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Should we strike over pension age like the French?

thisismoney.co.uk

October 26, 2010

United Kingdom

French workers have it bad don't they? One minute they're hanging up their boots at 60, the next it's 62.

Ouch. 

Ok, ok. I'm indulging in a little sarcasm here. After all, in Britain we've just been told that most of us will have to wait to 66 before we can claim our state retirement benefits.

So we're a damn sight worse off than the French, right?

Well, you'd have thought so. Yet it is French workers who are up in arms, striking across the country and bringing the streets to a shuddering halt.

Riot police have been playing cat and mouse at major oil refineries across France . With 12 facilities blockaded by strikers for more than two weeks, thousands of petrol stations across France have run dry.

Across the nation, rioters have blocked access to airports, smashed shop windows, and marched through the streets in protest.

It begs the question, should we Britons be doing the same (without the violent bits, of course)? I'd argue not – and here's why.

Firstly, one of reforms that President Sarkozy is pushing through in France would ask every French citizen to work 41.5 years before they can receive the full state pension, which is equivalent to about 40% of wages.

In Britain , we only have to work 30 full years – and contribute National Insurance payments - for the same right. At the moment, that only gets us £97.65 a week - not great. But reforms revealed yesterday should soon grant all 'citizens' the right to qualify for nearer £140, regardless of how long they've worked (more on this below).

The French system will be incredibly punishing on the part-time or self-employed. To reach 41.5 years by age 62, you'd have to have started working at 20 without a break in paying social security. In France , qualified people are entering the workforce later and later. Struggling to find a full-time job, many depend on their parents until the age of 30. For many, this means no full retirement until after 70.

Secondly, both the current French and British pension systems have become unsustainable. It's all very well to lament the passing of generous old age benefits – so do I - but we’d begun to borrow from baby Peter to pay grandad Paul.

It’s as simple as this: we're all living longer. In Britain , the retirement age of 65 has been in place since 1925. Back then, David Lloyd George was Prime Minister, British society was still brushing off leftover debris from First World War, and people like Hitler and Stalin had yet to emerge from the shadows of highly politicised Europe .

More importantly, back then, only a third of men and 40% of women were expected to live to see their 65th birthday. Nowadays, the average British male lives to 77; the average British female to 81.

Our taxes are being used to fund an ever-growing population of older, retired Britons – and with our national debt already at £890bn and a 'babyboomer' generation approaching their golden years, carrying on without tightening the belt would lumber our children and grandchildren (and their grandchildren) with a nigh-on insurmountable bill.

A third reason is this: the French system is a little different to ours. In France , you’re eligible to retire at 60, but then have to wait until 65 before you get the full state entitlement, which comes from two main compulsory public schemes (the proposals will see the qualifying ages rise to 62 and 67). It’s a little complicated, so I’ll spare you the drab details. But the French don’t really do private pensions. They rely almost exclusively on these state handouts. So getting the full amount is pretty important.

Finally, there are two silver linings hidden behind George ‘The Axeman’ Osborne’s Spending Review chops. Firstly, the actual level of the state pension we all get could increase. And it could happen before 2015.

Currently, the full basic state pension is £97.65 a week. A pittance. Sure, that can be topped up with pension credits to about £130 a week. But around 2m retired people still live below the poverty line, many having been unable to save much during their working lives.

The Lib Dem Pensions Minister, Steve Webb, has long harboured dreams of a ‘Citizen’s Pension’. And he’s repeatedly alluded to a 'decent and fair' system that doesn't leave any retired Britons desperately needy.

And - as I forecast during This is Money's coverage of the Spending Review- the Government is planning to increase the level of state pension provision so that it is more adequate for poorer Britons who have been unable to save. According to our sources at the Department for Work and Pensions, the level might be set at £140 a week for every single Briton, regardless of whether they've saved, contributed National Insurance or taxes, or have a partner.

It would be paid for by scrapping the Second State Pension (S2P) and the pension credit top-ups that make our current system inanely complicated.

Additionally, the Government is commited to scrapping a rule that allows employers to force older workers to retire against their will. It’s called the Default Retirement Age (DRA) and is currently applicable at age 65. Getting rid of this will allow older people to continue working if they are happy and able, which many are.

All I’d add is this. If we are going to expect over 65s to keep ploughing away, we will need more jobs. And with unemployment high – particularly among the 16-25 age group where around 17% are out of work and scrambling around for income – this looks like becoming a problem. Furthermore, these new jobs should be suitable for those who can no longer grift and grind. It’s no good forcing builders or dustmen to continue hauling kilos of bricks or bins around when their bones have started to creak. More jobs for old-timers and more jobs for young careerists is the bare minimum to make all this work.Over to you, Mr. Webb.