Ageing and wrinkles in public finances
Pay-as-you-go pension and healthcare schemes are under increasing pressure from ageing populations.
Politicians could choose to try and balance the books by raising taxes, cutting spending, increasing immigration or delaying retirement
When the UK state pension was originally introduced in 1908, it wasn’t designed to be widely used. The pension age was set at 70, but life expectancy for a 20-year old (i.e. someone who had survived childhood) was just 66. So most people were not expected to receive the pension! So on average, people were expected to spend 7½ years in retirement.
Fast forward to 2010 and life expectancy has risen to 81, so people were expected to spend around 20 years in retirement. So the pension system has clearly become more generous over time, putting pressure on public finances.
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