UKC

Live to 82. 

Hmmm.....

If you have not made any private pension contributions and you don’t own a house by the age of 50. You are in a word. Screwed.

It was calculated that if a 25-year-old wished to accumulate a pension worth £20,000 per year – that’s a lot ! When they retire they would have to contribute £246 a month to a pension.

No wonder people play the lottery!

However, someone starting their pension at age 35 would need to contribute £404 a month to achieve the same target.

This rises to more than £800 per month for a 45-year-old, so it makes sense to start early.

Get married - if your spouse/partner has a really good pension then it can be tempting to think you don’t need to make extra provision for yourself. Get divorced- average age of a divorcee is around 43 years old!

Take the time to do your research before making a decision on pensions and get advice from an independent financial adviser if needed. Yeah – trust a guy who works on a commission. Is that good advice? How do you know if your adviser is any good?

Remember – investments on the stock market go up and down, companies raid pensions, go bust, and people like R Maxwell will always exist.

Can you live on 20,000 a year in the UK?  Will you be able to live on £20,000 a year in 2080? Are you on £20,000 a year now?

Hmmm 82.....

Hmmm  82 ... ?   

There could a be lot of octogenarian odd job men & women around in the future couldn't there Doc ?

Is it too late to play some Public Enemy Really Loud do you think  ?

Good post. Isn't there a handy formula for calculating how much (say) 16k would be worth in 50 years?

I'm hoping thrifty habits will mean I can live okay on 16k -ish. 

Lots of people in the UK earn less that £20,000 a year. Of course you could live on it. In fact £20,000 a year is a bloody good pension.

Any pension quote should adjust the final pension to an estimate in 'real terms', e.g. the pension should be the equivalent of what £20k is worth today, not "you'll get £20k a year but a mars bar is £50".

A couple of extra things to consider:

cost of housing - much cheaper to live if you have paid off a mortgage and own your own property, you can consider a house as a big part of your pension pot.

care costs - these can be eye watering.

£20k will be easier to live on if you spend all day working. If you retire at 65, 66.. and are in reasonable health etc. You will probably want to do more with your time than sit in the house for those 40hrs you previously worked.

Yes much you can do is free, but you often need to transport or equipment too. I'm reckoning on needing more disposable income on retirement than now and factoring in inflation. It's tough as provisioning for the future does mean less now. 

All good points. I'm aiming to work to 60, but would go earlier if I could.

I'm taking the view that we need a fairly small regular pension, and we have at most 20 years of good health in which to burn through all our savings.

Last time I did a pension's calculator it put me at £160 per year on top of the state pension, £20k per year is quite a comfortable amount of money whether you're retired or not and I imagine the vast majority of people will be planning to live on much less in retirement.

It's important to look at this in a more complete sense.  Here are other considerations:

1. How much tax is paid on that £20,000?

2. What other benefits and concessions do pensioners get that helps to keep their costs lower in many ways?

3. By the time you reach pensionable age, what other outgoings are no longer applicable (mortgage for example)?

£20,000 on its own may not look like much, but £20,000 in relative terms will allow a fairly comfortable retirement.  There should be no need to struggle on £20,000 at the moment (ask me again in 10 years...)

I think you are under estimating just how much free time a pensioner has to fill. Not all will be living in a small cheap to run fully paid off home. Most people will want more from their retirement than using their free bus pass to visit the indoor wall during the day for a pensioners concession and popping into the library on their way home for 30mins free internet access and to keep warm. 

I bet few retirees think I wish I saved less when young. 

And don't forget that, currently, the state pension is worth £8k/year. Who knows what will happen to it in the future, but I suspect nudging the retirement age up will still be used to save money for a few years before they get rid of it altogether.

Alan

I reckon most people will be 'planning' to live on much more but will probably end up having to make do with less

I'm assuming your £20k a year retirement is including the £8k state pension using those numbers (£800 from 45/£404 from 35) They seem very small contributions to come up with anything decent in those time frames.

P(1+r)n . Cant find superscript so that is "to the power n.

So 16k at the government target of 2% inflation, gives 16k divided by 1.02 to the power 50, or 2.69, which gives £5,944 pa. At the actual current rate of 3% it equates to £3,649 pa.

My generation aren't going to have the option to retire. We will work until we are in our care homes. I currently do a physical job, but have also retrained and do little work as a translator. My theory being that eventually this will be a better job for my dotage. 

More and more of my generation are either self employed or in the gig economy, so the traditional pension set up doesn't help us as there are no employers contributions. I am planning to keep moving as many savings as I can around various fixed rate bonds and ISAs, whatever is best placed to give me some interest at that particular time, and hope that I have enough money by my old age to make it possible to reduce the work load a little. I think this is the reality for lots of us these days. Thankfully I do a job that I love. I think this is important if you genuinely think you won't retire.

Glad to see you back, I missed your cheery optimism and positive outlook.

Yes and no. Having retired at 58, I find that I now spend no more and no less then prior. 

