Liquid lives to solve retirement crisis


Forcing people to work longer is not the answer to the pensions crisis. The real alternative may well be a new, flexible approach to retirement that both transforms the experience of old age and brings "ripple down" benefits for future generations of younger workers.

This new concept of "liquid lives" forms the conclusion of a two-year research project into the future of retirement, conducted by the Tomorrow Project and published by the Chartered Institute of Personnel and Development (CIPD).

The project's report, "The Opportunity of a Lifetime - Reshaping Retirement" is based on consultations with 90 experts in labour market, pensions and savings issues and a series of focus groups.

The research reveals grave doubts in the Government's ability to provide an adequate state pension, low levels of trust in the financial services industry and strong opposition to the means testing of pensions.

As Britain's demographics have changed, people have moved from entering work aged 15, working for 50 years and dying on average ten years later, to a situation where most start working at 18, work for 47 years and survive in retirement for 20 years. The report starts from the premise that, as these trends continue, this is unsustainable.

The only way to stave off a potential crisis, the report concludes, is for the UK to adopt an entirely new approach to retirement.

According to Michael Moynagh, co-author of the report, retirement should not be seen as a distinct phase of life. Instead, people will mix and match work, extended leisure and learning throughout their lives.

"Working lives are being squeezed from both ends. People are retiring later and staying in education longer than they were before,” he said. “The question for the future is how we are going to deal with this.

“The answer doesn't lie in postponing retirement and forcing people to work longer. What we need is greater flexibility, a better state pension, and more attractive systems for saving - so that people can make their own decisions about when and how to stop working."

This flexibility would mean that rather than being stuck in an unfulfilling career by the fear of impending retirement, people would feel able to change career into their fifties and beyond.

The increased supply of older, more experienced workers would also help to address skills shortages, benefiting the national economy.

Meanwhile, the need to adapt working patterns to become more flexible for older people would also have a positive knock-on effect for the terms and conditions of younger workers - not least because people at the top have one eye on their own future flexible working needs.

In order to make the future a reality, the report calls for major reforms to the state pension, with a single state pension set at a level above the poverty line and paid from a 'central' pension age of 70, with the flexibility to take a lower pension earlier, or a higher pension later than this age.

A radical new approach to savings is also proposed as an alternative to increasing the use of compulsion to force greater contributions to traditional pension schemes.

This would take a whole life approach based on a new Lifetime Savings Account that would use government match funding and other incentives to create a single vehicle to fund the purchase of three individual assets - learning, housing and retirement income.

The alternative - simply raising the retirement age to avoid a meltdown in government and pension fund finances – will do nothing to remove age discrimination or the inflexibility in the retirement system, the report argues.

Only when the rest of the population begins to look at older people in a new and more positive light can progress be made towards solving our deepening retirement crisis.