tag:theconversation.com,2011:/au/topics/pensions-1565/articlesPensions – The Conversation2024-02-28T13:12:01Ztag:theconversation.com,2011:article/2229122024-02-28T13:12:01Z2024-02-28T13:12:01ZWill Britons work until they’re 71? Expert examines proposed pension age rise<figure><img src="https://images.theconversation.com/files/574609/original/file-20240209-22-wo3zz4.jpg?ixlib=rb-1.1.0&rect=48%2C0%2C5385%2C3579&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The current pension age of 66 is set to rise to 67 by 2028.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/elderly-man-changing-light-bulbs-retired-2269968695">Andrew Angelov/Shutterstock</a></span></figcaption></figure><p>The retirement age will need to rise to 71 for UK workers in future, according to a recent <a href="https://ilcuk.org.uk/ageing-populations-forced-to-increase-state-pension-age-to-71-by-2050-to-maintain-dependency-ratio/">report</a> looking at the effect of increasing life expectancy and falling birthrates on the state pension. </p>
<p>The current pension age of 66 is set to <a href="https://www.gov.uk/government/publications/state-pension-age-review-2023-government-report/state-pension-age-review-2023#:%7E:text=The%20Pensions%20Act%202014%20brought,68%20between%202044%20and%202046.">rise</a> to 67 by 2028, and to 68 from 2044. But research by the International Longevity Centre (ILC), a thinktank focusing on ageing, says that doesn’t go far enough. </p>
<p>It suggests that anyone born after April 1970 may have to work until they are 71 years old in future. And there’s a possibility that the age limit may need to go even higher than that. The underpinning reason is the rising cost of pension provision because the number of pensioners and the value of payments are growing. </p>
<p>The government’s Office for Budget Responsibility <a href="https://obr.uk/forecasts-in-depth/tax-by-tax-spend-by-spend/welfare-spending-pensioner-benefits/#:%7E:text=Pensioner%20benefit%20spending%20in%202023,5.3%20per%20cent%20of%20GDP">estimates</a> the state pension will cost around £124 billion this financial year. The pension level is safeguarded by the <a href="https://commonslibrary.parliament.uk/the-triple-lock-how-will-state-pensions-be-uprated-in-future/">triple lock</a>, which was first introduced in 2010. It means annual increases in payments are made in line with earnings growth, price inflation (currently 4%) or 2.5%, whichever is highest. </p>
<p>The Institute for Fiscal Studies has <a href="https://ifs.org.uk/publications/triple-lock-uncertainty-pension-incomes-and-public-finances">estimated</a> that continuing the triple lock will lead to an extra £45 billion of annual cost by 2050.</p>
<h2>It’s not just the UK</h2>
<p>The issue of rising pension costs isn’t merely a UK problem. Countries across Europe are currently grappling with the conundrum of how to look after their ageing populations in retirement. </p>
<p>Protests erupted across <a href="https://www.lemonde.fr/en/france/article/2023/06/06/in-france-a-14th-day-of-protest-to-derail-macron-s-pension-reform_6029218_7.html">France in 2023</a> in response to pension reforms which would increase the retirement age from 62 to 64. There have also been ongoing <a href="https://www.reuters.com/article/idUSL8N12F3RN/">protests in Greece</a>, which has been struggling with pension reforms since 2010. </p>
<p>Pension age increases are also <a href="https://www.etk.fi/en/work-and-pensions-abroad/international-comparisons/retirement-ages/">planned</a> in numerous other countries such as Denmark, the Czech Republic, Spain and the Netherlands.</p>
<h2>How the state pension works</h2>
<p>Unlike company-sponsored pensions, which invest money in individual accounts for future payouts, the UK state pension operates on a different principle. Instead of accumulating a personal “pot” of money, the idea is that current workers essentially fund the pensions of retirees. So, the state pension is financed from national insurance contributions and general taxation.</p>
<p>For this model to sustain itself, each new retiree entering the “pensioner pool” needs to be matched by a new worker entering the “worker pool.” As long as this balance persists, and pension claim periods remain reasonable, the system maintains its solvency.</p>
<p>Less than five years after the introduction of the state pension in 1946, the <a href="https://hansard.parliament.uk/commons/1954-11-15/debates/ed3805b1-dbb6-4f54-970e-58a43094a094/Old-AgeAndRetirementPensioners">pressures on the system</a> were already beginning to show. And the central issues are the same now as they were then – we are living longer and having fewer children. </p>
<p>In 1951, the <a href="https://www.ons.gov.uk/peoplepopulationandcommunity/birthsdeathsandmarriages/lifeexpectancies/articles/howhaslifeexpectancychangedovertime/2015-09-09">UK life expectancy</a> was 66 for men and 71 for women. By 2011, it had increased to 79 for men and almost 83 for women.</p>
<p>This means that a 66-year-old in 2024 will receive a pension for an average of nearly 16 years. But since <a href="https://www.statista.com/statistics/281416/birth-rate-in-the-united-kingdom-uk/">birth rates have fallen</a> from 15 per 1000 in 1951 to 10 per 1000 in 2021, those retirees aren’t being replaced with fresh workers.</p>
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Read more:
<a href="https://theconversation.com/matching-state-pension-to-the-national-living-wage-would-help-pensioners-maintain-their-dignity-217473">Matching state pension to the national living wage would help pensioners maintain their dignity</a>
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<p><a href="https://www.ons.gov.uk/economy/nationalaccounts/uksectoraccounts/compendium/economicreview/april2019/longtermtrendsinukemployment1861to2018#:%7E:text=Image%20.csv%20.xls-,The%20highest%20employment%20rates%20recorded%20were%20in%20the%20years%201872,average%20employment%20rate%20was%2073%25.">In 1951</a>, the UK population was 50 million with an employment rate of 70.4%. There were 35.2 million workers who were supporting 4.5 million pensioners, or 7.8 workers for every pensioner. </p>
<p>Today, the UK’s population is more than 67 million, which includes 33.17 million <a href="https://commonslibrary.parliament.uk/research-briefings/cbp-9366/">workers</a> and 12.8 million <a href="https://www.gov.uk/government/statistics/dwp-benefits-statistics-august-2023/dwp-benefits-statistics-august-2023#:%7E:text=The%20main%20headline%20figures%20for,5.6%25%20to%201.6%20million%20claimants">pensioners</a>. This means that every pensioner is being “supported” by just 2.6 workers. </p>
<p>Both central planks of the state pension system appear to be broken. And, to further complicate matters, we are seeing increasing levels of people <a href="https://commonslibrary.parliament.uk/how-is-health-affecting-economic-inactivity/">leaving the workforce</a> before they reach pension age, largely due to ill-health.</p>
<p>The state (in other words, the taxpayer) cannot afford the current pension provision for an ageing population for longer periods, let alone improve it. So, tough decisions have to be made, and soon. </p>
<h2>Generation X and millennials</h2>
<p>The implications of a rising retirement age won’t be felt by baby boomers like me. Generally speaking, we have benefited from jobs for life, free education, affordable housing and good company pensions. </p>
<p>The first cohort to shoulder the changes to the pension age will be generation X, born between 1965 and 1980. And they do not possess the wealth and assets of previous generations. </p>
<p>In fact, recent government <a href="https://www.gov.uk/government/statistics/analysis-of-future-pension-incomes/analysis-of-future-pension-incomes">figures</a> show that a third of the UK’s 14 million gen Xers won’t have enough savings to comfortably cover their retirement. <a href="https://www.justgroupplc.co.uk/%7E/media/Files/J/Just-Retirement-Corp/news-doc/2023/majority-of-gen-x-worried-they-wont-save-enough-for-good-standard-of-living-in-retirement.pdf">More than half</a> are not confident about achieving a good standard of living in retirement.</p>
<p>This generation, sometimes described as the “<a href="https://www.pensionsage.com/pa/Gen-X-face-huge-pension-black-hole-with-two-thirds-not-saving-enough.php">forgotten generation</a>” by finance experts, stands at a disadvantage due to their lack of early access to defined benefit pensions, which were largely closed to new employees by the time they entered the workforce. They also missed out on the financial benefits of automatic enrolment in workplace pension schemes, which was introduced only after many members of this generation had already established their careers.</p>
<p>The situation doesn’t look any rosier for the millennials, who have <a href="https://www.ons.gov.uk/peoplepopulationandcommunity/populationandmigration/populationestimates/articles/moreadultslivingwiththeirparents/2023-05-10">struggled</a> to get onto the housing ladder and are paying back student loans. <a href="https://www.theguardian.com/money/2023/sep/04/britons-cut-pension-contributions-hargreaves-lansdown-abrdn">Research</a> last year showed that almost a third of 18 to 34-year-olds had either stopped or cut back on pension contributions to save money. </p>
<p>Perhaps it comes as no surprise that more than two thirds of this age group <a href="https://www.pensionsage.com/pa/one-fifth-unsure-over-future-certainty-of-state-pension.php">don’t believe</a> the state pension will even exist when they enter retirement. </p>
<p>While the future of the state pension in its current form remains uncertain, one thing is clear – ignoring the problem is no longer an option.</p><img src="https://counter.theconversation.com/content/222912/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Chris Parry does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Increasing life expectancy and falling birthrates means many of us may have to keep working until beyond 71 years of age.Chris Parry, Principal Lecturer in Finance, Cardiff Metropolitan UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2174732023-11-23T17:24:27Z2023-11-23T17:24:27ZMatching state pension to the national living wage would help pensioners maintain their dignity<figure><img src="https://images.theconversation.com/files/558813/original/file-20231110-27-e08yw2.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C3461%2C2305&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The UK is currently 16th out of 50 European countries in terms of the best pension offering.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/hands-elderly-woman-british-money-palm-596706170">Linda Bestwick/Shutterstock</a></span></figcaption></figure><p>A question that is perennially <a href="https://www.if.org.uk/research-posts/can-the-uk-afford-to-pay-pensions/">asked</a> by financial experts is: “can the government (in other words, the taxpayer) afford to keep increasing pensions?” But in my view, the real question should be: “what is the purpose of the state pension?” </p>
<p>This isn’t an economics question, it’s a moral question. And, as a society, we are poor at discussing moral questions. </p>