I no longer have my commuting costs, work clothes are irrelevant, and I can spend time doing my hobbies and interests without a huge outlay, having well provided for them before retiring. It costs nothing to put my boots on and take the chaps for a walk to see the sea.

I now have a huge allotment which is staring to pay dividends in food, and gets me out of the house for a couple of hours a day.

Socialising with friends from the village is more fun than sitting in my office.

We've made a conscious plan and effort to live modestly for a couple of years.

Every single one of you?

Maybe, maybe not.

Looking at your profile there's a long time to go until you'd be considering retirement based on your age. A lot can change in that time, and changes aren't always for the worse.

At the risk of sounding like an old fart, when I left school in the 80's the country was shit. Huge unemployment, miner's strike, high interest rates on mortgages, negative equity and town centres had far more casual vandalism and violence then they do now. The future was all doom and gloom. Plague pestilence and Thatcher stalked the land.

Getting a half decent job, a car or buying a house seemed all but impossible at the time. 

30 odd years later things have improved for me immensely. Although most people would claim that as being down to hard work, it's pretty much all down to luck and global changes that I have no influence over.

Yes I work hard, I'm extremely frugal and that has no doubt contributed to me being where I am now. However it's widespread economic changes that have been the big driver.

It sounds like you're doing all the rght things. The future is not guaranteed to be miserable, no matter what the media narrative keeps saying.

A large proportion I would guess.

There won't be a state pension, and with more and more of us not in a position to get employers contributions the prospect of a pension is unlikely for many.

Sounds good, your plan is working. For those of us not retired, we can only plan and save. Yes you can live cheap, we already grow much of our own food and try to future anything long term. No fixing the house etc on the cheap, do the job right to see it through the next century etc and hopefully avoid too many big bills in retirement. 

There is no doubt that the current young generation are less well off financially than the older generation. Yes, mortgages went  crazy in the early 80s (my parents remember 17% interest on theirs), but even with that more could buy than can now. 

Yes, being frugal helps, but in today's climate rent is so high that even if people are frugal, most can't still save for a deposit. I have been very fortunate with some inheritance which I am currently feeding into a lifetime ISA to get the gov bonus before we buy the place we are currently renting from my parents. But if it wasn't for lower rent due to parents being the landlords and the inheritance then there is no way I could ever have considered buying a house. Also, I don't have kids which helps too. 

I feel this puts me in a stronger position than many of my peers, and I don't expect to retire. 

I'm not necessarily looking at this in a gloomy light, I like my work and I have a good life. We just have to think differently about our later life than our parents and we need to plan for a longer working life and discard thoughts of a retirement 

As a general rule of thumb, whatever your pension pot is, divide it by 20. That's what you'll get per year. If you've not got a £400k pot, then you'll be out of luck if you are hoping for £20k.

There are other ways of dividing your pension pot; being able to take a lump sum, for example. So perhaps if you took a lump sum, paid off the mortgage and eat cold baked beans for 20 years, it could work out alright.

If you retire at 60 with a 400k pot and draw down 20k per year increasing each year at 2.5% inflation you’ll still have £121,000 in your pension pot aged 80. 

Edit: figures calculated using an annual pension growth rate of 4% 

20,000 a year, that's assuming they'll get the same level of state pension as now. They simply won't. High likelihood is, if you are in your 20s or 30s, and don't own a home, you will probably have no choice but to work until you die.

It's an inescapable demographic reality. Anybody can do the maths.

As an employee of (what ended up being) Northern Telecom. About 10 years worth of contributions are currently being used by solicitors arguing over the dregs of what’s left of the company’s assets.

So when/if it finally gets sorted, those years will (if I’m lucky) probably end up in the Pension Protection Fund.

A good return for the investment – I doubt it.

I know a few who wish they'd spent more.  Someone I know in particular has been denying himself, saving for doing things in the future and is now realizing he probably won't be physically capable of doing what he's been waiting for.

its a fine balance between living a full life and saving enough.  And life can deal out some nasty lessons too.  I'm glad I have a job I like as I'll be doing it to 70 plus I think

Auto enrolment guarantees that participating employees put away 9% of income (technically 8% but there's the tax rebate to throw in) for their entire working lives. That's not huge but it's a pretty good start. It would deliver a pension pot well into six figures even for low earners and at very slow rates of growth.

I admit I don't know what the national uptake has been but in my company it's about 90%. And that includes the low earners. In fact those youngsters are the ones I most encourage. As an employer the scheme has been a pain in the arse and effectively another 4% of employer's NI. But I'm impressed how smoothly it has run and I'm comforted that my employees are being encouraged to develop the right habits. It was a far-sighted policy.

Which is fine for those in traditional employment. However the gig economy and self employment are growing fast and many people working like this are young people. It appears that around 15% of the workforce are self employed. Add to this the numerous zero hours and casual contracts and you have a lot of people not in pension schemes. Yes, it's a great idea for those in traditional work, but not a solution for all by any means!

