Political short-termism and – let’s be honest – the indifference of elites are directly culpable for the demographic timebomb awaiting today’s millennials and Gen Z-ers. We are getting older, and fast. There are already over 11m people in the UK aged 65 and over and by 2043 there will be 17.4m (including me, I hope).
Great, we’re living longer. Better than the alternative. But what sort of life can these cohorts look forward to in their dotage? How are they going to pay for themselves? Or, more pertinently, who’s going to pay for them?
Social care has never been so bad and our state pensions are among the worst in the developed world. Moreover, without family money many of tomorrow’s pensioners will have no choice but to rent privately. Good luck with that.
This week I was taken by the news that Herbert Smith Freehills is among the first businesses to become a ‘living pension’ employer, committing to higher contributions to ensure a minimum standard of retirement living. The scheme, promoted by the Living Wage Foundation, sets a savings target of 12% of annual salaries, of which the employer pays at least 7%.
HSF is to be commended for being a first-mover here, but what is striking is the modesty of this minimum provision. How many comfortably profitable law firms out there pay less than this into staff pensions? Quite a few, I bet.
This matters. A golden rule on paying into a pension is to take the age at which you start and divide by two. So if you start at 30, you need to pay in 15% until you retire. That’s a lot of money over many years.
Partners can look after themselves, but HSF’s initiative suggests to me that employer pension contributions will become more of a differentiator in recruiting scarce talent. Especially with today’s under-35s groaning under the burden of huge student debt, extortionate rents and – where they can afford to buy – soaring mortgage payments. After consuming all that avocado toast (joke!), few are in a position to commit hefty chunks of their salary to the life they aspire to live 30 or 40 years hence.
Like HSF, I believe their employers have a responsibility to help them.
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