<p>A <a href="https://obr.uk/forecasts-in-depth/tax-by-tax-spend-by-spend/welfare-spending-pensioner-benefits/#:%7E:text=Pensioner%20benefit%20spending%20in%202023,5.3%20per%20cent%20of%20GDP">report</a> from the Office for Budget Responsibility earlier this year stated that in the current financial year, the state pension will cost around £124 billion. This is more than the £105 billion education <a href="https://www.statista.com/statistics/298910/united-kingdom-uk-public-sector-expenditure-education/#:%7E:text=Government%20spending%20on%20education%20in%20the%20UK%202023%2C%20by%20function&text=The%20United%20Kingdom%20spent%20approximately,primary%20and%20pre%2Dprimary%20education">budget</a> and more than double the £52 billion <a href="https://commonslibrary.parliament.uk/research-briefings/cbp-8175">defence</a> budget.</p>
<p>The level of the UK pension is safeguarded by the <a href="https://commonslibrary.parliament.uk/the-triple-lock-how-will-state-pensions-be-uprated-in-future/">triple lock</a>, which was first introduced in the June 2010 budget. It means annual increases in payments are made in line with earnings growth, price inflation (currently 4.6%) or 2.5% – whichever is highest. </p>
<p>With another triple lock <a href="https://commonslibrary.parliament.uk/the-triple-lock-how-will-state-pensions-be-uprated-in-future/">increase</a> of 8.5% in pensions due in April 2024, the state pension will rise to £221.75 per week (£11,531 per annum). This is only £20 per week less than the <a href="https://www.gov.uk/government/publications/the-personal-allowance-and-basic-rate-limit-for-income-tax-and-certain-national-insurance-contributions-nics-thresholds-from-6-april-2026-to-5-apr/income-tax-personal-allowance-and-the-basic-rate-limit-and-certain-national-insurance-contributions-thresholds-from-6-april-2026-to-5-april-2028">personal allowance</a> everyone can earn before having to pay tax or national insurance. </p>
<p>Assuming wages exceed inflation and 2.5% in line with the last five year <a href="https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/bulletins/averageweeklyearningsingreatbritain/october2023">averages</a>, then the pension up-ratings could be in the region of 5% in 2025 and 2026. This will see pensioners, who have no other income, having to pay tax – in some cases, a decade after they last paid income tax.</p>
<p>So, how do we ensure that retired people are able to have a comfortable standard of living once they stop working? As a starting point, we can consider <a href="https://ec.europa.eu/social/main.jsp?catId=1606&langId=en">principle 15</a> of the European pillar of social rights, which was set out in 2017 by the European Union and maintains: “The right of workers and the self-employed to a pension commensurate with contributions and ensuring an adequate income. The right to equal opportunities to acquire pension rights for both women and men. The right to resources that ensure living in dignity in old age.”</p>
<h2>Comparing incomes</h2>
<p>The <a href="https://www.gov.uk/national-minimum-wage-rates">national living wage</a> is two thirds of UK average earnings and should be the minimum to cover “adequate income” and “dignity in old age”. The salary obtained by an adult working 37 hours per week at the national living wage is currently £10.42 per hour. This will <a href="https://www.bbc.co.uk/news/business-67484102">increase</a> to £11.44 per hour from April 2024.</p>
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<img alt="A table comparing incomes in 2023 from the state pension, national living wage and average earnings." src="https://images.theconversation.com/files/560698/original/file-20231121-4461-ybavll.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/560698/original/file-20231121-4461-ybavll.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/560698/original/file-20231121-4461-ybavll.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/560698/original/file-20231121-4461-ybavll.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/560698/original/file-20231121-4461-ybavll.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/560698/original/file-20231121-4461-ybavll.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/560698/original/file-20231121-4461-ybavll.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">A comparison of the state pension, national living wage and average earnings in the UK in 2023.</span>
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<p>Were the UK pension matched with the national living wage, it would be set at a figure of £22,308 per year, and pensioners’ income would be vastly different as of April 6 2024. </p>
<p>Even after paying more than £1,900 in tax, the poorest pensioner would be still be £225.15 per week better off than they are today. And the extra disposable income could be recycled into the economy through increased expenditure, with knock-on impacts in indirect taxes such as VAT. </p>
<h2>A European comparison</h2>
<p>A <a href="https://www.almondfinancial.co.uk/pension-breakeven-index-how-does-the-uk-state-pension-compare-to-the-rest-of-europe/">recent survey</a> by pension advice firm Almond Finance UK shows the UK is currently 16th out of 50 countries in terms of the best pension offering across Europe. Spain tops the survey, with Belgium in second place and Luxembourg third. </p>
<p>Bringing the state pension in line with the national living wage would move the UK up to fourth position, ahead of Bosnia and Herzegovina, Cyprus, Lichenstein, France, Denmark and Switzerland.</p>
<p>Such an increase would raise the annual cost to the Treasury from the current <a href="https://obr.uk/forecasts-in-depth/tax-by-tax-spend-by-spend/welfare-spending-pensioner-benefits/#:%7E:text=Pensioner%20benefit%20spending%20in%202023,5.3%20per%20cent%20of%20GDP">£124 billion</a> to £236 billion. And such a large increase in expenditure would require more taxes or more borrowing, which would accrue more debt interest in turn. But this sum could be reduced by £13 billion by charging pensioners national insurance. </p>
<p>In a response to an <a href="https://www.dailyrecord.co.uk/lifestyle/money/calls-living-state-pension-payments-30501193">online petition</a> in August, which called for the state pension to be matched to the national living wage, the government <a href="https://petition.parliament.uk/petitions/636088">said</a> it had “no plans to increase the state pension to equal 35 hours a week at the national living wage”. It went on to describe the state pension and national living wage as having “different purposes” and said that a direct comparison could not be drawn between the two. </p>
<p>With the <a href="https://theconversation.com/autumn-statement-live-experts-respond-to-chancellors-tax-and-benefit-cuts-218211">focus</a> on cutting both business rates and national insurance in the autumn statement, it’s worth considering how those measures will help to ensure that pensioners live in dignity in old age.</p><img src="https://counter.theconversation.com/content/217473/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Chris Parry does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>How does the UK ensure a decent standard of living for its elderly population?Chris Parry, Principal Lecturer in Finance, Cardiff Metropolitan UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2063622023-06-05T15:57:29Z2023-06-05T15:57:29ZWhy saving for a pension has become more risky<figure><img src="https://images.theconversation.com/files/528068/original/file-20230524-33669-p13c5d.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C4992%2C2979&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-vector/vector-illustration-risk-challenge-business-concept-714831775">inamar/Shutterstock</a></span></figcaption></figure><p>How much money are you going to have to live on in retirement? Perhaps, just like <a href="https://www.unbiased.co.uk/news/financial-adviser/one-in-three-brits-don-t-know-how-much-pension-to-save">one in five Britons</a>, you do not know. </p>
<p>This is not a surprise since there are so many shifting factors, or risks, to consider when thinking about retirement finances. You need to think about how much you’ll earn during your life, to what your employer will decide to contribute towards your a pension, and how much tax you will have to pay. </p>
<p>And then, even for the (fairly simple) <a href="https://www.gov.uk/browse/working/state-pension">state pension provided by the government</a>, there is “policy risk” to think about. This refers to how big your pension pot will be by the time you retire, not to mention <a href="https://www.ageuk.org.uk/information-advice/money-legal/pensions/state-pension/changes-to-state-pension-age/">when you will able to claim it</a>.</p>
<p>What this uncertainty means is that, almost irrespective of how much you earn, <a href="https://ifs.org.uk/pensions-review">most of us face a lot of risks</a> when it comes to our retirement finances. And unfortunately, you are likely facing more now than perhaps your parents did 25 years ago.</p>
<p>Back then, most of the uncertainty around pension pots came from not knowing how much you would earn over the course of your career. People typically had traditional occupational pensions, known as <a href="https://www.moneyhelper.org.uk/en/pensions-and-retirement/pensions-basics/defined-benefit-or-final-salary-pensions-schemes-explained#:%7E:text=A%20defined%20benefit%20(DB)%20pension%20scheme%20is%20one%20where%20the,year%20in%20line%20with%20inflation.">defined benefit</a> or final salary pensions. These were basically a promise from an employer that they would invest enough money to ensure their employees were paid a particular amount from retirement at 65 until death. That amount would depend on a person’s earnings and length of service. </p>
<p>Some people did not have occupational pensions, but instead had <a href="https://www.unbiased.co.uk/discover/pensions-retirement/managing-a-pension/what-is-a-serps-pension">state earnings-related pensions</a>. With this type, higher earnings meant paying more in national insurance contributions, resulting in a higher state pension in retirement.</p>
<p>And so, 25 years ago it didn’t really matter how well the stock market did – if an employer’s investments did not cover their pension promise to employees, they had to top it up (and often did so, leading to companies having “<a href="https://www.investorschronicle.co.uk/news/2022/05/12/ftse-350-firms-pension-deficits-shrink-to-lowest-level-in-two-years/">pension deficits</a>”). But for employees, it didn’t matter if they lived longer than expected, their company, or the government, would pay their pension for as long as they lived. </p>
<p>These risks – investment risk (how well the stock market and other assets do) and longevity risk (the risk of living much longer than expected and running out of money) – were not a big concern for people with pensions in the past. But the changing nature of UK pensions in recent years has caused these risks to be transferred from the government and companies to anyone saving into a future pension pot.</p>
<h2>New retirement risks</h2>
<p>For a variety of reasons (including the amount of risk employers had to bear in the past) <a href="https://www.pensionspolicyinstitute.org.uk/media/3916/20210923-the-dc-future-book-2021-final.pdf">barely any organisations</a> outside the public sector offer traditional defined benefit pensions these days. Instead, on top of a state pension – which is now a flat-rate, no longer earnings-related – most people saving for retirement do so in a <a href="https://www.pensionbee.com/pensions-explained/pension-types/what-is-a-defined-contribution-pension">defined contribution</a> pension. </p>