Our retirement plans are dependent on the Turkish wallnut trade! As long as the bottom doesn't fall out the market AND our field full of newly planted trees don't all die in the next 15 - 20 years we will have a comfortable retirement in the sun.

BTW. How do you think these 'care homes' you mention are going to work for you? Have you seen just what's on offer in your area if you have little means? And just how much a half-decent care home will cost you per week?? Many people have enough money in the bank to given them about 6-8 weeks in a good care home.

I'd suggest that saving for retirement and not enjoying life whilst young & physically able to are not precisely the same thing. But I do get your point that some of us will be unfortunate and not reach retirement age at all, or not have the health to fully enjoy the free time. However skipping investing in a pension, when you can afford to, thinking you won't need it is simply foolish. 

Indeed, the whole system for dealing with old people needs to change. It may be that we are left to fester and die with no care cause we can't afford it! I was being optimistic that there may still be some provision for old people!

It's not a system I agree with, it's just the reality. We need to pay more tax to fund numerous things, including old age care, but people don't vote for that. 

Thanks, but I am quite aware of the scheme, I’ve had consulting jobs in several pension funds and even met Steve Webb a couple of times in of those  (FYI he’s the former minister who implemented the policy, and yes, he now works for a pension fund, wink wink)

Far sighted policy ? Very good for the pension funds indeed (by the way most of them offer very, very poor value for money). But the reality is that if you are in your 20s that money would be better used towards buying a house. Once you own the house yes it makes total sense, put as much as you can in it.

Someone born in 1990, putting away 300£ a month in a pension pot, including employer contribution, and retiring at 68, can expect a pension pot of 200k, which can provide an income of about .... 7000 pounds.

Not even enough to cover your rent in most parts of the country, and that’s in today’s prices... 

It’s not 10% of their income millennials need to save for retirement, it’s about 30%. But they also need to save for a deposit. Basically it’s just technically impossible appart for a few big earners.

Bottom line is, if you are 30 today, and you haven’t inherited house from the bank of mum and dad, expect to work well into your 70s.

Agreed with you 100%. Unfortunately many young people just shut their minds to it, I think. Have had the realities brought home to me recently in our family. 

PS. And I count ourselves as being among the very lucky ones ...

The OECD countries are facing a pension deficit of about 80tn$. 

Old age in 40 years will be very different to what it is today. People will work past 70. There probably won’t be the state pensions. We can just hope that technology will help.

I've been self employed for 37 years repairing domestic appliances however I put money into a private pension scheme, only £25 a month to start with but it increased with inflation and now I'm paying about £250 per month. Pension pot about £140k at present. I can pay up to the age of 74 to claim tax relief on my earnings although I want to retire at the end of this year when I'm 70. Whats the problem with self employed people not paying for a pension I've never earned more than 15k a year but managed. Problem these days seems to be priorities and expectations, doing without expensive  stuff eg iphones,ipads et al doesn't seem to be an option. Eating out,takeaways are taken for granted, and who drives an old banger these days, Young people dont have anything repaired these days most of my clientele are over 50 - today my customer said her daughter of 22 just told her to go and buy a new tumble drier because it was noisy - turned out it was a lump of fluff. I hear this story again and again and its no wonder my business is a dying trade. The old adage about look after the pennies etc. still applies but seems to be overlooked. I think one of the differences with my generation is that we did without when we were younger, it was more make do and mend . We are better off in our old age whereas the reverse may be true of the millennial generation.

All the the rhetoric about the baby boomers never having it so good doesn't wash. We were kids in the 50s on the tail end of rationing, most of us wore cast off clothing from siblings or relations - we didnt care, had to do unpaid chores at home where money was scarce. 60s were a good time  if you were a teenager with no responsibilities but these kicked in when you left home. My weekly rent was about 40% of my take home pay, food was relatively dearer than today and we also payed a lot more income tax even on low wages than we do today. At the start of the seventies I got married we had the first child and bought a house £850(honestly) on a mortgage. Unknowingly this was a wise move, although I had to commute to Manchester everyday(trainfares etc.) similar properties in Manchester were twice the price and in rough areas - I wasnt to know that Hebden Bridge was going to be des res territory, it was regarded as hippy central in those days. My point is if you want to get on the property ladder you've got to think outside the box there are still places up here in the north - solid built terrace houses for 80k but you will have to travel or commute. If you live in London or the Home Counties or some of the more fashionable areas and you are earning less than 30k and want to get on the property ladder - dream on or get real.

Old age is already very different. People are on average healthier, more active and live longer. Isn't it logical that they would work longer too? With an extended lifespan surely the same length of time and quality of life in actual retirement is still achievable?

Not suggesting there aren't challenges ahead.

Indeed, they should work longer, but starting now, not in 40 years, it will be too late. It’s already too late in fact.

