The solution is compact cities

The problem is prosperity.

The world’s population is expanding rapidly.  Whilst we in Europe have been trapped by the economic crisis, the likes of Brazil, India and China have found room to manoeuvre, adapting and continuing to grow at phenomenal rates. 

By 2050 there will be 9.3bn people living, breathing and consuming our planet’s resources, with 75 per cent of these living in cities.  To accommodate this we would need to build the equivalent of more than one new Birmingham every single week for the next 40 years.

The successful cities of the future will be more compact and efficient.  But to realise this future, we need to overcome the paradoxes created by prosperity and connectivity.

The stark fact is that unless we make our cities more efficient and sustainable, the quality of life of most people everywhere in the world will suffer.   Rapidly urbanising populations are a feature of emerging economies, but the new middle classes in the likes of the BRICS also expect their quality of life to keep growing. 

City development has relied on continuing low energy costs.  But population growth, consumer demand and supply reaching nature’s limits are putting pressures also on rising energy costs, and together these present a massive threat to people’s quality of life. This is the Prosperity Paradox.

If we don’t find solutions to this paradox, the world could face a major crisis. 

So we need to encourage and plan for more compact cities.  These will see people living closer to their place of work and commuting less, travelling more on public transport and less in cars.  Urbanisation has seen fragmentation of communities, but in the compact city your neighbours and friends will be nearer to you, and where you shop, work and play will be closer to where you sleep. That will save energy, reducing per capita spend and therefore keeping disposable incomes up. 

Politicians alone can’t deliver the compact cities we need.  In an interconnected world, we need governments incentivising smart growth; communities moderating their short-term demands for goods for the benefit of their friends and neighbours in the long-term; business offering smarter, more integrated solutions that work in the long-term rather than just responding to the short-term demands of their shareholders. 

Overcoming this Connectivity Paradox requires good story-telling.  Politicians need to be more honest with voters about the short and long-term trade-offs of decisions; communities need to discuss and plan for their own future needs; businesses need to articulate a vision to shareholders that realises long-term value as well as short-term gain.

The responsibility doesn’t just fall on our politicians, our community or our business leaders.  It falls to each and every one of us, individually and collectively.

Jeremy Bentham is Head of Scenarios at Shell.

Photograph: Getty Images

Shell Head of Scenarios

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Stability is essential to solve the pension problem

The new chancellor must ensure we have a period of stability for pension policymaking in order for everyone to acclimatise to a new era of personal responsibility in retirement, says 

There was a time when retirement seemed to take care of itself. It was normal to work, retire and then receive the state pension plus a company final salary pension, often a fairly generous figure, which also paid out to a spouse or partner on death.

That normality simply doesn’t exist for most people in 2016. There is much less certainty on what retirement looks like. The genesis of these experiences also starts much earlier. As final salary schemes fall out of favour, the UK is reaching a tipping point where savings in ‘defined contribution’ pension schemes become the most prevalent form of traditional retirement saving.

Saving for a ‘pension’ can mean a multitude of different things and the way your savings are organised can make a big difference to whether or not you are able to do what you planned in your later life – and also how your money is treated once you die.

George Osborne established a place for himself in the canon of personal savings policy through the introduction of ‘freedom and choice’ in pensions in 2015. This changed the rules dramatically, and gave pension income a level of public interest it had never seen before. Effectively the policymakers changed the rules, left the ring and took the ropes with them as we entered a new era of personal responsibility in retirement.

But what difference has that made? Have people changed their plans as a result, and what does 'normal' for retirement income look like now?

Old Mutual Wealth has just released. with YouGov, its third detailed survey of how people in the UK are planning their income needs in retirement. What is becoming clear is that 'normal' looks nothing like it did before. People have adjusted and are operating according to a new normal.

In the new normal, people are reliant on multiple sources of income in retirement, including actively using their home, as more people anticipate downsizing to provide some income. 24 per cent of future retirees have said they would consider releasing value from their home in one way or another.

In the new normal, working beyond your state pension age is no longer seen as drudgery. With increasing longevity, the appeal of keeping busy with work has grown. Almost one-third of future retirees are expecting work to provide some of their income in retirement, with just under half suggesting one of the reasons for doing so would be to maintain social interaction.

The new normal means less binary decision-making. Each choice an individual makes along the way becomes critical, and the answers themselves are less obvious. How do you best invest your savings? Where is the best place for a rainy day fund? How do you want to take income in the future and what happens to your assets when you die?

 An abundance of choices to provide answers to the above questions is good, but too much choice can paralyse decision-making. The new normal requires a plan earlier in life.

All the while, policymakers have continued to give people plenty of things to think about. In the past 12 months alone, the previous chancellor deliberated over whether – and how – to cut pension tax relief for higher earners. The ‘pensions-ISA’ system was mooted as the culmination of a project to hand savers complete control over their retirement savings, while also providing a welcome boost to Treasury coffers in the short term.

During her time as pensions minister, Baroness Altmann voiced her support for the current system of taxing pension income, rather than contributions, indicating a split between the DWP and HM Treasury on the matter. Baroness Altmann’s replacement at the DWP is Richard Harrington. It remains to be seen how much influence he will have and on what side of the camp he sits regarding taxing pensions.

Meanwhile, Philip Hammond has entered the Treasury while our new Prime Minister calls for greater unity. Following a tumultuous time for pensions, a change in tone towards greater unity and cross-department collaboration would be very welcome.

In order for everyone to acclimatise properly to the new normal, the new chancellor should commit to a return to a longer-term, strategic approach to pensions policymaking, enabling all parties, from regulators and providers to customers, to make decisions with confidence that the landscape will not continue to shift as fundamentally as it has in recent times.

Steven Levin is CEO of investment platforms at Old Mutual Wealth.

To view all of Old Mutual Wealth’s retirement reports, visit: products-and-investments/ pensions/pensions2015/