You’re never too old to work Politicians ignore pensions

According to insurance guru Ned Cazalet, speaking at a seminar last week organised by the specialist annuity and home-income-plan providers Just Retirement, the real scandal in politics today is the deep silence on the age issue which he feels is our greatest economic challenge.

The challenge is how western Europe is going to support the huge surge in old people which it is about to experience, and how long it can maintain the fiction that its present state pension systems are sustainable.

In the UK in 1984, for example, there were 700,000 Britons older than 85. Today there are 1.4 million. In 30 years' time there will be 3.5 million. And the UK with its miserable state pension and relatively favourable demographics is one of the least badly affected. Italy, Greece or Germany face even bigger difficulties.

In some European countries it is already the case that almost half the yield from income tax goes out in paying pensions, and far from increasing retirement with longevity the effective ages of retirement in many countries are actually coming down because the retirement pensions are so generous.

Thus the system becomes even more precarious. It is an unsustainable Ponzi scheme which, Cazalet says, robs Peter to pay Paul but whereas in the US they jailed the $50 billion (£32.91 billion) fraud Bernie Madoff, in Europe he would be elected to government.

The only solution is to increase the retirement age, probably to 70, and increase it regularly thereafter as long as longevity continues to rise.

Even then a lot of countries will also have to cut benefits from their existing levels — 90% of average earnings in some cases — as they have done recently in Ireland and as they are rioting about in Greece.

One might agree with Cazalet that this challenge ought to get some acknowledgement from politicians at election time. But once again there are no votes in it.