Nope, it wouldn’t even be nearly achievable even if life expectancy was to keep increasing at the same rate it did for the past 60 years. Which it isn’t btw, it’s ground to a halt. 

Not only there are challenges ahead, massive ones, but they are met by people with no plans to do anything about it, or in fact doing everything they can to make the problem worse...

The advantage of a pension scheme is employers contributions. If you are self employed then the ability to move savings around to benefit from the best rates makes much more sense, it's also an emergency fund. Even if put away the same amount that I would if I was in a traditional job with pension scheme, the lack of employers contributions make it a much smaller pot. 

As it happens, it's only in the last few years when I have been renting from my parents that saving anything at all has been possible due to inflated rent prices these days.

As for this myth that persists about feckless young people wasting their money...can we please put that to rest?!

I have a  basic smart phone (only got one in the last few years as I need to be able to get work emails anywhere), no tv, no iPad or any gaming devices. Meals out or take aways are a very rare luxury, I don't buy ready meals either or eat much meat. Most nights we have soup and homemade bread for dinner (this isn't just about cost, I put on weight with the slightest sniff of rich foods!). I have done a huge number of my own car repairs (on my old second hand car!), holidays are very rare, 2 years ago we went to the Altai mountains and that would have been the first holiday I paid for in 5 years (my parents live in Munich so they often  buy us flights to visit them as Christmas or birthday presents). 

I remember the day when I was just in my first few years of being self employed when I was waiting for an invoice to be paid and I had £5 left at the bottom of my overdraft to get something for dinner that night and get enough fuel in the car to get to work the next day! Thankfully I have more of a reputation now and those sorts of moments are in the past but there was certainly no thoughts of pensions then! (At least I am practiced for dealing with my old age though! Lol)

The inescapable fact is that things are getting better faster than they ever have in the past and the pace of change is only going to accelerate.  Artificial intelligence, robotics and biotechnology vastly increase our capabilities to make things and control our environment.   There is going to be far more 'wealth' than ever before.   

The whole financial system needs ripped apart to deal with the changes that are coming and make sure that everybody gets a share of this wealth.   I don't think people in their twenties now will get a state pension or any other kind of pension.  Everyone will get a universal income and it will be enough for a fairly nice standard of living.  Why shouldn't it?

thats an interesting contrast - UBI vs pension, why is it that one appears increasungly likely, and the other increasingly unlikely?

I think UBI, or some variant of that, has to be the way to go. It gives people the ability to earn more when required, and people see the immediate effects on their lifestyles, it's not a case of being totally reliant on paying tax and into a private pension and hoping there's something left for you when you hit 70.

Biggest problem is the vested interests that want to keep the status quo out of personal greed, and the influence they have over government.

I agree that should be possible. The problem I see is that some people think that no-one, except themselves, should get something for nothing. We live in a society where we have built social value in what someone does and we think that someone's worth is in their position in life and that someone doesn't deserve a comfortable life just for being human. You have to earn a comfortable life. 

I don't know how we change this mindset.

Sounds good if we can though!

I don’t see how UBI would alleviate the problem.

The basic issue is that there won’t be enough young of working age to take care of the old, and we haven’t made reserves.

As no male in my family has ever lived past 74 maybe I don't have worry about this so much........... 

You have a lot to live up to

If I can't work I won't be able to play either, then it'll be time for a long walk off a short pier. Seen too many long drawn out illnesses lately to want that.

I think you'

re being too pessimistic,

Are you planning for this eventuality?

There;s plenty of advice here..

http://forums.moneysavingexpert.com/forumdisplay.php?f=19

ETA: just read your next post, it would appear you are being pro-active and have put some thought into the matter. 

So far, however, as you say there may be pitfalls ahead which we cannot plan for, hence we're trying to live below our means in order to build up a cushion.

Not pessimistic, just the reality. 

Yes, I am planning for this. I have retrained so that I have a sit down  job (translation ) ticking over in the background for now so that when my current physical work becomes too much I can move into a more static job. I have some savings building up so that in my later years I can may be reduce my work load. 

I see this as much more positive thinking than those who keep assuming  they will have a pension when the current trends suggest we won't have. I am mentally prepared and got the training to keep working. Setting out with this attitude of keeping going will make it much easier when it comes around.

You have my respect for that.

I have a 23 year old daughter who is just embarking on her adult life. I'm trying to keep aware of not just our (me and the Mrs) financial situation, but hers too.

Why do you think there will not be any pension provision. The trend has been to get a state pension later and to increase contributions. Not to remove or reduce.

With UBI everyone benefits, and it removes the 'I pay taxes and everyone gets the benefits' mindset, which I suspect stops people saving for pensions as they 'want something back' when they retire.

If you get UBI you perceive that payback immediately, and it removes the 'us and them' mentality that is prevalent in the UK. It gives more flexibility and removes the precarious existence of those unfortunate enough to be stuck in the ZHC economy.

This doesn't answer the pensions question, (although UBI will replace a state pension), but it moves society towards a more Scandinavian model where people feel included in society and hence are more likely to contribute in both higher taxes and social responsibility.