<p>At its core, a defined contribution pension is a tax-advantaged savings account that you and your employer contribute to, and which you can only access in your late 50s. When you do access it, you simply have a pot of money. </p>
<p>If you are very lucky in terms of what you have chosen to invest in (Amazon shares in the early 2000s maybe), your pot will have done very well. If you are unlucky (and you owned funds which were invested in companies that went bust, for example), you won’t have done as well as an Amazon-owning colleague – even if you contributed the same amount.</p>
<p><strong>Amazon’s rising share price</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/528065/original/file-20230524-15-b3n9co.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Line chart showing Amazon share price rising since 1990s." src="https://images.theconversation.com/files/528065/original/file-20230524-15-b3n9co.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/528065/original/file-20230524-15-b3n9co.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=329&fit=crop&dpr=1 600w, https://images.theconversation.com/files/528065/original/file-20230524-15-b3n9co.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=329&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/528065/original/file-20230524-15-b3n9co.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=329&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/528065/original/file-20230524-15-b3n9co.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=414&fit=crop&dpr=1 754w, https://images.theconversation.com/files/528065/original/file-20230524-15-b3n9co.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=414&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/528065/original/file-20230524-15-b3n9co.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=414&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">We’d all like some Amazon in our pension pots.</span>
<span class="attribution"><a class="source" href="https://www.tradingview.com/chart/">TradingView</a></span>
</figcaption>
</figure>
<p>Longevity risk is also now a factor to consider. This is the risk that you will live for a very long time and run out of money. </p>
<p>One reason for this is that, <a href="https://www.theguardian.com/money/2014/mar/22/death-compulsory-annuities-pension-revolution">since 2015</a>, retirees no longer have to turn their “pots” of defined contribution pension savings into an “annuity”. This is a stream of income that’s guaranteed until death. </p>
<p>Instead, most people simply spend their pensions pots any way they like now. But this means living much longer than expected increases the risk of completely depleting your private pension savings.</p>
<h2>Pension risk transfer</h2>
<p>One obvious question is: if pensions are now so risky, why don’t people pay to guarantee an income in retirement? That is, why doesn’t the government bring back annuities? When they were required, many people felt they weren’t getting a good <a href="https://www.moneymarketing.co.uk/opinion/steve-webb-keep-your-eyes-on-comeback-kid-annuities/">deal out of these products</a> – they were paying a lot upfront for only a small guaranteed annual income. </p>
<p>But while removing compulsory annuitisation is generally thought to be a popular policy – and it certainly gives people the freedom and opportunity to match their income with the way they want to spend in retirement – it also increases the risk of running out of private resources before you die.</p>
<figure class="align-center ">
<img alt="Woman with grey hair, sunglasses and surf board standing at the edge of the sea." src="https://images.theconversation.com/files/528067/original/file-20230524-27-hqgdxo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/528067/original/file-20230524-27-hqgdxo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=361&fit=crop&dpr=1 600w, https://images.theconversation.com/files/528067/original/file-20230524-27-hqgdxo.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=361&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/528067/original/file-20230524-27-hqgdxo.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=361&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/528067/original/file-20230524-27-hqgdxo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=454&fit=crop&dpr=1 754w, https://images.theconversation.com/files/528067/original/file-20230524-27-hqgdxo.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=454&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/528067/original/file-20230524-27-hqgdxo.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=454&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Risk-free retirement living?</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/surfer-nice-beach-1212137647">Rawpixel.com/Shutterstocl</a></span>
</figcaption>
</figure>
<p>In the past 25 years there has been a big transfer of investment and longevity risk from employers (who used to provide occupational pensions), from the state (who used to provide earnings-related state pensions) and from insurance companies (who typically used to sell annuities) on to people saving for retirement. </p>
<p>Managing these risks is now very important, especially as many working-age people may not realise just how much risk they are facing when it comes to ensuring financial security in retirement.</p><img src="https://counter.theconversation.com/content/206362/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jonathan Cribb receives funding from the Economic and Social Research Council, abrdn Financial Fairness Trust and Nuffield Foundation. </span></em></p>Making sure you have enough set aside for a long retirement has become more difficult over the past 25 years.Jonathan Cribb, Senior Research Economist, Institute for Fiscal StudiesLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2047662023-05-17T13:23:14Z2023-05-17T13:23:14Z91% of sub-Saharan African workers don’t save for old age: why that’s a problem and how to fix it<figure><img src="https://images.theconversation.com/files/523614/original/file-20230501-28-ys3s45.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Sub-Saharan Africa has the lowest level of pension savings in the world</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/nigerian-naira-notes-pension-jar-elderly-759556243">Shutterstock</a></span></figcaption></figure><p><em>Less than 10% of the workers in sub-Saharan Africa save for old age, <a href="https://www.ilo.org/wcmsp5/groups/public/@ed_protect/@soc_sec/documents/publication/wcms_849597.pdf#page=32">the lowest</a> rate for any region in the world. That implies most of the breadwinners today won’t be able to afford basic items after retirement. A pension plan is meant to commit employers to make regular savings so that employees will continue to earn after retirement. The Conversation Africa asked Owen Nyang'oro, a financial economist, about Africa’s pensions and why they need to be fixed.</em> </p>
<hr>
<h2>What’s the state of sub-Saharan Africa’s pension savings?</h2>
<p>In a <a href="https://www.wider.unu.edu/sites/default/files/Publications/Working-paper/PDF/wp2022-95-pension-funds-in-sub-saharan-africa.pdf">recent study</a> of retirement savings in sub-Saharan Africa (other than the francophone countries), we established that the continent’s pension funds are diverse in architecture, coverage and performance. But they mostly lag behind in reforms compared to other regions. Pension savings are also low compared to other regions. Only 19.8% of people above statutory retirement age receive a pension in sub-Saharan Africa, and just 8.9% of the labour force <a href="https://www.ilo.org/wcmsp5/groups/public/@ed_protect/@soc_sec/documents/publication/wcms_849597.pdf#page=32">is covered by pension schemes</a>. This is much lower than the global average where 77.5% of people above statutory age and 53.7% of workers have pension coverage. </p>
<p>Pension schemes in sub-Saharan African countries are characterised by low contributions due to low earnings, high informality, high financial illiteracy levels and lack of proper information about the benefits of adequate contributions for future pension withdrawals.</p>
<p><a href="https://www.oecd.org/daf/fin/private-pensions/Pension-Markets-in-Focus-2022-FINAL.pdf">Market data</a> shows that South Africa, with pension fund assets valued at about US$330.3 billion in 2019 (latest country update), is the continent’s top performer in absolute terms. Nigeria, which had assets worth US$32.6 billion, Kenya with US$13.7 billion and Namibia with US$13.3 billion were the <a href="https://www.oecd.org/daf/fin/private-pensions/Pension-Markets-in-Focus-Preliminary-2021-Data-on-Pension-Funds.pdf#page=2">other top pension savers</a> in 2021. </p>
<p>Countries with low pension savings at the end of 2021 included Mozambique with US$224 million, Zambia (US$745 million) and Angola (US$861 million). </p>
<p>But in proportion to the <a href="https://www.oecd.org/daf/fin/private-pensions/Pension-Markets-in-Focus-2022-FINAL.pdf#page=11">size of the economy</a>, the best performers in 2019 included Namibia (95.4%), South Africa (82.6%) and Botswana (51.9%). Angola, Mozambique, Zambia, Nigeria and Ghana trailed with pension assets below 10% of their gross domestic product.</p>
<p>Generally, Africa’s pension assets are very small compared to the 2021 retirement funds of say, the United States (US$40.0 trillion) or the United Kingdom (US$3.8 trillion). </p>
<h2>What’s peculiar about Africa’s population?</h2>
<p>The majority of the population is young and <a href="https://data.worldbank.org/indicator/SP.DYN.TFRT.IN?locations=ZG">fertility rates</a> are high. The old-age dependency ratio (the number of elderly people for every economically active person) is low compared to other regions, averaging <a href="https://population.un.org/wpp/Download/SpecialAggregates/EconomicTrading/">5.5 in 2022</a>, and the ageing population is small but increasing. The annual population growth rate in sub-Saharan Africa was 2.5% in 2022, which is more <a href="https://www.un.org/development/desa/pd/sites/www.un.org.development.desa.pd/files/wpp2022_summary_of_results.pdf">than three times the global annual average of 0.8%</a>.</p>
<p>With much <a href="https://www.un.org/ohrlls/news/young-people%E2%80%99s-potential-key-africa%E2%80%99s-sustainable-development#:%7E:text=Africa%20has%20the%20youngest%20population,to%20realise%20their%20best%20potential.">younger populations</a> and relatively <a href="https://data.worldbank.org/indicator/SP.POP.GROW?locations=ZG">high population growth rates</a>, the number of dependants in sub-Saharan African countries is increasing at a slightly faster rate, and over time the numbers of elderly people needing social support will also rise. It is projected that the number of elderly persons in the region will grow at <a href="https://www.un.org/development/desa/pd/sites/www.un.org.development.desa.pd/files/wpp2022_summary_of_results.pdf#page=20">annual rates above 3% between 2022 and 2050</a>. </p>
