Demographic impact of retiring baby boomers

[siasl]

A study has been just published by National Institute of Economic and Social Research (with help from ONS) on the shifting of tax burdens across age groups in the UK.

www.niesr.ac.uk/pubs/dps/dp147.pdf

www.thisismoney.co.uk/news/article.html?in_article_id=525737&in_page_id=2

The results are pretty worrying for young people today. The study suggest that higher taxes (or cuts in services) of £82bn a year will need to found to avoid crippling debts of £7.8 trillion being passed down from baby boomers to the next generation.

"One might think that, in a steady state, the net contribution would be zero. However, there is a past history of pay-as-you-go benefits, which has allowed earlier generations to receive more from the state than they have contributed over their lifetimes and it is inevitable that there is now a net contribution which has to be paid."

The study suggest a child born today will pay £68,000 more in taxes over their lifetime than they get back in pensions and health services. A child born after 2020 will pay £160,000 extra.

I can't comment on the quality of the research (or likely vested interests) but I am of the opinion that simple demographics are the primary reason why this country has to reduce its public sector debt burden.

I don't think the "baby boomers" knew that spending over the past 40+ years was excessive at the time but the impact of increased longevity has resulted in a massive intra-generational transfer of wealth to them (house prices and pensions being two prime examples). I don't why my DCs should have to pay for this excessive spending.

I don't know why baby boomers should pay either... they aren't the people making the decisions, they haven't exactly had a life of wine and roses and OK so they're living longer but they've paid the tax due, on the nail, as requested.....

Not their fault that governments have got it wrong, surely? And unfortuate that the current generation have to pick up the tab but c'est la vie

I think this is interesting - I noticed the same thing (since my parents are a case in point and have recently retired). You can't really take away pensions already earned even if over-generous schemes, that opens a can of worms, but it's a hard pill to swallow that our generation and the next will pay a lot more to fund their own retirement, as well as to make up the existing pension deficit. And on top of that their housing costs and student debt and the likely increase in energy costs, none of these things are going to get cheaper. Life is not going to be as good as our parents had it, on average.

My work pension scheme has recently been butchered, it went in 5 years from being quite buoyant to the collapsing fund nearly taking the company down with it, the same market conditions apply to the public sector too.

"Life is not going to be as good as our parents had it, on average."

This is where I part company with the current mantra that they never had it so good. My own parents... working-class people in their seventies... did not have a 'good life' and they weren't untypical. Higher education was closed to them as they had to leave school and go out to work as soon as they were able. They both had to work full-time to pay bills - no SAHMs for them. There were no tax credits or other generous top-up schemes to fall back on & no credit cards to splash out with - everything was cash or forget it. The mortgage was as tough to meet each month for them as it is for us now. Redundancies hit them in the eighties. They don't have gold-edged pensions but they saved a lot ... and even that income is now badly eroded due to interest rate slumps. Sheer dumb luck means their house is worth a lot more than they paid for it.. and that's about the only thing in their favour.

My parents were the same. They were not graduates, they had modest jobs and have retired with quite modest pensions. It wasn't great for them but it's probably going to be even less great in the future, I think I meant. Less cushy for the well off and dire for the poor.

Chill

Baby boomers are those born between 1945 and 1965 (so broadly 45 to 65 in age). If your parents are in their seventies then they are not baby boomers.

Those that have derived maximum benefit (welfare state, final salary pensions, free education, house price inflation etc) are not by a large those who have already retired. It is those who will retire over the next 10 to 20 years that derived most benefit. You could also add a fairly decent chunk of Generation X (including myself) to those who have benefited in a variety of ways. Another study I read a while back quoted 48 as the "optimal age".

The issue for me is that it seems that the baby boomers and generation X are going to leave generation Y and younger with a huge debt burden.
We need to accept that it is us who are going to have to pay more tax, receive lower quality public services and get a smaller pension (or contribute more to it). We may not like it but tough.

However, instead it seems as though generation Y and our children are paying the price. Politically this makes a huge amount of sense since children can't vote but morally it seems pretty reprehensible.

I don't think it is a question of morality. More a question of 'luck' or being in the right place at the right time .. but I don't think it's immoral to be lucky. If there has been bad planning at the top, a refusal to face up to demographic changes and a head in the sand approach to taxation and benefits that's where the blame lies. Not with the poor bloody infantry.

I'm a baby boomer myself, and I don't see, either, why we should be pushed to the front of the queue while the students get shafted.

If I'm misunderstanding this idea which is being mooted, then please correct me... There's talk of the state pension being raised to £140 for all pensioners - but as far as I'm concerned the students should get first dibs if that sort of money can be afforded.

Unless I've got it wrong, - bringing the state pension up to £140 will be a very nice windfall, thankyou very much, for those people coming up for pension age who aren't on track for getting pension credit - and they are the pensioners who, most of them, won't be too badly off anyway. So why do it? (Unless it's for the votes - or am I being cynical?)

Today I heard more detail of the dire straits a lot of students will be landed in, thanks to the diabolical tuition fees plans. It's been calculated that those students who'll have to pay the max. £9,000 p.a. fees and who start earning above the £21,000 income threshold, will end up paying back TWICE as much as they borrow (thanks to the interest payments) - the debt will run on for over 30 years and STILL they won't have paid it off in full by the time they retire.

The figures I heard (R4) were: for a typical £30,000 loan, the total sum repayable would be £79,000. And a person who is in deep debt of that kind will face problems getting a mortgage (stands to reason, really, doesn't it?)

I am just so angry about all this. My dd is at university now, so she's cushioned from the worst of it - thank God - but I'm beside myself with anger when I think of the shit this government is throwing current sixth formers in to - and for WHY?

I heard this study being discussed on the R4 Today programme.

Apparently, we in the UK will be less effected by this 'demographic time bomb' than many other countries. Because of our recent baby boom (so thanks to us lot) and the high rates of immigration over the last 10 year (I guess that's thanks to Blair and Brown). Every cloud.....

But we do have to sort out pensions and retirement age - we can't rely totally on the next generation.

dotnet - think the jury's still out ref those pensioners who don't get pension credit. the slightly wealthier pensioners will have paid into NI all their working lives and the gov hasn't said yet if they will get a higher pension to reflect this. it might end up that they only get 140 despite paying extra NI - and that was done on the understanding they would get higher pensions. so they may well be shafted yet. The real winners, from what i can see, are the people who've taken long career breaks to bring up children and therefore haven't paid much NI.

agree with your comments ref students. Its an absolute appalling situation and will serve this country right in future if it doesn't have enough educated english graduates to fill key roles.

Hi dreamingofsun I do agree, I think, about what you're saying - that it looks likely that pensioners who have built up a good pension through the state system via a lot of secondary state pension, probably won't get a top-up, given that they've got it already in a sense.

People who have taken long career breaks to bring up children etc., have Home Responsibilities Protection to make up for missing N.I. So, women's records can show 30 years of NI contributions (the new, 'full amount') even though they haven't worked in a paid job all that time. Which will mean that they will get full (current) pension of - is it £95 a week? And if they have £40K or £50K or whatever in savings, which would currently exclude them from pension credit - they will get a £45 hike to their £95 state pension to bring their state pension amount up to £140.

Basically I think I have just now said the same as you did in your post, but in different words! I hadn't thought about the 'best-paid' state pensioners when I wrote before - but the fact still remains that for some reason - whoring for votes, I think - David Cameron wants to please a huge chunk of the retiring baby boomers and meanwhile doesn't give a toss about our children.

There's been a bit in the papers recently about English children increasingly applying abroad, to more enlightened countries, for their higher education now. It really really stinks, I'm so sickened by all this.