That's a demographic issue which will resolve itself with time. The answer is not to import more young people, who will age, need care, need more young people... That's just continually increasing the population to end up in the same state further down the line. (Plus with UBI more people might have children in the first place).

In the interim a lot can be done with health care to allow people to be healthy and independent longer, plus robotics could solve a lot of personal care issues for the elderly.

Frankly, I have no idea about UBI, I’ve seen some evidence that it can be cheaper to run than conventional welfare system so I am not agai st trying out. I just know that it doesn’t fix a basic problem of productive capacity.

No, that would be the case only if those who came during that time have a fertility rate well below replacement rate. Which isn’t the case. 

Sure robots will help, but I think you haven’t taken measure of the scale of the problem. You would need productivity increases many times the historical average to compensate. Such productivity increases in the short term are just a pipe dream.

Seeing as how I have calculated that I could live quite comfortably on £17,000 an extra £3000 would be icing on the cake. My current wage is £24,000 and I still end up saving around £6,000 -£8,000 a year

In retirement, we've budgeted for £25,000 pa, but we are hoping to live off between £15,000 - £20,000 to build up a cushion.

Self- employed people can still take out pensions. I have a private pension which matures next year. I agree with you re-casual contracts though.

Self-employment is not a bad thing. It depends on how much you get from it.

A lot depends on where you live as well. Where I am it is quite easy to live off less.

They are pushing it later and later. Eventually it will be at an age where actually no one will benefit from it. Then it's easy to scrap. 

Whose contributions are increasing? Mine aren't! Any rises in NI really need to be going to NHS (I don't actually know the break down), which in turn is old provision I suppose as most people are likely to need it more as they age.

They can, but lack of employer contributions make it a much smaller pot than their peers. Some will be able to retire on it, some won't. Private savings make more sense if you are a low earner, but either way you are likely to struggle to live off it in old age and there just won't be a state pension for us to help us. If you have the state pension to boost your savings then great, but we just won't have it. The best I can hope for is it use my savings to work fewer hours when I reach that stage.

True. We live at a rather rural/remote place, so travel is one factor we have to be aware of, and look for efficiencies.

My parents, Father 85 carpenter , mother 83 clerk, are both still working part-time in order to supplement state pensions and make ends meet. Mother in particular has been a life long victim of low pay and never received any workplace pension from any employer. 

N

I know what you mean about the lack of employer contributions, but I think that you may still be better off paying your money into a pension instead of an ISA, as you will be missing out on the tax break if you don't. That's just free money that your not taking advantage of 

But you pay tax when you draw down from your pension and you pay a fund manager for the privilege. Probably worth it if you are a high earner, but not for a low earner. ISAs at the moment are not great, but still some ok rates in bonds.

Anyway, the actual mechanics of what each person does with their money will vary, but either way many self employed and zero hours workers are unlikely to be able to retire and that is an ever larger percentage of the younger generation.

I don't believe that there won't be some form of state pension because of the knock on effect across society. No state pension would lead to a) a vast increase in homelessness b) relatives being expected to look after the elderly (as my grandparents did) with a commensurate loss of income in those families (ie not working to look after relatives c) impact on availibility of jobs as older people do not retire d) impact upon local services left to deal with the problems of age related poverty. e) increased health problems related to poverty. The bottom line is if you don't have a state pension then you end up paying in other ways. A none contributry pension won't be much but it will exist.

The point is there isn't going to be anything like the same correlation between number of young working people and amount of useful work/services.    This video is a new car factory in 2017: almost no people but it still makes plenty of cars.  

youtube.com/watch?v=em09c2WxwQM&

By 2027 or 2037 robots and AI will be doing the same thing in far more industries.   AI is also going to increase the rate of technical progress by increasing science and engineering productivity.  So change is only going to get faster.

We don't need 'reserves'.  Reserves are just an entry in a ledger held by a bank.  Cars are real, medicines are real, houses, food is real.   In real life when technology improves we get more capacity to make the cars, medicines, houses and so on that we need to give everyone a good standard of living.   If our financial model says we can't do something we obviously can do in the physical world then we don't need to do without, we need to change our model.

You only pay tax above the income tax threshold, whereas you will almost certainly get tax relief on all of your contributions and, in the interim, your capital is larger getting you a bigger return.

The tax relief in the very first year more than offsets a 1% management fee. The low earners will probably need their private pension more. They are less likely to have a fully paid off home etc... or separate life / critical illness insurance... 

Being self employed, do you not make your own employers contributions? 

I know a lot of self employed people who are going to be very comfortable in retirement. 

I'd say the problem is low wages / high cost of living rather than being self employed. 

That has a strange and scary beauty to it.

I can't quite remember the figures now, but I did spend a day going into the maths in-depth, and got my dad to check it, and concluded I was better not using a pension fund. 

It is also an emergency fund if ever needed. 