<p>The concern is that <a href="https://www.ilo.org/global/research/global-reports/world-social-security-report/2020-22/lang--en/index.htm">only one in five</a> people of pensionable age receives an old-age pension compared to over three in four people globally. </p>
<p>High levels of unemployment and the large <a href="https://theconversation.com/yes-africas-informal-sector-has-problems-but-the-answer-isnt-to-marginalise-it-188234">size of the informal sector</a> – which <a href="https://www.ilo.org/global/publications/books/WCMS_626831/lang--en/index.htm">accounts</a> for over 89.2% of the labour work force – mean that the elderly will continue to face income challenges. Households are also becoming smaller and changing from multi-generational (made up of grandparents, parents, children and grandchildren) which offer social support to the elderly, to skipped-generation (where grandparents live with grandchildren in the absence of parents) or one-generation (where the elderly live by themselves). </p>
<h2>What are the benefits of a good pension system?</h2>
<p>The primary goal of pension savings is to provide income and livelihood in old age. However, pension savings can also be mobilised to finance productive activities and improve living standards.</p>
<p>The continent’s annual infrastructure funding gap (the difference between resources required and what’s available) is <a href="https://www.afdb.org/fileadmin/uploads/afdb/Documents/Publications/African_Economic_Outlook_2018_-_EN.pdf#page=16">estimated</a> at between US$68 billion and US$108 billion. Resources to meet the infrastructure gap could be mobilised from pension funds. This requires good governance and removal of any regulatory obstacles. Pension funds can also support development of capital markets and improve ease of trade in the capital market through their investment activities.</p>
<p>Pension funds can also reduce public borrowing, and improve efficiency of the labour market by creating incentives for formalisation of businesses.</p>
<h2>How should countries improve pension savings?</h2>
<p>African governments can boost pension savings in four ways:</p>
<ul>
<li><p>Increase pension participation and coverage by including the unemployed and those in the informal sector. This could be achieved through a targeted universal pension scheme and greater financial literacy. The countries should have a mix of universal schemes and schemes with payroll deductions and employer contributions.</p></li>
<li><p>Bundling pensions with other products. Bundling pensions with other products such as life insurance cover, and even matching contributions to encourage greater participation and long-term savings in pension funds. Favourable tax considerations can also enhance the growth of contributions and assets of pension funds.</p></li>
<li><p>Use of technology. Leverage innovations in digital technology to increase pension savings. The region <a href="https://www.gsma.com/sotir/wp-content/uploads/2022/03/GSMA_State_of_the_Industry_2022_English.pdf">accounts for 53% of active mobile money accounts in 2021</a>. Use of digital technology could increase coverage, especially in the informal sector. It can make enrolment and contribution to pension funds easier.</p></li>
<li><p>Review regulatory frameworks of the pension sector to open it up to the unserved population. There is also a need to streamline management of pensions and minimise costs of administration, especially for private pensions. This will allow pension funds to extend investments to other assets, including foreign ones, to improve returns.</p></li>
</ul>
<p>Sub-Saharan African countries are likely to gain from a well-developed pension system that provides adequate income to the elderly. This will in turn reduce the need for social protection, provide financing for infrastructure development, and support the development of capital markets. </p>
<p>All this calls for deliberate reforms to facilitate growth of pension savings. Countries should prioritise pensions within their development plans, address informality in the labour market and take advantage of technological advancements and the youthful population.</p>
<p>A well-developed pension system will improve the region’s financial stability through reduced budgetary strain as funds become available for development. It could also open up capital markets and improve the labour market, thus leading to growth.</p><img src="https://counter.theconversation.com/content/204766/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The article is based on a study prepared within the United Nations University World Institute for Development Economics Research (UNU-WIDER) project: "The domestic savings shortfall in developing countries - what can be done about it?" which is part of the Domestic Revenue Mobilisation programme financed through specific contributions by the Norwegian Agency for Development Cooperation (Norad).</span></em></p>The number of elderly people in need of support in Africa is projected to grow at annual rates above 3% up to 2050.Owen Nyang'oro, Lecturer, University of NairobiLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2019642023-03-16T15:47:20Z2023-03-16T15:47:20ZThree ways the ‘back to work’ budget will affect your finances<figure><img src="https://images.theconversation.com/files/515807/original/file-20230316-16-qc1ez4.jpg?ixlib=rb-1.1.0&rect=162%2C108%2C5844%2C3899&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Calculating how the budget will affect your finances.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/woman-entrepreneur-using-calculator-pen-her-710912206">Atstock Productions/Shutterstock</a></span></figcaption></figure><p>In the <a href="https://www.gov.uk/government/publications/spring-budget-2023/spring-budget-2023-html">2023 spring budget</a>, UK chancellor Jeremy Hunt unveiled a raft of measures designed to boost economic growth and productivity. To achieve this he has overhauled both pensions and childcare support, which will have implications for current and future personal finances.</p>
<p>The Chancellor wants to encourage the UK’s <a href="https://www.ons.gov.uk/employmentandlabourmarket/peoplenotinwork/economicinactivity/datasets/economicinactivitybyreasonseasonallyadjustedinac01sa">8.9 million “economically inactive”</a> working age people back into the labour force. As the chart shows, this means focusing mainly on those who are retired, ill or caring for children.</p>
<p><strong>Reasons for not working</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/515804/original/file-20230316-26-3ydjqh.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Number of people aged 16 to 64 who are economically inactive." src="https://images.theconversation.com/files/515804/original/file-20230316-26-3ydjqh.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/515804/original/file-20230316-26-3ydjqh.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=375&fit=crop&dpr=1 600w, https://images.theconversation.com/files/515804/original/file-20230316-26-3ydjqh.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=375&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/515804/original/file-20230316-26-3ydjqh.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=375&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/515804/original/file-20230316-26-3ydjqh.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=471&fit=crop&dpr=1 754w, https://images.theconversation.com/files/515804/original/file-20230316-26-3ydjqh.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=471&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/515804/original/file-20230316-26-3ydjqh.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=471&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><a class="source" href="https://www.ons.gov.uk/employmentandlabourmarket/peoplenotinwork/economicinactivity/datasets/economicinactivitybyreasonseasonallyadjustedinac01sa">Author provided based on data from the Office for National Statistics</a></span>
</figcaption>
</figure>
<p>Even if you aren’t in one of these groups, the new changes could affect your finances or working life in three key areas:</p>
<h2>Tax-related retirement benefits</h2>
<p>From April 6 2023, the overall annual limit on contributions for pension savings will rise to £60,000 from £40,000. The cap on the total pension saving a person can have over their lifetime, currently £1,073,100, will also be abolished. These changes target the particular problem of high earners, <a href="https://www.day-accountants.com/news/blog/archive/article/2019/June/the-nhs-pension-tax-trap-and-how-to-escape-it">such as doctors</a> quitting the labour market early to avoid a hefty clawback of pension tax reliefs when they exceed these caps if they work for longer and therefore the value of their pension savings keeps growing.</p>
<p>Pension tax reliefs typically benefit rich people the most. Back in January, it was estimated that income tax relief on pensions this year would total <a href="https://www.gov.uk/government/statistics/main-tax-expenditures-and-structural-reliefs">£51.7 billion</a>. That’s a fifth of the <a href="https://obr.uk/docs/dlm_uploads/OBR-EFO-March-2023_Web_Accessible.pdf">£249.8 billion</a> total income-tax revenue, and broadly speaking <a href="https://www.pensionspolicyinstitute.org.uk/media/3516/20200623-ppi-bn122-tax-relief-on-dc-contributions-final.pdf">around half of that relief goes to the richest 15%</a> of people.</p>
<p><a href="https://www.oecd.org/unitedstates/35664068.pdf">Research suggests</a> that pension tax reliefs do not increase the total level of saving, they merely cause savers to switch into pensions from forms of saving that aren’t subject to tax relief. This calls into question the rationale for spending such large sums of taxpayer money on subsidising the savings of wealthy people who would most likely set aside enough for retirement anyway.</p>
<p>Instead, it is time for a wholesale redesign of the pension tax system to target support where it is genuinely needed. For example, <a href="https://wbg.org.uk/wp-content/uploads/2021/10/Pensions_-Autumn-2021-pre-Budget-Briefing.pdf">topping up the pensions of people (mostly women) engaged in unpaid caring work</a> -– and in the process a simpler, more targeted system without the need for complicated annual caps could remove the side-effect of high earners retiring early.</p>
<p>A more widely useful pension-tax change helps anyone who chooses to “flexibly” access pensions savings, for example, by drawing out money from age 55 onwards – maybe to cope with an emergency or the current cost of living crisis. While you might intend to rebuild your retirement savings later, there will be a limit on how much you can continue to save tax free. From April, this limit will be £10,000 per year, under the latest budget, up from £4,000 annually at the moment. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/the-last-two-recessions-hit-young-people-hardest-heres-how-you-can-protect-yourself-for-the-next-one-184783">The last two recessions hit young people hardest – here's how you can protect yourself for the next one</a>
</strong>
</em>
</p>
<hr>
<h2>Reduced childcare costs</h2>
