When Bismark created the world’s first state pension scheme in the 1880s he never expected to pay out – it was simply a creative (and seemingly popular) tax raising exercise. Life expectancy in Germany at the time was 48, so 65 was selected for benefit payments to start, thus ensuring there were few, if any, claimants.
Fast forward 120 years and the world has changed. Other countries soon followed the German model and most adopted 65 as their retirement age. However, since 1880 average global human life expectancy increased from age 40 years to over 70, with many countries averaging well over 80. As a result, what started as a nice little tax ‘earner’ for the Germans has become a collective ‘millstone’ around the necks of most governments.
The ‘dream’ offered was of the state looking after their elderly in retirement, while today’s reality is that anyone trying to live on only their state pension is ensuring a life of extreme poverty – surviving on food banks and handouts.
Far too late some countries have started to increase their state pension age in line with increasing life expectancy. If this had happened from ‘day one’ then UK citizens could today look forward to receiving a generous state pension – from the age of 97!
Rather than ‘retiring’ on reaching 65 those turning 65 today can look forward to something new and completely unexpected – a new and ‘extra’ stage of life. 65 it seems is simply ‘too young’ to retire.
When I started researching living longer, I interviewed many octogenarians who would often talk of their regrets. Despite the lucky ones having a generous final salary pension to ensure no financial worries, their main regret was not knowing age 65 that they should expect another 20 years of healthy life. They spoke of playing a little less golf/bridge/bingo (or whatever), and instead doing something more worthwhile and interesting with this ‘extra’ time.
Today’s ‘near-retirees’ do not have the same generous pension arrangements to cushion their later life, but they have one great advantage – they know they must plan to be active for the next two decades – now that is a gift worth having!