16 Jan, 2017
Hard Brexit means retiring later, Britons warned
A hard Brexit with severe cuts to immigration would force Britons into longer working lives in order to uphold a sustainable ratio of workers and pensioners, according to modelling carried out for the Guardian.
The state pension age is due to rise as a result of increased life expectancy and large numbers of baby boomers retiring. However, further delays to pension payments will be necessary if current levels of immigration, which sustain the country’s old age dependency ratio, are not maintained, the Oxford University work indicates.
Director of the Oxford Institute of Population Ageing and Chair of the UK government’s foresight review on ageing societies, Professor Sarah Harper, said: “The message from Brexit is if you don’t want immigrants, you’re going to have to work longer. That’s how the sums work”.
In the modelling, Ms Harper’s team predicted that if migration were stopped, it would have a serious impact on workers, necessitating “far longer working lives”.
She added: “Since the middle of the 20th century, the UK, like many other advanced economies, has employed migrant labour to reduce the ratio between older dependants and workers, which has arisen as child-bearing rates have fallen and people have lived longer”.
“However, if all migration into the UK was to be halted, then over the next five years, those coming up to retirement would have to work about one-and-a-half years longer just in order to maintain current output [of GDP]. Indeed, any significant reduction in labour immigration would wipe out the projected benefits to GDP of small delays in retirement, or require far longer working lives,” she continued.
Harper, who serves on the government’s science and technology council, also warned that if limits to immigration were implemented, the UK’s fertility rate, which is close to replacement level (about two births a woman), would fall, as women living in the UK who were born outside Britain have much higher birth-rates than those born in the UK.
Harper said, “If, because of Brexit, we limit migration, we will start ageing at the same rate as Greece, Italy and Spain”. These countries are facing serious economic and social problems linked to declining populations caused by low birth-rates - 1.3 births per woman in Greece, 1.32 in Spain and 1.37 in Italy, compared with 1.81 in the UK.
While Harper’s modelling was based on zero net migration, even lowering the number of people allowed into the country to a “low migration scenario” would have a significant effect on the state pension age.
John Cridland, the former CBI director who is revising the state pension age, told a recent conference run by the International Longevity Centre UK that the affordability of the state pension into the future had been made uncertain by “the Brexit factor”.
Even without changes to immigration, the number of dependants for every working adult is starting to rise in the UK. As a result, according to a report by the Resolution Foundation thinktank, the state pension age could be forced up to 70 by the late 2030s.
The foundation estimates that the size of the dependent population (broadly speaking, children and pensioners) will start to rise for the first time in decades. The report says there are seven dependants for every 10 people of working age at the moment, but this will increase to eight in the 2020s and nine by 2050.
“This decade marks the turning point in a transition to an ageing population in which the population of people aged 65+ is set to grow faster than that of working age,” said David Willetts, the executive chair of the Resolution Foundation.
He added, “While the UK population has steadily risen over the past 50 years, it is the balance within society between the young (aged under 20), old (aged 65 and over) and those of working age (age 20 to 64) – on whom the remainder are largely dependent – which is set to change most dramatically”.
“For individuals, in simple terms, living longer will require an overall higher level of lifetime income to maintain a certain standard of living. With the large baby boomer cohort entering retirement, the concern is that younger generations face a need to balance achieving a higher lifetime income with the requirement to direct additional resources to support an ageing population”.
Today's earlier news - Trump keen to fast track US-UK trade deal