<p>Targeting the 1.7 million economically inactive who are engaged in unpaid care work at home, the budget includes a phased extension of the <a href="https://www.gov.uk/30-hours-free-childcare#:%7E:text=You%20can%20get%2030%20hours,this%20is%20something%20they%20offer.">30-hours-a-week free childcare scheme</a> for children aged one and two in working families. The government seems to have paid heed to advice to address <a href="https://www.eyalliance.org.uk/government-underfunding-drives-rising-childcare-costs-cost-living-crisis-hits-early-years-sector-new">the woeful underfunding of free childcare places</a> and has said it will increase this - for example, by an average of <a href="https://www.gov.uk/government/speeches/spring-budget-2023-speech">30% at the two-year-old rate</a>- which will hopefully prevent the closure of more nurseries.</p>
<p>Working parents on universal credit can currently claim back 85% of childcare costs up to a limit of <a href="https://www.gov.uk/government/publications/benefit-and-pension-rates-2023-to-2024/benefit-and-pension-rates-2023-to-2024">£646.35 per month for one child and £1,108.04 for two or more children</a>. In a welcome move, the budget will enable the costs to be claimed in advance rather than arrears. This removes the barrier of needing to find a substantial sum to cover childcare payments up-front before being able to start a job. </p>
<p>The upper limits are also being increased to £951 a month for one child and £1,630 for two or more. However, this will have only a limited impact since <a href="https://ifs.org.uk/articles/early-years-and-childcare-england-public-spending-private-costs-and-challenges-ahead">few families claim anything near the maximum amount</a>.</p>
<figure class="align-center ">
<img alt="Woman and child drawing, close up, pens, paper," src="https://images.theconversation.com/files/515806/original/file-20230316-22-wv5m9i.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/515806/original/file-20230316-22-wv5m9i.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/515806/original/file-20230316-22-wv5m9i.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/515806/original/file-20230316-22-wv5m9i.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/515806/original/file-20230316-22-wv5m9i.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/515806/original/file-20230316-22-wv5m9i.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/515806/original/file-20230316-22-wv5m9i.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">New budget measures aim to help working people with the cost of childcare.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/mom-child-drawing-kitchen-black-mother-435546280">Ground Picture/Shutterstock</a></span>
</figcaption>
</figure>
<h2>Help for those with long-term health conditions</h2>
<p>The recent budget included <a href="https://www.gov.uk/government/publications/spring-budget-2023-disability-white-paper-factsheet/spring-budget-2023-factsheet-disability-white-paper">a white paper setting out carrots and sticks</a> to get people with long-term health conditions back into work. </p>
<p>The paper outlines a plan for more employment support for people with disabilities and health conditions. This includes nationwide “work coach” support provided via Jobcentres, an extension to the <a href="https://www.gov.uk/work-health-programme">Work and Health Programme</a>, which helps people find jobs if they are in certain categories such as refugees, care leavers, homeless, ex-armed forces reserves or are living with disabilities. A new “in-work progression offer” is designed to persuade people in work on universal credit, including people with disabilities, to increase their earnings and move into better-paid roles.</p>
<p>The government also seems to be setting great store in the opportunities opened up by the growing trend towards hybrid and home working. But <a href="https://www.disabilityrightsuk.org/news/health-and-disability-white-paper-support-not-sanctions-needed-says-dr-uk">health and disability charities</a> are concerned that these measures could be used to force people into unsuitable jobs.</p>
<p>Overall, these measures clearly aim to retain people in work or entice them back. But the government should remember that ill health can make it very hard or impossible to commit to regular work. And many of those who are caring for their children or others or who have already retired may be doing so by choice rather than because they see barriers in the way of working.</p><img src="https://counter.theconversation.com/content/201964/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jonquil Lowe is affiliated with Women's Budget Group.</span></em></p>To encourage the ‘economically inactive’ back to work, the government is changing pensions, childcare funding and creating more support for people with long-term illnesses.Jonquil Lowe, Senior Lecturer in Economics and Personal Finance, The Open UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2018932023-03-15T15:53:34Z2023-03-15T15:53:34ZSpring budget 2023: experts react to UK government’s plan to get the economy moving<p><em>Jeremy Hunt’s <a href="https://www.gov.uk/government/publications/spring-budget-2023">2023 spring budget</a> covers employment, energy, enterprise and much more besides. The plan has already been dubbed his “<a href="https://www.bbc.co.uk/news/blogs-the-papers-64960042">back to work budget</a>”, although he has called it a “<a href="https://www.ft.com/content/7d80ee45-4cb2-4871-bdf8-e1b5f5e92ff5">budget for growth</a>”.</em> </p>
<p><em>Hunt was appointed chancellor in a bid to calm financial markets after last year’s <a href="https://theconversation.com/mini-budget-2022-experts-react-to-the-new-uk-governments-spending-and-tax-cut-plans-191274">dramatic mini-budget</a> under previous prime minister Liz Truss. His ongoing efforts to maintain this mood have included giving away several major chunks of this announcement beforehand. Now that Hunt has provided more of the detail, here’s what our panel of academic experts think of the government’s plans for the economy:</em></p>
<h2>Evidence for ‘levelling up’ measures is mixed</h2>
<p><strong>Phil Tomlinson, Professor of Industrial Strategy, School of Management, University of Bath</strong></p>
<p>The short-term outlook for the UK economy is <a href="https://www.theguardian.com/uk-news/2023/mar/15/five-charts-jeremy-hunt-budget-inflation">better than expected</a>. Economic growth <a href="https://www.ft.com/content/3248741b-b112-43ed-a9af-d75a7916445c?shareType=nongift">picked up in January</a>, falling gas prices have reduced the cost of the government’s energy support package, and public borrowing is likely to be <a href="https://www.reuters.com/world/uk/uks-hunt-has-extra-30-bln-pounds-play-with-march-budget-ifs-2023-02-28/">£30 billion lower</a> than last November’s Office for Budget Responsibility (OBR) forecast. This has allowed the chancellor some leeway to deal with some of the economy’s long-standing challenges. </p>
<p>Since the 2008 global financial crisis, the UK economy has <a href="https://www.ft.com/content/dd195cda-ca12-48a6-9e8b-65a36e4e7c14">been largely stagnant</a>. It remains the only country in the G7 not to have recovered to its <a href="https://www.theguardian.com/business/2022/sep/30/uk-is-only-g7-country-with-smaller-economy-than-before-covid-19">pre-pandemic level of national income</a>. Business investment has been <a href="https://www.bankofengland.co.uk/bank-overground/2019/what-has-driven-the-recent-weakness-of-business-investment">weak for decades</a> (and especially so, since the 2016 Brexit referendum), while the labour market has lost <a href="https://www.bbc.co.uk/news/business-60039923">almost a million workers</a> since 2019. And then there is the “<a href="https://blog.geographydirections.com/2021/06/02/left-behind-places-regional-inequalities-and-levelling-up/">levelling up</a>” needed to reduce the UK’s wide regional inequalities. </p>
<p>Today’s budget seeks to address some of these issues. The childcare support package is geared towards helping young parents return to the labour market. And while benefiting higher earners, changes to the lifetime tax-free pension allowance and the annual cap on contributions are intended to encourage older and highly skilled professionals – especially NHS doctors – to remain in their posts, rather than take early retirement. </p>
<p>The chancellor also announced <a href="https://www.independent.co.uk/news/uk/politics/budget-announcement-2023-jeremy-hunt-b2300026.html">12 new investment zones</a> in the combined authority regions of the north of England and Midlands, and in Scotland, Wales and Northern Ireland. Each will receive £80 million of funding for upgrading skills, specialist business support, local infrastructure and for tax incentives. The goal is to attract new business investment and build innovation clusters in key sectors (such as advanced manufacturing and life sciences) to generate dynamic growth in “left behind” regions.</p>
<p>The funding itself, however, is not overly generous, while the <a href="https://www.centreforcities.org/publication/in-the-zone-have-enterprise-zones-delivered-the-jobs-they-promised/">evidence on similar initiatives</a> (including freeports and enterprise zones) is mixed. For instance, there are concerns such zones merely shift business activity from places located outside a zone to places located inside a zone (rather than attracting new investment). Many “left behind” towns and cities not in a combined authority region will also miss out on this initiative. </p>
<h2>Too little, too late for business?</h2>
<p><strong>Steven McCabe, Associate Professor, Birmingham City Business School</strong></p>
<p>Will <a href="https://theconversation.com/why-the-uk-has-no-clear-party-of-business-128437">businesses</a>, which have suffered so much in recent years, welcome chancellor Jeremy Hunt’s spring statement? </p>
<p>Many will claim what’s offered is too little, too late. Indeed, a lot of businesses are merely surviving because of <a href="https://theconversation.com/gas-prices-are-falling-but-your-energy-bills-still-wont-be-affordable-any-time-soon-199904">spiralling energy costs</a> and increased wages. </p>
<p>Hunt, who owes his political renaissance to the disastrous consequences of his predecessor <a href="https://theconversation.com/kwasi-kwarteng-only-a-desperate-prime-minister-sacks-a-chancellor-192544">Kwasi Kwarteng’s</a> “<a href="https://theconversation.com/mini-budget-will-kwasi-kwartengs-plan-deliver-growth-191285">mini-budget</a>” in 2022, attempts to continue the return to stability with optimism of better times ahead. </p>
<p>He will continue with the intention, which Rishi Sunak set out when he was chancellor, of <a href="https://news.sky.com/story/budget-2023-corporation-tax-set-to-rise-from-19-to-25-in-april-12827274">raising corporation tax</a> from 19% to 25%. This will help to repair damage to public finances caused by the pandemic and made worse by Russia’s invasion of Ukraine – as well as <a href="https://theconversation.com/liz-truss-is-now-a-case-study-in-poor-leadership-192554">Liz Truss</a>’s ill-considered dash for growth. This announcement will be greeted with mixed emotions by businesses. </p>
<p><a href="https://www.independent.co.uk/money/pension-tax-changes-jeremy-hunt-budget-b2301370.html">Changes to pension pots</a> and contributions may help to retain and attract high earners. Hunt also hopes to encourage a significant number of the nine million “<a href="https://www.dailymail.co.uk/news/article-11857639/Britains-economically-inactive-areas-half-people-work-revealed.html">economically inactive</a>” (people who are neither working nor looking for work) into employment. </p>
