Retirement: (noun). (1) The action or fact of leaving one’s job and ceasing to work: a man nearing retirement, e.g. the library has seen a large number of retirements this year; (2) the period of one’s life after retiring from work, e.g. he spent much of his retirement travelling in Europe.
FUNNY, ISN'T, IT, how everyday words come and go. Up till recently, the word “retirement” was well understood and widely used. Retirement was a recognised stage in life, a social fact.
But today retirement has a new definition. It goes something like: (1) the period of one’s life which you thought you’d saved up for but turns out a total mirage; (2) the action or fact of working harder than you ever did to make ends meet.
I didn’t invent this. I only report it. And I speak from knowledge. For the past few months I’m supposed to have entered the state of retirement – i.e., retired as in not working. But for a fast growing number such a state is a mirage and delusion. Most of the people I meet who are formally “retired” are nothing of the sort. They’re working like the clappers.
One of the biggest social changes in Britain today is the disappearance of retirement. Check the ONS Labour Market Statistics and you will find that in the section providing a breakdown of employment by age there is only one category where the figures show a consistent rise. Downturns and recessions seem to have no influence.
The category of constantly rising employment is to be found in the column for men and women aged 65 and over. Since 2010 this figure has climbed from 791,000 to 906,000. Over the latest quarter alone it has climbed by 36,000 or 4.2 per cent. It is not fanciful to suggest that by the end of this parliament the figure will have hit one million – and will still be rising.
How terrible you might think. People who have spent forty years or more in work find that when feet-up time comes, they still have to work. But many would regard themselves as the lucky ones. For the alternative is an indefinite period of growing worry over poverty as government bond yields and bank deposit accounts have slashed the return on savings.
Nothing more brings to life the reality behind the outstanding article by Mike Nevin posted on this website yesterday. If you have not already done so, I strongly recommend a read. It explains superbly why the Bank of England’s policy of quantitative easing is failing to work in the manner expected. Indeed, it is having the opposite effect. The quantity of money may be rising. But the velocity of circulation has declined as apprehensive businesses and households alike have pulled back on spending and taken to hoarding.
Nevin cites figures showing how a 65-year old man with a £100,000 pension pot could have secured an annuity income of £6,930 in March 2009 when QE was started. Three years later, the same man would have been offered £5,850.
This 15 per cent reduction in annuities has forced pensioners to cut back their expenditure, and increased the unfunded liabilities of corporate pension schemes. And this is a growing problem hitting both households and companies.
Last week, Dawson International was driven into insolvency by its unfunded pension liabilities. Other companies, Nevin warns, may well follow if the Bank of England continues its QE programme.
And as if to ram home this point, out came figures yesterday, after the article was published, from the ingloriously named Pension Protection Fund (PPF) showing that the deficit of the UK's final-salary pension schemes hit its second highest level on record in July.
The PPF said pension deficits reached £283 billion at the end of the month, up from £267 billion at the end of June. The finances of many schemes have deteriorated sharply because of the rising estimated cost of paying for pensions.
Says Joanne Shepard, a senior consultant at Towers Watson, "Ultra-low interest rates on government debt are translating into big deficits for pension funds. An added twist that some companies are just waking up to is that today's low interest rates also increase the amount that the PPF is likely to demand in levies next year." There were an estimated 5,418 schemes in deficit, with 1,014 in surplus.
So-called “retirees” now have a stark choice: adjust to a life of penury as interest income dwindles - or go back into the labour market.
To add insult to injury, this is the generation that Cabinet Minister David Willetts argues has had a life of affluence and should surrender more in Inheritance Tax on those big gains in the value of their homes.
But house prices, of course, have fallen back. The housing market remains sticky. And the argument that the generation that had to pay double-figure mortgage rates for most of the 1970s and 1980s had it so good that they should be liable for more tax on the grounds of inter-generational equity is farcical.
In the past three months I have encountered many over 65s who are back on the treadmill – and many more striving to do so. They may seem to have “loadsamoney to spend”. But changing longevity enforces a natural caution. The fear of dying in poverty is all too real. Pottering round the garden nursing the hybrid teas?
The Britain of Lloyd George at least held out the prospect of retirement. The debt-soaked Britain of QE is killing it off.