Living to a hundred, fees and pensions

by reestheskin on 04/06/2016

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This is from a book review in the Economist about the implications of changes in life expectancy (The 100-Year Life: Living and Working in an Age of Longevity. By Lynda Gratton & Andrew Scott). The figures are sobering.

Jack, born in 1945, worked for 42 years and was retired for eight. He had to save only a small percentage of his salary in a pension every month, which was topped up by the government and by his company. Jimmy was born in 1971 and has a life expectancy of 85. If he works for 44 years and retires for 20, he will be likely to need to save a whopping 17% of his income during his working life. From here the numbers grow more unsettling. Jane, born in 1998, will need to finance 35 years of retirement on the same 44 years of work. This will mean she must save 25% of her income—an improbable sum given other commitments such as mortgages, university fees and child care. The upshot of all of this continued extension of longevity is that working to 70 or even past 80 may not only become less unusual, but may be necessary in the future.

Three thoughts. I think practising medicine is going to be tough, especially on the surgeons (and do not mention shift working, as it will only drive the best into alternative careers). The second, is that student fees are going to  compete with pension saving, as the provision of occupational pensions deteriorates. Third, as the quote below attests, we need to question the model of bingeing on expensive education in early adulthood.

But universities may need to rethink the model of handing a big dollop of education once, in youth, and forcing graduates to repay that cost over decades. If people must retrain throughout their lives, as well as save more for retirement, a costly, one-shot education at the start might become an unmanageable burden.