As for being less likely to own a home, I agree but due to an inheritance I will be buying a home and not having money in my pension will be good as I can put some of that into the deposit and reduce the time in am paying a mortgage and therefore save money long term. I suspect my money might grow more in property than a pension fund. (Both are a gamble, so I will keep some in my various saving accounts)

Only if you can afford to save more! I'm a sole trader, it's all my money! Either it's my wages or my savings! There is a small balance kept for paying tax and other small expenses, but I can only save as much as I can afford!

Good points. However once your pension is above the income tax threshold surely that negates things to an extent, (although it's a good point about having more capital to get returns on)?

If we assume someone is say 10 years from retirement and has a pension pot predicted to give a pension of 11k a year, wouldn't they be better putting money into ISAs or similar, (bad interest rates aside), and drawing tax free from the ISAs?

For example isn't an 11k pension plus 5k/year tax free from ISAs better than a 16k pension and paying tax above the threshold?

Sure change will happen, and productivity increases due to AI and so on help, but I’m telling you, unless these technologies produce productivity increases several folds the historical average, this isn’t going to be enough. So far productivity is going nowhere so I wouldn’t  bet too much on it if I were you.

I am quite heavily involved in AI and machine learning myself, in fact most of my job for the past few years has been to advise corporations on how to leverage these techs effectively. And my first advice is often to lower your expectations. To get these things to work you need armies of skilled data scientist and developers. Which we don’t have, and will be harder to find as population ages. There is no magic AI button that will fix everything.

And they are less likely to own their home if they put their money in a pension pot instead of putting it in a home..

As I’ve said before, putting money in a pension is tax efficient, but paying rent for all your life is several times less efficient

Mine have. As an employee with a workplace pension, my NI contribution went up by about £500 a year a couple of years ago. Loss of the top up exemption was part of the flip side of the minimum income pension promise the government made at that time.

I'm currently making voluntary NI contributions to bring me up to the full contributing years. 

Only because the UK has a home ownership/ renting phobia problem. Plus a lack of housing which has driven up cost relative to income. 

Other countries fair better with this problem, they also have more multi generational households which in part helps the care in old age & child care problem etc.. There is more than one way to skin a cat.

And how do you measure 'productivity'?  If you do it in terms of money then saying we can't get large productivity increases is just a self-fulfilling statement.    The prices of things are usually determined far more by scarcity than capability.  Technical progress tends to make things less scarce or provide more capability but it doesn't usually manage to extract more money for them. 

If all you look at is money then that's not increasing productivity: you may be making more stuff or better stuff but you aren't making more money.  However, in the real world making more things or better things is what matters.

Productivity is simply the rate of output divided by units of production, that is what it measures.

Now it’s quite easy to work out that if demand increases faster than units of production can increase production, and you can’t increase the number of units of production, then you cannot meet demand.

There is no doubt that technological progress helps increasing the output per unit, I am simply pointing out that it doesn’t look like it will be enough, and it would need to increase several times faster than historical trends for it to be enough, which doesn’t look even remotely likely.

Investopedia: "Productivity is an economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in revenues and other gross domestic product (GDP) components such as business inventories."

So usually productivity is defined in terms of revenue i.e. money.   As soon as you do that you are playing a zero sum game.  Money based on debt and prices based on scarcity mean you can't get ahead with technology in the economist's measurements even though in terms of practical utility you absolutely can.

Productivity a the macro level is usually defined in terms of the net value added over the number of units of production. I don't see the issue, technological improvement will most definitely be captured by the productivity measure since they increase added added value and output.

The problem is that economics measures value added with money not real world capability.

Example:  A DRAM manufacturer one year sells 100,000,000 4Gbyte DDR4 memory chips for $50 a go.  Three years later they sell 100,000,000 16Gbyte DDR5 memory chips at $50 a go.

If you measure output in US dollars there is no productivity gain.  Revenue is exactly the same: $5Bn.  But the chips they are selling are 4x the capacity and 2x the speed.  So in 'real world' terms their product is 8x as good and there's been a hell of a productivity improvement.   There's no scarcity because all the other DRAM manufacturers have been implementing the same tricks so the price hasn't increased despite the product being vastly improved.   

You are confusing increase in performance with increase in value. Sure, my new phone is 2x faster than the one I had last year, it is twice as valuable to me as the older one ? I don’t think so.

At the macro level using GVA or GDP as the output measure makes sense because it encompasses so many things that in practice, it works very well at measuring living standards.

The economists are confusing value with price.   In a market like DRAM or cars or phones the price has little to do with value it is forced by competition.   Technical performance may not be an ideal proxy for value but it is better than price. 

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Is it ? Surely a good indicator of the value of something is what you would be prepared to exchange it against, not necessarily how fast it goes or how big it is.

Anyway this is irrelevant unless you  have reason to believe productivity, regardless of how you define it, will increase several times faster than historical average. Seems like a complete pipe dream.