<p>Undoubtedly the most eye-catching announcement made by the chancellor is funding for <a href="https://www.independent.co.uk/news/uk/politics/budget-announcement-2023-jeremy-hunt-b2300026.html">12 investment zones</a> to “supercharge” high-tech growth across the UK.</p>
<p>Cynics may stress that Hunt’s assertion of the importance of investing in growth and opportunity comes from a government <a href="https://www.cnbc.com/2022/08/09/britain-is-becoming-an-emerging-market-country-analyst-says.html">that’s been in power for 13 years</a>. Indeed, the fact remains that the UK is <a href="https://www.theguardian.com/business/2022/sep/30/uk-is-only-g7-country-with-smaller-economy-than-before-covid-19">the only G7 country</a> with a smaller economy than before COVID. And political inability, striking workers and a disappearing public health system certainly haven’t helped.</p>
<h2>Not not a recession</h2>
<p><strong>Alan Shipman, Senior Lecturer in Economics, Open University</strong></p>
<p>The chancellor has announced that the economy will avoid a “<a href="https://www.theguardian.com/politics/video/2023/mar/15/the-uk-will-not-enter-a-technical-recession-this-year-says-jeremy-hunt-video">technical recession</a>” this year. This is because that requires two-quarters of falling GDP, whereas the OBR, which provides independent economic forecasts and analysis of the public finances, now shows falls in just one-quarter. </p>
<p>But most people would probably still view a <a href="https://www.bbc.co.uk/news/business-64963869">0.2% drop</a> in the size of the economy across the year as a recession.</p>
<p>Hunt has responded to post-Brexit labour shortages with measures to push more of the <a href="https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/bulletins/jobsandvacanciesintheuk/february2020">eight million</a> <a href="https://www.ons.gov.uk/employmentandlabourmarket/peoplenotinwork/economicinactivity/timeseries/lf2m/lms">inactive working-age people</a> into paid employment. That includes the half million sidelined by <a href="https://www.ons.gov.uk/employmentandlabourmarket/peoplenotinwork/economicinactivity/articles/halfamillionmorepeopleareoutofthelabourforcebecauseoflongtermsickness/2022-11-10">health problems</a> since the pandemic. </p>
<p>The need for more workers to revive output reflects the stagnation of UK labour <a href="https://cepr.org/voxeu/columns/explaining-uks-productivity-slowdown-views-leading-economists">productivity since 2008</a>, which has prevented real wage growth in the UK and left it unusually vulnerable to last year’s jump in living costs.</p>
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<a href="https://images.theconversation.com/files/515529/original/file-20230315-20-m4ry5r.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/515529/original/file-20230315-20-m4ry5r.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/515529/original/file-20230315-20-m4ry5r.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/515529/original/file-20230315-20-m4ry5r.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/515529/original/file-20230315-20-m4ry5r.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/515529/original/file-20230315-20-m4ry5r.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=502&fit=crop&dpr=1 754w, https://images.theconversation.com/files/515529/original/file-20230315-20-m4ry5r.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=502&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/515529/original/file-20230315-20-m4ry5r.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=502&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="attribution"><a class="source" href="https://obr.uk/efo/economic-and-fiscal-outlook-march-2023/#chapter-1">Office for Budget Responsibility.</a></span>
</figcaption>
</figure>
<p>The chancellor’s hands are increasingly tied not only by higher public borrowing costs after last year’s inflation and interest rate rise, but also by the need to prioritise extra spending and tax breaks for groups whose votes are needed for the government’s electoral revival. </p>
<p>So there will be more funds for childcare to help new parents return to work and attract younger voters. But still no strategy for the rising and unequally-distributed costs of social care. This is 12 years after the <a href="https://careappointments.com/care-news/england/188558/dilnot-astonished-over-really-distressing-and-deeply-regrettable-delay-to-social-care-reforms/">Dilnot Report</a> which found that the adult social care system in the UK is not fit for purpose and requires more funding. </p>
<p>And nothing to addresses that other early-life constraint, the high cost of <a href="https://lordslibrary.parliament.uk/through-the-roof-housing-and-the-cost-of-living/">renting or buying homes</a> in towns and cities with jobs. </p>
<p>The government’s desire to not hit homeowners or landlords any harder is heightened by the property-market correction <a href="https://theconversation.com/uk-house-prices-history-says-the-market-is-in-for-a-long-slowdown-not-a-crash-186072">that’s already happening</a> with prices predicted to <a href="https://www.bloomberg.com/news/articles/2023-03-15/uk-house-prices-to-fall-10-from-peak-obr-says">fall further</a> over the coming month. </p>
<p>Any worsening of this slide could turn this year’s projected 0.2% GDP decline into outright recession and worsen the already extremely <a href="https://obr.uk/docs/dlm_uploads/OBR-EFO-March-2023_Web_Accessible.pdf">weak growth outlook</a> for the next five years.</p>
<h2>What the budget means for your energy bills</h2>
<p><strong>Catherine Waddams, Emeritus Professor, Norwich Business School, and Andrew Burlinson, Lecturer in Energy Economics, University of East Anglia</strong></p>
<p>There’s good news and bad news for household energy prices. The chancellor has confirmed that the government will <a href="https://www.gov.uk/government/news/energy-bills-support-extended-for-an-extra-three-months">extend support for energy bills</a> for a further three months. But a £400 winter fuel payment will not be renewed, so household costs will still rise in the short term.</p>
<p>The government has also said it will bring energy costs for prepayment meter customers in line with comparable direct debit charges until April next year, while the regulator develops social tariff proposals.</p>
<p>Such targeted support is crucial, not least because some of the most vulnerable people use prepayment meters and experience the difficult choice between <a href="https://doi.org/10.1016/j.socscimed.2022.115498">heating and eating</a>.</p>
<p>The UK has <a href="https://www.theguardian.com/business/2022/jan/31/as-uk-households-feel-pressure-how-are-other-european-countries-tackling-energy-crisis">less effective safety nets</a> for financially vulnerable households than elsewhere. This has resulted in more generous but less targeted support compared with other European countries affected by <a href="https://www.theguardian.com/business/2022/apr/26/ukraine-war-food-energy-prices-world-bank">rising gas prices</a> following the Russian invasion of Ukraine. The government’s recognition of its responsibility for the distributional implications of energy prices is particularly welcome.</p>
<h2>A budget boost for nuclear power</h2>
<p><strong>Jim Watson, Director, UCL Institute for Sustainable Resources</strong></p>
<p>Against the backdrop of Russia’s war against Ukraine and the growing impacts of climate change, Jeremy Hunt is right to emphasise alternatives to fossil fuels. Most of the specific announcements are not entirely new, and they had a narrow focus on nuclear power and carbon capture and storage. There are only hints at a more comprehensive strategy, with further announcements promised for later this month.</p>
<p>As the government’s advisory Climate Change Committee <a href="https://www.theccc.org.uk/publication/delivering-a-reliable-decarbonised-power-system/">made clear last week</a>, the UK is going to fall short on decarbonising the power sector by 2035 unless policies are beefed up.</p>
<p>The chancellor said in his speech that nuclear will have “access to the same investment incentives as renewable energy”. In reality, large-scale nuclear already receives significant policy support, including for two projects at Hinkley and Sizewell. Hinkley is the only nuclear project under construction in the UK, and has a generous 35-year contract for the power it will produce.</p>
<p>He also prioritised smaller nuclear plants – known as small modular reactors (SMRs) – which were <a href="https://www.theguardian.com/environment/2015/nov/24/mini-nuclear-reactors-answer-to-climate-change-crisis">first championed by George Osborne in 2015</a>. More than eight years later, momentum has dissipated. Today’s announcement is an attempt to rectify that. While SMRs may form part of the UK’s energy future, it would be unwise to rely on them until their developers demonstrate they can deliver them on time and at a reasonable cost.</p>
<p>Successive governments have tried to get carbon capture and storage deployed for even longer – since the late 2000s. Today’s announcement confirms the government’s high level of ambition, with £20 billion of support over two decades. Many analysts think this technology will be required to reach net zero. But, just as with small reactors, the construction of real projects is required before we know whether carbon capture can actually deliver.</p>
<figure class="align-center ">
<img alt="HMRC Her Majesty's Revenue and Customs tax paperwork and pound coins, sterling, gbp, business taxes" src="https://images.theconversation.com/files/515511/original/file-20230315-1689-t6bd4j.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/515511/original/file-20230315-1689-t6bd4j.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/515511/original/file-20230315-1689-t6bd4j.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/515511/original/file-20230315-1689-t6bd4j.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/515511/original/file-20230315-1689-t6bd4j.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/515511/original/file-20230315-1689-t6bd4j.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/515511/original/file-20230315-1689-t6bd4j.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The budget included a tax update.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/london-uk-jan-24th-2019-hmrc-1293744619">Ink Drop/Shutterstock</a></span>
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<h2>Business tax rise comes with counterbalances</h2>
<p><strong>Gavin Midgley, Senior Teaching Fellow in Accounting, University of Surrey</strong></p>
<p>This was a budget with very few tax policy surprises. Given the recent decline in economic confidence, it was possibly the best the chancellor could hope for. The government may be hoping that anticipated GDP rises and inflation falls will come to pass, distracting voters from a still relatively high tax burden.</p>
<p>The increase in the main corporation tax rate from 19% to 25% – on which the government has flip-flopped in recent months – has now come to pass. Hunt’s justification is that it will only affect 10% of companies and that it remains the smallest rate in the G7. </p>
