Brits May Have To Work Until 75

[cashinmattress]

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A colossal savings glut in China, the world's second largest economy, means British workers in their twenties will only be able to retire at 75, a report by the Center for Economic and Business Research (Cebr) showed on Thursday.

According to the report, excessive savings in emerging economies, especially in China, and the country's growing share of the global economy will keep yields and interest rates down for many years. This will leave pension funds underfunded keeping annuity rates low.

"To retire at close to the standard of living that they (U.K. workers) have previously enjoyed, they will have to extend their working life and cut their number of years of retirement by working till they are much older than the present retirement age," said Douglas McWilliams, executive chairman of economics consultancy Cebr.

The state pension age in the U.K. is 65 for men and 60 for women currently, but it is set to steadily rise to 66 for both by 2020, as set by the government's Pensions Bill in October 2012.

McWilliams pinpointed China's savings glut as a key driver behind this trend.

China's population holds a staggering 25 percent of the world's savings, the report found, rising from $153 billion in 1990 to a likely $4.5 trillion this year - a figure Cebr expects to grow further.

Weak state finances following austerity measures will also make it difficult for British workers to retire before the age of 75, the report said.

The U.K. economy was stripped of its Triple-A rating by credit ratings agency Moody's this week on concerns over its subdued growth prospects and rising debt burden.

The British government is currently undergoing vigorous austerity, but the cuts have come at the expense of growth. The economy emerged from a nine-month recession in the third quarter of last year with 0.9 percent growth, however , it then contracted more than expected by 0.3 percent in the final quarter of last year.

According to Cebr, the long-term cost of the austerity measures will outweigh the cost of bailing out banks during the financial crisis.

It estimates that the cost of bailing out the banks will have cost the British taxpayer about 120 billion pounds ($181 billion) eventually, while the problems of excess deficits built up since 2000 will have cost the economy 1.5 trillion pounds by 2025.

"It will be well in the late 2020s at the earliest before austerity policies can be eased up," said McWilliams.

Interest rates in the U.K. meanwhile are likely to stay low for at least 20 years, the report from Cebr said.

"Even the [u.K.] Pensions Regulator admits that most pension schemes are underfunded and many will never be able to be fully funded while low yields persist without bankrupting their guarantors," McWilliams said.

"And for those on direct contribution pension schemes, the annuity yields that they are able to buy are unlikely to rise much from today's very depressed levels. Workers could save more. But they are unlikely to do so and if they did so around the world, they would only add to the glut of savings that is a fundamental cause of the problem,' he added.

Direct contribution pension schemes are retirement plans where an employer matches its employee's contribution of his or her earnings each year.

The tendency towards saving in China means the Chinese will eventually own a quarter of the world's assets, as they invest heavily abroad to use up their savings, said Cebr.

"So far the Chinese have invested heavily in areas like Africa and South America which the West has neglected as well as in U.S. Treasury bonds. But they will have to turn increasingly to other assets like companies and properties in the West including U.K. companies," he said.

Um. But...

All aboard!

[PopGun]

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Um. But...

All aboard!

They can't save AND take up the demand slack internally when the west goes pop.

Over production, demographics and millions of graduates on the scrap heap.

Besides, I'm still waiting for the Japanese to take over everyone (as was promised by similar 'experts' circa 1989).

[EUBanana]

Perhaps the government taking half of my income has something to do with it as well.

[doomed]

Perhaps the government taking half of my income has something to do with it as well.

Protectionism is the only way living standards in this country do not fall to match that of china. I have a feeling that this will be the policy at some point when the plebs have had enough. I do not know if this is good or bad?

[Errol]

Besides, I'm still waiting for the Japanese to take over everyone (as was promised by similar 'experts' circa 1989).

Japanese takeover was 'promised' but the chinese takeover is actually happening. They are simply buying assets, land, commodities etc everywhere all around the globe. And in massive quantities.

[billybong]

It sounds like a bit of rewriting history and its consequences.

A lot of the problems facing young and old alike would have stood a chance of being resolved if house prices weren't so crazy and kept so by the VIs. Bailing out the banks to the extent they did/do hasn't helped either ...etc

Edited February 28, 2013 by billybong

[PopGun]

Japanese takeover was 'promised' but the chinese takeover is actually happening. They are simply buying assets, land, commodities etc everywhere all around the globe. And in massive quantities.

So they're not saving anymore?!?

[Errol]

So they're not saving anymore?!?

Saving in what?

[Dorkins]

Protectionism is the only way living standards in this country do not fall to match that of china.

You're right, it's so hard to get your hands on things made in China, I guess it was worth doing to preserve UK manufacturing though. Imagine what would have happened if we hadn't pursued such protectionist policies, there'd probably have been millions of unemployed people in the UK's former industrial heartlands just for starters.

[Saving For a Space Ship]

Japanese takeover was 'promised' but the chinese takeover is actually happening. They are simply buying assets, land, commodities etc everywhere all around the globe. And in massive quantities.

It's a bit like the rush to cash in the gift cards when GAME & HMV went bust

[billybong]

It's a bit like the rush to cash in the gift cards when GAME & HMV went bust

+1

"Don't bother to present those trillions of dollars/pounds they're not valid anymore". I imagine the Chinese and the others will just have to accept that

[zugzwang]

So they're not saving anymore?!?