The value of a PC would be the price that a PC manufacturer could get for their product if people had no alternative supplier: you either buy at that price or you do without.   It is almost impossible to keep knowledge secret, competitors very quickly learn how to duplicate the features of any product which means there is relatively quickly intense price competition and nobody gets close to the value of their product.   Most of the time tech industries are handing all the increase in value that comes from innovation over for free: 16G DRAM chips at the price of 4G DRAM chips a couple of years after they come out. The economists look at the money and think nothing has improved but that's a comment on their modelling not the real world.

How you define productivity is absolutely crucial.  If you define it based on money then you are never going to see large increases in productivity because the system is constructed to prevent something-for-nothing which is exactly what technical progress provides.   In the real world, as opposed to the economists numbers, large increases in productivity are not a pipe dream they are glaringly obvious.  Look back twenty or thirty years and pretty much everything with a technical component is far better than it was: computers: thousands of times better, cars: safer, less polluting, more comfortable, on the verge of driving themselves, air travel: cheaper, safer, medicine: huge improvements.

If we can make enough of the things that we need to live and the things we make are better than they were before then we do not have a 'real world' problem with giving people a nice standard of living.  If our way of measuring things with money doesn't reflect the reality of scientific and technical progress then it needs to be improved and updated just like everything else.

Sorry but it seems to me what you measure as "technologhcal progress" is completely subjective. Having a computer a 1000 times faster than the one from 10 years ago doesn't make your quality of life a 1000 times better, or doesn't make you a 1000 times richer either. You may want to convince yourself of that but you are going to be disappointed in afraid !

However prosthetic limbs, although perhaps not a thousand times better, have improved massively in both comfort and functionality. Compare what were in effect crude wooden legs only a few years ago with todays units. In terms of productivity laser printed prosthetics can now be produced faster and better in undeveloped nations, bringing a hitherto unknow level of mobility to the poorest.

Advances in technology are also driving limbs that can be operated by nerve induction, hip replacements are routine, and once reliable knee joints and perhaps powered exoskeletons come on stream that will be a massive improvement in quality of life and mobility for the elderly. It's not a case of making a flashier iphone to boost profits and make spreadsheets look good.

This brings us back to the original point made earlier. Technical advances will make it easier for people to care for themselves in their own home, live more fulfilling lives and actually be less of a burden on the state.

We simply need the government and NHS to prioritise spending towards prolonging the quality of life, not letting people deteriorate to the point where life isn't worth living to save a few quid, then spending a massive amount of money and resources keeping them in that state for as long as possible.

Simply importing more and more people is not the answer. It's not all about boosting GDP.

It depends how you define 'better'. Better performance perhaps,better longevity -questionable. In a mature market ie pcs,mobile phones, domestic appliances all they can do is apply added value to a product to tempt the buyer and this is usually peripheral (anybody read the blurb to try and tempt you to buy the latest samsung phone - they are really scraping the barrel). So they make them to fail after a certain time and make sure the parts to repair are outpriced  or in the case of apple phones to slow down just to sustain the market. The excuses usually used are that jobs will be lost if they lasted longer as if corporations employ people out of the goodness of their hearts - it will be interesting  when robots take over if anyone will care about unemployed robots. Quality (try defining that) has gone out of the window in a lot of cases, most washing machines produced today are crap - some of them only lasting a couple of years but that seems to be acceptable to a lot of people - especially the young who dont realise they are being suckered by marketing.

I think you are overoptimistic if you think all these great technologies will suddenly be avaible to everyone, cheaply, with no effort. It takes time and talented people.

All very well but as I've pointed out, unless technology improves many times faster than it ever has historically, even during the industrial revolution, it won't be enough.

Not more and more. Just enough to smooth out the demographic bump. Makes total sense especially when you have countries with the opposite imbalance and have too many young people. It's a win win.

You are correct it's not all about GDP, it's about GDP per capita, in practice a remarkably good indicator of human development and standards of living, simply because it encompasses so many things. 

It's really not hard to understand really, if the rate of consumption of the goods and services that make our standard of living goes up faster than the rate of production then something has to give. History suggests we won't increase the rate of production fast enough for the demand. 

I'm not saying it's impossible that technological progress suddenly explodes and goes faster than it has ever done, I'm saying I wouldn't bet on it and it would be wise to not count on it.

There are talented people across the world, the problem is those talents are diverted into the marketing of consumer junk, the production of consumer junk and the shuffling of imaginary money around the world to produce immense wealth in return for producing nothing.

Technologies don't suddenly appear cheaply and with widespread availability. However my cheap mobile phone has more computing power than NASA had to put a man on the moon, my cheap Kia has technology that the most expensive Mercedes didn't have a few years ago. New technologies are phenomenally expensive initially, then churned out for next to nothing ten years later.

Much as I admire Victorian engineering, it wasn't rocket science, (which in itself isn't particularly innovative). It was well established principles enabled by the steam engine and a complete lack of health and safety for the peasants. 