<p>But this might not be enough to allay Conservative backbenchers’ concerns about their party being responsible for <a href="https://obr.uk/box/corporation-tax-in-historical-and-international-context/">the largest rate increase in the tax’s history</a>. <a href="https://twitter.com/YouGov/status/1635771719289032704">Recent polls suggest</a> the public has little opposition to such as raise, so this increase may only be a problem for internal Tory unity.</p>
<p>The announced rise in the corporation tax rate has been accompanied by two potential major counterbalances: small and medium-sized firms whose research and development costs are over 40% of their total expenditure <a href="https://twitter.com/hmtreasury/status/1635989732688646146">can claim significant further tax credits</a>. However, it’s not clear what proportion of total firms that could benefit from this policy. </p>
<p>Companies can also “<a href="https://twitter.com/hmtreasury/status/1635989349996134400">expense</a>” equipment purchases to reduce tax liabilities. This could provide a significant reduction in a firm’s tax liability but, again, <a href="https://twitter.com/PJTheEconomist/status/1635989961815080963">without more information</a> it will be difficult for companies to plan their spending to take advantage of this. Businesses may see this change as a missed opportunity as a result.</p>
<h2>Difficult to justify new business allowance</h2>
<p><strong>Karl Matikonis, Lecturer at Queen’s Management School, Queen’s University Belfast</strong></p>
<p>The super deduction, introduced from April 2021 to March 2023, was the UK’s most generous investment allowance ever. It was created to improve productivity and help pandemic recovery efforts. Companies were able to write off 130% of the cost of investments in machinery and equipment, and 50% for certain other types of capital expenditure.</p>
<p>This budget has replaced the super deduction with an “expensing” allowance. This is designed to avoid a double blow for businesses next month when corporation tax will jump from 19% to 25%. Companies had warned <a href="https://www.dailymail.co.uk/news/article-11809701/How-business-Industry-chief-demands-planned-corporation-tax-hike-scrapped.html">this tax hike could deter growth</a>, particularly after the super deduction allowance expires. </p>
<p>Although the relief is now reduced to 100%, with corporation tax soon to be 25%, the tax savings are fairly similar versus the previous 130%. According to my calculations, companies will now save £2.50 (instead of £2.47) on their tax bill for every £10 invested. A 50% deduction for special rate capital expenditure also stays the same up to March 31 2026. </p>
<p>A <a href="https://www.gov.uk/government/publications/potential-reforms-to-uks-capital-allowance-regime-inviting-views/potential-reforms-to-uks-capital-allowance-regime-inviting-views#:%7E:text=An%20Additional%20FYA%20would%20allow,qualifying%20expenditure%20spread%20over%20time.">recent Treasury consultation</a> deemed this option the costliest out of all allowances to incentivise growth, however. And the UK is the only advanced economy offering such substantial allowances. Corporation tax uplift will result in greater tax revenue (£40 billion in 2021-22 versus £77 billion in 2023-24), but this allowance still swallows £10 billion in tax takings annually.</p>
<p>Because the allowance is temporary, it is likely to encourage businesses to spend, or at least make planned purchases sooner. But it is uncertain if it will contribute to productivity growth. Many factors contribute to productivity, and <a href="https://doi.org/10.1007/s11187-021-00450-3">research</a> also points to many other constraints to productivity growth aside from investments. If such subsidies do not boost productivity levels, it’s difficult to justify this large tax incentive.</p>
<h2>No focus on health and the NHS workforce</h2>
<p><strong>Karen Bloor, Professor of Health Economics and Policy, University of York</strong></p>
<p>Jeremy Hunt, formerly chair of the health select committee and the longest-ever serving secretary of state for health, knows better than most the challenges currently facing the NHS. Despite this, there were few solutions announced to address the key problems plaguing health and social care in today’s budget. </p>
<p>The NHS currently has <a href="https://digital.nhs.uk/data-and-information/publications/statistical/nhs-vacancies-survey/april-2015---december-2022-experimental-statistics">124,000 job vacancies</a>. Tens of thousands of junior doctors are <a href="https://www.bma.org.uk/our-campaigns/junior-doctor-campaigns/pay/junior-doctors-strike-doctors-guide-to-industrial-action-2023">on strike</a>, NHS consultants have <a href="https://www.bma.org.uk/bma-media-centre/consultants-in-england-ready-to-strike-as-bma-consultative-ballot-shows-overwhelming-support-for-industrial-action">voted to strike</a>, and nurses, ambulance staff and other NHS staff are threatening the same. In primary care, patient demand continues to <a href="https://www.rcgp.org.uk/News/Chancellor-Letter-Spring-2023">grow faster than the number of GPs</a>.</p>
<p>Around <a href="https://www.bma.org.uk/advice-and-support/nhs-delivery-and-workforce/pressures/nhs-backlog-data-analysis">7.2 million people</a> are on an NHS waiting list, and these figures are <a href="https://ifs.org.uk/news/nhs-waiting-lists-unlikely-fall-significantly-2023">unlikely to fall significantly</a> this year. Efforts to clear this record-high waiting list are being severely hampered by long-standing workforce problems and exacerbated by strikes, which delay elective care.</p>
<p>The chancellor’s statement has addressed only one of the workforce challenges facing the NHS directly – that of doctors’ pensions. The pension tax, described as “<a href="https://www.bma.org.uk/our-campaigns/consultant-campaigns/pension/end-the-pension-tax-trap">punitive</a>” by the British Medical Association is believed to be contributing to senior NHS doctors -– both consultants and GPs -– choosing to retire early or work part-time. </p>
<p>But in abolishing the lifetime allowance (for all, not just doctors), the chancellor is rewarding the highest-paid individuals. Retaining staff is crucial to reducing waiting lists and improving NHS performance, but doctors – however well-rewarded – cannot fix the NHS alone.</p>
<h2>Targeting a range of voters</h2>
<p><strong>Despina Alexiadou, Senior Lecturer at the School of Government and Public Policy, University of Strathclyde</strong></p>
<p>The 2023 spring budget gives “goodies” to the traditional Tory voting base (high earners) but also introduces employment growth policies that should be widely popular. </p>
<p>As of September 2025, the state will provide free childcare for 30 hours a week for children over 9 months old as long as both parents work. This is a significant increase in public spending towards working parents with direct benefits for young mothers. </p>
<p>Childcare support for young children has long-term benefits for women’s careers. The <a href="https://www.oecd-ilibrary.org/social-issues-migration-health/drivers-of-female-labour-force-participation-in-the-oecd_5k46cvrgnms6-en">OECD has found</a> “an unambiguous positive correlation between the provision of childcare services for the under-3s and full-time and part-time female participation in the labour force”. This major policy intervention will be welcomed by parties and voters across the ideological spectrum. </p>
<p>Less so for another big announcement, which will mostly benefit high earners. The abolishment of the lifetime cap on pensions and the increase in the annual tax-free pension allowance from £40,000 to £60,000 is a bonus for those lucky enough to be able to save twice the UK median salary. </p>
<p>Though the policy is meant to encourage specialist doctors to stay in the labour market, it is a financial boost for all high earners at a time when average household income is expected to decline at <a href="https://obr.uk/box/the-outlook-for-household-income-and-consumption/">its fastest rate since 1950</a>. </p>
<p><em>Check back for deeper analysis in the coming days of key issues such as childcare funding, employment measures and what this budget will mean for the UK economy.</em></p><img src="https://counter.theconversation.com/content/201893/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Andrew Burlinson currently receives funding from UKERC (UKRI) and previously received relevant funding from EPSRC.</span></em></p><p class="fine-print"><em><span>Catherine Waddams currently receives no research funding, but has previously received funding from the EPSRC and the ESRC. She is a member of Ofgem's Academic Panel. </span></em></p><p class="fine-print"><em><span>Jim Watson receives funding from the Foreign, Commonwealth and Development Office (FCDO) and UKRI.</span></em></p><p class="fine-print"><em><span>Karen Bloor receives funding from the National Institute for Health Research, including funding to provide a fast-response analysis programme for the Department of Health and Social Care.</span></em></p><p class="fine-print"><em><span>Karl Matikonis receives funding from ESRC (UKRI) to investigate how the adoption of new technologies impacts businesses in Northern Ireland, including subsidies and tax collections.</span></em></p><p class="fine-print"><em><span>Alan Shipman, Despina Alexiadou, Gavin Midgley, Phil Tomlinson, and Steven McCabe do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Childcare, pensions and support for energy bills are among the main budget plans for the UK government.Phil Tomlinson, Professor of Industrial Strategy, Co-Director Centre for Governance, Regulation and Industrial Strategy (CGR&IS), University of BathAlan Shipman, Senior Lecturer in Economics, The Open UniversityAndrew Burlinson, Lecturer in Energy Economics, University of East AngliaCatherine Waddams, Emeritus Professor, Norwich Business School, University of East AngliaDespina Alexiadou, Senior Lecturer at the School of Government and Public Policy, University of Strathclyde Gavin Midgley, Senior Teaching Fellow in Accounting, University of SurreyJim Watson, Professor of Energy Policy and Director of the Institute of Sustainable Resources, UCLKaren Bloor, Professor of Health Economics and Policy, University of YorkKarl Matikonis, Lecturer at Queen's Management School, Queen's University BelfastSteven McCabe, Associate Professor, Institute for Design, Economic Acceleration & Sustainability (IDEAS), Birmingham City UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2006952023-03-09T13:39:38Z2023-03-09T13:39:38ZTeacher pensions are becoming a bigger share of educational costs<figure><img src="https://images.theconversation.com/files/513265/original/file-20230302-24-d8akfb.jpg?ixlib=rb-1.1.0&rect=15%2C0%2C5018%2C3358&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Teacher pensions cost nearly $66 billion in 2020.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/photo/teacher-holding-a-stack-of-books-royalty-free-image/57012360?phrase=retired%20teacher&adppopup=true">Jose Luis Pelaez Inc/Getty Images</a></span></figcaption></figure><p><em>The 2022 stock market plunge has taken a toll on some of the nation’s <a href="https://www.pionline.com/section/returns-tracker">largest state and municipal pension funds</a>, making it harder for governments to pay for future retirement benefits to millions of K-12 teachers and other public employees.</em></p>
