CHAPTER 2: ADEQUATE INCOME

An adequate, stable and secure income during later life can play a crucial role in maintaining good health, facilitating greater engagement in wider society and promoting a greater sense of security among older people. 

Since the introduction of old age pension by Bismark in the late nineteenth century, most pension systems rely to a considerable extent on intergenerational transfers. The older people of today have made significant contributions to the pensions of earlier generations and the young people of today will receive pensions paid for by future generations of workers.

As a country we are facing a crisis in the public finances, the general government deficit in 2009 was just under 12 per cent of GDP and the Government has committed to an austerity programme to reduce this to 3 per cent by 2014. As a result public spending will be severely constrained over the next few years. It is clear that if we wish to enjoy an adequate income as we age, so that we are free from poverty, substantial changes are necessary in the way we provide for income in retirement. 

The present system is unsustainable but given our demographic structure we have the time to put the required changes in place. The main options to choose from are

• To increase the pension age on a gradual basis and remove the barriers to older people working
• To increase savings and the incentives for savings and
• To increase taxation.

While difficult during a time of economic recession and increased unemployment, in the medium and long-term there will be a need to examine issues relating to the falling dependency ratio resulting from demographic trends. Given the scale of the challenges we face it is likely that the solution will require elements of all these options.

This chapter will discuss the financial contribution made by older people as family members and as workers. It examines the factors contributing to early retirement and looks at ways of ensuring that greater numbers of older people remain in employment or self-employment. It discusses the importance of the state pension in protecting against poverty, identifies measures necessary to ensure adequate replacement income through occupational pensions and examines possible models for reform. Finally, it explores the key economic opportunities of the silver markets and for silver entrepreneurs.