Technology doesn't need to develop to the point of teleportation and interstellar travel - an automated wet room, an arse wiping machine and a Goblin teasmaid that also knocks up a bacon buttie will pretty much replace the massive expense of care homes.

So what do we do with these surplus young people when they start getting old? Deport them at 40? Expect them to maintain a high breeding rate in a society where people elect not to do so?

We need to move away from constantly increasing consumption and constantly increasing the rate of production. Do economists diagnosed with cancer think "Brilliant, look at my increase in cell production, I must be really healthy!"?

Just look at the amount of cheap junk that nobody really needs that is churned out today. There's massive production capacity out there if it was repurposed and retooled to produce useful items.

It doesn't need to explode, we just need to exploit existing and nearly acheivable technology.

A bizarre and incoherent post. I'll leave you in your dream world of cheap automated arse wiping machine.

As far as I am concerned I'd rather be planning for the future and making it sustainable instead of counting on pipe dreams

My opinion is that if you live sensibly now, don't keep up with the Jones, live as a human being not a human doing, then you'll be fine in later life. Plan, but don't worry. 

Well I support a family of 2 adults and 2 young children on a salary of £24k pre-tax, so the trick to your £20k retirement is to make damn sure you own a house by then.

Predicting fast technical progress is not a pipe dream it is common sense.   It is delusional to look at robot dogs opening doors with an arm mounted on their head, robots doing back flips, thousands of self driving cars on the streets of California, people growing meat in test tubes and so on and think that nothing much is going to change.

I completely agree that the present pension system is obviously unsustainable.  There's no way most people can pay for decades of retirement from an affordable share of incomes which are being squeezed by all kinds of pressures.  But the problem isn't a physical one: we will have the technology to easily make what we need to give everyone a reasonable house, reasonable set of possessions and reasonable standard of education and medical care but the financial and social systems don't allow it to happen.

My guess is we are heading for another massive financial crash or series of crashes and eventually a reboot with a different set of rules.   Perhaps blockchain technology will be one of the catalysts for the transition.   In South Korea today many young people are preferring to invest in crypto-assets instead of trusting traditional financial services.  This could be a sign of the future: young people seeing they can't get ahead within the traditional system and deciding to play a different game.

Do we ? Take medical care as an example, the best predictor of good health outcome, in most advanced economies, is simply the number of physicians per head of population. And we can't recruit the health professional we badly need. And it's not even question of funding at this point, the salaries on offer are high and the position available. There just isn't enough.

Now I'm sure that technology helps greatly and health professional can and will be able to do more in less time, but cutting edge technology, as impressive as it is, takes time to make its way from the cutting edge research labs of Caltech and MIT into the hands of everybody. You may blame social an economic system for that, fine, but it doesn't change the nature of the problem : Needs increasing faster than productivity can increase combined with a reduction of the working age population.

How is that relevant?  We are talking about changes with *time* in terms of technical progress, not differences between countries.   It seems fairly likely that number of physicians per head of population is correlated with funding for health and therefore also with access to medical technology.

The actual question would be what are the outcomes now compared with 20 years ago if we want to predict 20 years into the future.  If there were no MRI scanners and so on would physicians make as good diagnoses?  With 20 years advance in drugs and surgical techniques (e.g. keyhole surgery) how much better outcomes are there.   As I said I think things are actually going to go faster in the next 20 years because we are just starting to be able to exploit our understanding of genetics, AI technologies are going to impact how effectively we can make use of data in every other discipline and robotics will bring a whole new set of capabilities beyond what human hand/eye can accomplish.

Of course funding has an impact, which is why I made the point that funding will not be able to match needs.

The funding issue is made much worse by the fact that, if you don’t have enough physicians, and their productivity doesn’t increase fast enough, you have a problem.

Let me put it another way.  I think the decade you are living in is a far better predictor of outcome than the number of physicians.  I'd rather have 2040 medical technology and fewer doctors per head of population than 1960 medical technology and tons of doctors.

I don't agree that funding won't match 'needs' if you have a realistic definition of 'needs'.  Technology will let us do things cheaper and it will let us do more things.    If you put in a constant level of funding you will get a better service with time.  But what we have been doing is using up all the gains to fight harder and harder to keep old and very sick people alive just a little longer.  This is an unlimited task and it will use as many resources and as much technology as we choose to throw at it.   

You might regret these words in 2040 when you realise that technology, although it will have improved , is not readily available to everybody simply because the demand is too high and the supply to low.

I think you are way to optimistic as to the rate at which medicine improves. As we plan for the future, the reasonable approach is to look at past trends, and make projections, instead of gambling on pipe dream breakthroughs. 

Yes, of course, but as I've said many times now, the evidence is that the rate as which it is happening is not fast enough to compensate for the demographic pressures, and there is no indication that it is getting any faster. 

Add to that the fact the current generation, at least in the UK, is officially the worst generation on record when it comes to obesity, and you have a time bomb.