The provision of pensions is to a considerable extent a matter of political decision and philosophy.
The Pensions and Lifetime Savings Association (U.K.) has developed the “retirement living standards” to show what life in retirement looks like at three different levels – minimum, moderate and comfortable – with a single person needing about £12,800 a year to meet the “minimum” threshold. The thresholds for moderate and comfortable are £23,300 and £37,300 a year respectively.
Those with moderate or comfortable retirement incomes are those who can afford the money (and the time!) to go on cruises.
The insurer Scottish Widows has said its research indicated that 35% of people were not on track for even a minimum retirement lifestyle, which meant they were at risk of struggling to afford basics such as food and heating when they were older.
The minimum scenario leaves a pensioner with only £54 a week for food (including food away from the home), no car, and up to £580 a year for clothing and footwear. These figures assume the individual has paid off any mortgage.
Stephen Bird, the Abrdn chief executive, has said that in the U.K. “to have any chance of achieving decent retirement outcomes, the contribution rate needs to double – taking it closer to the levels seen in other developed economies. There is a very real crisis brewing for millions of individuals in the coming decades in terms of an inadequate income in retirement.”
However disposable income inequality for people in retired households increased by 1.3 percentage points to 32.1% in FYE 2022; income inequality of retired households is at its highest since records began (ONS)
In the USA 2022 “Families in the top 1% held more than one-third of the total wealth, while the bottom half of the distribution held only 2%.”
Which is the background. But surely we ought to consider the ethics?
On the present situation, “winner takes all”. He who can afford to put most into pension provision shall have the most comfortable retirement. Those who cannot share will barely receive minimum pension income. Is this right?
There is the danger in making this party-political. “Of course hard work shall be rewarded, and not those who have lived off the state”. On the face of it a fair reaction.
And yet. And yet. Those “high earners” include those who have earned most by being able to charge high fees for their services which often impoverish the poor. It includes those who have made fortunes by being the drug “barons” or pimps.
Those who have not earned much (if any) include those who have spent large parts of their lives looking after elderly or disabled relatives. Those who have done the unsavoury jobs such as cleaning sewers or “bin-men”. Those who have devoted their lives to charitable or conservation work.
Should there not be some greater effort to ensure that those who should at present be able to double their contributions put more into the “pot” of those with “minimum” pensions – or less?
Regardless of political niceties, what is morally right?