They haven't been saving for years.

[R K]

Japanese takeover was 'promised' but the chinese takeover is actually happening. They are simply buying assets, land, commodities etc everywhere all around the globe. And in massive quantities.

So did the Japanese before they crashed and burned.

Don't you remember Thatch opening all the Japanese plants?

We'll default on China one way or another. Good.

[cashinmattress]

+1

"Don't bother to present those trillions of dollars/pounds they're not valid anymore". I imagine the Chinese and the others will just have to accept that

All holders of US dollars/treasuries/debt will feel the pain: Chinese, Saudis, Norwegians, UK, the west, the east.

If America goes down, the whole world is going down.

What's the pound got to do with anything?

Nothing of value is traded in pounds, except property here for us mugs.

Edited February 28, 2013 by cashinmattress

[gimble]

So did the Japanese before they crashed and burned.

Don't you remember Thatch opening all the Japanese plants?

We'll default on China one way or another. Good.

If Chinese own a lot of our property and rent it back to us (happening in London already, 60% of new apartment sales are to Asian investors) the only way we can default is to seize the property back or not pay the rent. Either way you're talking about major disruptions to rule of law and property rights here in the UK which could be calamatous in all sorts of ways. Not good.

[billybong]

All holders of US dollars/treasuries/debt will feel the pain: Chinese, Saudis, Norwegians, UK, the west, the east.

If America goes down, the whole world is going down.

What's the pound got to do with anything?

Nothing of value is traded in pounds, except property here for us mugs.

Apparently foreign investors (including China) own about 35% of the UK government's debt and pounds are traded even if not in the same numbers as dollars. Chinese bought London property etc included.

Compared to the US of course the total is relatively small but even so is China (and the others) going to accept a default (even a gradual default) of any currency like a UK Comet or HMV voucher holder had to - I'm not so sure and in fact of course they aren't.

What their actual response will be is another matter.

Edited February 28, 2013 by billybong

[MarkG]

A colossal savings glut in China, the world's second largest economy, means British workers in their twenties will only be able to retire at 75, a report by the Center for Economic and Business Research (Cebr) showed on Thursday.

British workers in their twenties have a good chance of living for centuries, so they won't be retiring at 75 unless it's for a short break before they look for something useful to do again afterwards.

[Quicken]

If Chinese own a lot of our property and rent it back to us (happening in London already, 60% of new apartment sales are to Asian investors) the only way we can default is to seize the property back or not pay the rent. Either way you're talking about major disruptions to rule of law and property rights here in the UK which could be calamatous in all sorts of ways. Not good.

We could just apply a land-protectionist tax on foreign ownership (e.g. ownership by people/companies not paying UK tax). They'd sell up soon enough.

Q

[interestrateripoff]

We have to work until dead. For some they won't even get to 75.

[blackgoose]

British workers in their twenties have a good chance of living for centuries, so they won't be retiring at 75 unless it's for a short break before they look for something useful to do again afterwards.

In 50 years time, there will be very few jobs left for people to do. Almost everything will be able to be automated, so they will not have jobs to go to. Hopefully the UK will have access to enough energy and raw materials, otherwise there may be trouble.

Edited February 28, 2013 by blackgoose

[Gone baby gone]

We could just apply a land-protectionist tax on foreign ownership (e.g. ownership by people/companies not paying UK tax). They'd sell up soon enough.

Q

Could be part of a land value tax.

You pay £y if you are a citizen.

You pay £y X 2 if you are a non-citizen.

[wonderpup]

The odd thing is that China has the lowest amount of internal consumption relative to GDP in recent history- so who's going to be buying all the stuff the world produces?

As far as I can tell the plan is for a global dash into export led growth in order to pay down debt.

Maybe that's why the search for life on other planets is hotting up lately- we need those off world markets.

[easy2012]

The odd thing is that China has the lowest amount of internal consumption relative to GDP in recent history- so who's going to be buying all the stuff the world produces?

As far as I can tell the plan is for a global dash into export led growth in order to pay down debt.

Maybe that's why the search for life on other planets is hotting up lately- we need those off world markets.

The Chinese? Often they do the shopping (of goods made in China) at London, Singapore, HK or Tokyo though, where the amount spent is registered as consumption outside China...

[bigkid]

Strange you should mention this point as this very subject came up in a discussion with some colleagues in my office when the RBS figures were announced.

Quite a few wondered how many factories, coal mines and steel plants could have been kept in operation if they had received the same huge taxpayer subsidies now effectively being doled out to the financial sector. At least we would have had some physical output for our money. When are politicians going to face up to the reality that much of the investment banking sector in the UK is now just as much a rust belt burden on society as the most unproductive mine or mill of the 1970s.

Why China? Surely we're all working later in life to fund tax credits. Benefits claimants are amongst the most selfish people I have ever met. It's all me me me with them.

[Gone baby gone]

Why China? Surely we're all working later in life to fund tax credits. Benefits claimants are amongst the most selfish people I have ever met. It's all me me me with them.

Heh.

Think it through.

Why are the majority of them claiming benefits... because there are loads of vacant positions in decent paying semi-skilled jobs? Are we back to calling 2.5 million* people shirkers?

* = which doesn't include the "under-employed" - doing part-time jobs when they want full time.