Pay up for pensions

How you reacted to the past week's press claims that the government wants you to work until you are 70 (all the better to tax you, grandmama) will depend on three things: what kind of work you do, how rich you are and your age. Those whose work gives them status, a social network, an absorbing interest and a reason to get up in the morning might moan a little about a few more years on the treadmill, but will probably be secretly delighted to push back their confrontation with the plateau of retirement. If they are earning a decent salary, they will note, too, that they are accruing improved benefits from their company or private pension.

But though the doughty Alfred Brendels, Joan Bakewells and Tony Benns are vibrant proof that a working life can be rich past 70, they are in the lucky minority (talented, healthy and in demand). Research from the Trades Union Congress reveals that it is not like that for everyone, and that if the retirement age were raised to 70, a third of all men would die before picking up a pension, rising to half in the UK's most economically disadvantaged areas. Brendan Barber, TUC general secretary, puts it thus: "It is simply not an option for many manual workers to carry on working until they are 70. They will either die or be forced on to benefits before they can claim their rightful pension."

The Department of Trade and Industry insists that all options for changing the retirement age are still being considered, and that the government has no plans to delay paying pensions to those who retire at 65. But the nugget of truth in the alarmist tales is that the government will have to announce soon how it intends to implement a European Union directive on age discrimination. From October 2006, a worker who wishes to continue working beyond the age of 65 cannot be fired on the grounds of age alone.

Last July, the government issued a consultation document seeking views on how the directive should be implemented. One option would be to have no fixed retirement age at all (with essential exemptions to acknowledge that some jobs require high levels of fitness and concentration). An alternative suggestion, creating the recent spate of concern, was a new default retirement age of 70.

The Confederation of British Industry, always reliably hostile to any encroachment on employers' rights to hire and fire at will, argues for a cut-off point, but believes this should be 65. In other words, no change. The TUC backs the idea of no compulsory retirement age, but vociferously opposes raising the age of entitlement to the state pension.

Neither is facing up to the real enormity of the looming demographic change. Our working (and taxpaying) years are diminishing as our lives get longer. We enter the workforce later (after education and gap years) and leave it earlier. Until recently, a pension - state or private - had only to cover a few years of rest after work. Now, for an increasing number of citizens, it has to provide an income for two decades or more.

This is no short-term demographic blip. The assumption has been that our increased life expectancy is a one-off harvest from being wealthy and that now, having all but conquered disease and malnutrition, we will see a levelling out to some "natural" age of dying. Yet forecasts of life expectancy are continually revised upwards. As Professor Tom Kirkwood pointed out in his 2001 Reith lectures: "Our bodies are not programmed with some unavoidable sell-by date: we are not programmed to die." In other words, we don't know how long the pensioners of tomorrow will live.

We are ill-prepared for this excellent news. Already a generation of reasonably fit and active fifty-, sixty- and seventysomethings has retired or been retired on full pensions. Someone has to pay. Meanwhile, those in their thirties and forties are working themselves into depression (see Patrick Hosking, page 32). On top of increasing debt (student loans, higher mortgages), they must save for their own pensions and take on the burden of paying for those who have retired. Without radical changes now in our assumptions of what constitutes a working life and at what age people should expect to receive a pension, this already overburdened age group will have to work longer hours and pay higher taxes. Today, about 17 per cent of those at work put in more than 48 hours a week. Recent surveys show that women, in particular, are unhappy with the work/life balance this gives them.

When Tony Blair came to power in 1997, roughly 15 per cent of the population was over 65 years old. By the time his son Leo is 50, 22 per cent of the population will be over 65. In Italy, it will be a staggering 34 per cent. Such proportions presage a grim future for today's children. Do their parents really want them to be workhorses for an improvident generation that has refused to pay higher taxes but now wants to be supported in a long retirement? These days, a third of British men and women between the ages of 50 and 65 - 2.8 million people - are no longer employed, a level of inactivity that some estimate costs the economy £26bn a year.

The CBI's no-change demand is not an option. It places an intolerable burden on the young, and would eventually stifle the energy and enterprise needed for a dynamic economy. The TUC must, of course, defend older workers from being forced to work 'til they drop (and fight against the inequalities that shorten their lives). But it is a poor exchange if their freedom from exploitation is won at the expense of their children and grandchildren.

Telling the baby-boomer generation that it must start paying its way will not be popular, but that is precisely what the government must do.