondly, ramping up inflation would increase the demand on the currently artificially low supply of housing and general infrastructure, meaning increased accomodation costs, which leaves even less for people to pay into tax pots.

abaxas

If the oldies get their way with age discrimination, we wont have to pay their pensions.

Job done.

HAMISH_MCTAVISH

Graham_Devon wrote: »

Well it's not really a game of choices, is it.

No, that's exactly what it is.

Graham Devon, please choose between the following.

Option 1. Starting tomorrow, we'll freeze immigration, but you need to pay 30% of your income in National Insurance payments for the next 50 years, in addition to the current levels of income and consumption taxes. This lets us pay for the current burden, plus make provisions for you in your retirement, so that future generations need only pay for themselves.

By the time you reach 75 or 80, we'll be caught up on the retirement burden front and future generations will only need to pay for themselves, so population can fluctuate up or down with little impact to retirement costs.

Option 2. We can expand population and achieve the same thing but with everyone paying far less.

Which is it to be? (And if you choose option 1, you're lying.)

You suggest the government can ramp up immigration to plug the gap.

But can they?

They already have.

If we ramp up immigration at a time when we have little or no growth, increasing unemployment, a public sector undertaking a programme of job cuts over the next few years....just how are these new immigrants going to find the employment to pay the taxes and plug the gap?

The fallacy of static systems....:(

You never listen, do you Graham?

A population of 100 million requires twice as many doctors, lawyers, shop assistants, bakers, plumbers, etc as a population of 50 million.

Population growth creates jobs. If it didn't, then 99% of today's adults would be unemployed.

Secondly, ramping up inflation would increase the demand on the currently artificially low supply of housing and general infrastructure, meaning increased accomodation costs, which leaves even less for people to pay into tax pots.

Inflation?

But yes, that prices will rise strongly is now inevitable.

Read the latest BOE research paper on the subject of demographics and population density for an eye opening read on the future.

Graham_Devon

I'm not going to get into a long tedious argument over this one hamish. Neither am I going to choose Option 1 or 2, as both are bias towards extremities (for instance, we weren't even talking about freezing immigration, but suddenly you have included that).

I know why you prefer the pyramid route, and totally understand why you prefer this. However, that's just what it is...a pyramid scheme which, without perpetual increases in population, will never function.

There are tough choices ahead, and unfortunately, we have hidden away from making them. Allowing the boom and doing nothing with it (apart from vote buying and useless projects) from the noughties was one of our biggest errors, which we will be paying for for a long time to come. The money was pouring in (in relative terms) and pouring back out again for today, with little regard to tommorow.

The trouble is, apart from the money now not pouring in, nothing has really changed. The whole of Europe is living for today.