<p><em>Here, <a href="https://education.wayne.edu/profile/aa0901">Michael Addonizio</a>, an education policy expert at Wayne State University, provides insight on how teacher pensions are affecting K-12 school budgets overall and what, if anything, can be done to better manage pension systems and close funding gaps.</em></p>
<h2>1. Is there enough money to pay teacher pensions?</h2>
<p>Yes and no. There is enough money to pay pension benefits to current retirees. But there is not enough money to pay all promised benefits to future retirees. </p>
<p>U.S. teacher pension funds collectively manage <a href="https://equable.org/teacher-pensions-in-2022/">about US$3 trillion in assets</a>. These dollars are invested in various ways – stocks, bonds, real estate, foreign currency, and other ways. But these assets held by the retirement plans are generally less than the plans’ liabilities – that is, the projected cost of benefits promised to future retirees. As of 2022, this gap between assets and liabilities is <a href="https://equable.org/teacher-pensions-in-2022/">about $878 billion</a>. Put another way, the ratio of assets to liabilities is about 77%. This ratio is down from about 84% in 2021, but is higher than any other year since 2008.</p>
<p>The amount spent on teacher retirement costs in 2020 – <a href="https://equable.org/hidden-funding-cuts/">$65.9 billion</a> – represented 5.5% of total state and local K-12 spending. </p>
<p>The problem is that these <a href="https://equable.org/hidden-funding-cuts/">retirement costs have been growing faster</a> than total K-12 expenditures for decades. In 2001, retirement costs amounted to only 1.3% of total state and local school spending. </p>
<p>The growth in teacher retirement costs is due mostly to an increase in payments for unfunded pension liabilities, often referred to as pension debt. This is the amount of money that states and municipalities pay annually into their retirement systems to cover previously unfunded liabilities – that is, the shortfall that a pension fund needs to pay all future promised benefits.</p>
<h2>2. How do these pension funding shortfalls occur?</h2>
<p>Every year, pension planners have to make assumptions about how fast teacher salaries will grow, how many teachers will teach long enough to qualify for a pension, how long qualified retired teachers will live and collect benefits and how the pension fund’s investments will perform. If all these assumptions are correct and the plan’s expected assets cover its expected liabilities, the plan is considered fully funded.</p>
<p>But the typical teacher pension plan <a href="https://www.brookings.edu/blog/brown-center-chalkboard/2020/02/25/teacher-pension-plans-are-getting-riskier-and-it-could-backfire-on-american-schools/">has not been fully funded</a> at any point since about the year 2000. Overly optimistic investment assumptions are often the <a href="https://www.brookings.edu/blog/brown-center-chalkboard/2020/02/25/teacher-pension-plans-are-getting-riskier-and-it-could-backfire-on-american-schools/">biggest part of unfunded liabilities</a>. In response, states or big cities often redirect money from school operating budgets into the pension funds. But these governments often <a href="https://direct.mit.edu/edfp/article-abstract/5/4/402/10127/An-Introduction-to-Teacher-Retirement-Benefits?redirectedFrom=fulltext">fail to make these payments in full</a>. </p>
<p>States and cities face fiscal pressures from other spending demands and from tax collections that fail to keep pace. Pushing some unfunded pension liability costs into the future is often seen as less painful than cutting current government programs or raising taxes. But skimping on covering costs for future retirees often compounds the system’s liability problem over time.</p>
<p>In 2021, fully <a href="https://equable.org/hidden-funding-cuts/">69% of teacher retirement costs</a> went to cover unfunded pension liabilities, up from 17% in 2001. In other words, the cost of future benefits is growing faster than the cost of current-year benefits. </p>
<p>Could it be due to increasingly generous retirement benefits? No. A recent report by the Equable Institute, a bipartisan nonprofit that studies public pensions and advises employees, communities and policymakers, concludes that the average value of lifetime benefits for new teachers is <a href="https://equable.org/hidden-funding-cuts/">about $100,000 less</a> than for their more senior colleagues. </p>
<p>Rather, unfunded pension liabilities can rise because of downturns in the financial market, lowering the systems’ investment earnings. Also, they may increase when schools hire more teachers and support staff, increasing the numbers of workers in the pension system. It can also be due to the <a href="https://www.cnbc.com/2022/11/02/fed-raises-borrowing-costs-with-another-jumbo-interest-rate-hike.html">rising cost of borrowing</a>, </p>
<h2>3. What does this mean for education funding?</h2>
<p>As more public dollars flow to teacher retirement systems, fewer resources are available for schools and classrooms. From 2002 to 2020, <a href="https://equable.org/hidden-funding-cuts/">total state and local K-12 spending rose 33%</a>, while teacher retirement spending rose 220%. Nationally, and in most states, teacher pension costs have been rising faster than K-12 spending for the past two decades. States then <a href="https://equable.org/hidden-funding-cuts/">take money from state funds</a> normally dedicated to school operations and move them to the pension fund. The result has been less spending for school operations, in the form of either spending cuts or a smaller share of a growing spending pie.</p>
<p>For example, in the 2022-23 fiscal year, my state of <a href="https://www.house.mi.gov/hfa/PDF/Summaries/SchAid_Exec_Rec_Summary_fy23-24.pdf">Michigan will pay nearly $3 billion</a> from the state School Aid Fund into the state-administered Public School Employees Retirement System to cover future pension costs. However, while this move will lower the amount of unfunded liabilities in the system, these dollars will come directly from state funds intended to support general K-12 school operations.</p>
<p>This practice has been repeated in many states over the past two decades. According to the Equable Institute study, the “<a href="https://equable.org/hidden-funding-cuts/">hidden cuts</a>” of using K-12 funds to cover pension costs have risen from $457 per student in 2001 to $1,290 per student in 2021 – a 182% increase in constant 2021 dollars.</p>
<h2>4. How can the problem be solved?</h2>
<p>The solutions rest with the states, and there is no “one size fits all” remedy. Each state has its own K-12 funding system and <a href="https://direct.mit.edu/edfp/article-abstract/5/4/402/10127/An-Introduction-to-Teacher-Retirement-Benefits?redirectedFrom=fulltext">teacher retirement plans</a>, which are governed by many rules that are embedded in state constitutions and laws. These state laws vary. For example, teachers in 15 states, including California and Texas, <a href="https://www.fool.com/retirement/2018/10/07/why-does-social-security-leave-out-teachers-in-the.aspx">aren’t covered by the Social Security system</a>. But there are some common issues and ways to address them.</p>
<p>One common problem is transparency. While it’s usually relatively easy to see how much states, districts and schools are spending for operations, it’s much more difficult to find public data on teacher retirement costs, particularly pension liability costs, because the data is <a href="https://www.brookings.edu/blog/brown-center-chalkboard/2017/03/07/another-reason-to-stop-ignoring-teacher-pensions/">remarkably scarce</a>. </p>
<p>Pension dollars are as much a part of public education budgets as spending on teacher and staff salaries, books, buses and the rest. Careful monitoring and reporting of pension costs, both payments and liabilities, may improve management of these costs before they inflict more damage on budgets for teaching and learning.</p>
<p>Secondly, many states have reduced their financial support for K-12 schools in recent years. The share of personal income given to K-12 schools has <a href="https://www.schoolfinancedata.org/the-adequacy-and-fairness-of-state-school-finance-systems-2023/">steadily declined</a> since the 2007-2009 Great Recession in 39 states. </p>
<p>States could protect school operating budgets by using general fund revenue to pay pension liability costs, not dedicated K-12 aid. Local districts could be responsible for the cost of current-year retirement benefits but cannot do much to manage unfunded pension liabilities. States could cover pension debt costs without reducing state aid for school operations, but it would require raising taxes or cutting programs in other areas.</p>
<p>To begin moving in this direction, states could restore their pre-recession levels of tax effort for K-12 education. <a href="https://www.schoolfinancedata.org/the-adequacy-and-fairness-of-state-school-finance-systems-2023/">A recent study</a> by researchers from Rutgers University, the University of Miami and the Albert Shanker Institute concluded that had all states done this by 2016, schools would have reaped $288 billion in added funding. </p>
<p>Trading off pension support against school operating funds is not an inevitable result of rising pension costs. Whether states have the economic means or political will to address this problem effectively remains to be seen.</p><img src="https://counter.theconversation.com/content/200695/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michael Addonizio does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>States are struggling to cover pension costs for public school teachers. A education policy expert weighs in on potential solutions.Michael Addonizio, Professor of Educational Leadership and Policy Studies, Wayne State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1950732022-11-22T17:20:58Z2022-11-22T17:20:58ZWhy UK universities are going on strike<figure><img src="https://images.theconversation.com/files/496812/original/file-20221122-18-r2or16.jpg?ixlib=rb-1.1.0&rect=8%2C0%2C5982%2C3368&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">University staff on strike in 2019. </span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/durham-county-uk-11252019-university-staff-1570237234">Lee Iveson/Shutterstock</a></span></figcaption></figure><p>Universities in the UK are striking on 24, 25 and 30 November 2022, with action short of a strike beginning on 23 November. Around 70,000 university staff across 150 universities are taking industrial action, following a series of smaller strikes in recent years. These strikes may be the <a href="https://www.theguardian.com/education/2022/nov/08/university-staff-to-strike-across-uk-in-pay-and-conditions-dispute">largest ever in the higher education sector</a>, after members of the University and College Union backed a national ballot in favour of industrial action. </p>
<p>The <a href="https://www.ucu.org.uk/article/12581/University-staff-vote-for-UK-wide-strike-action-in-historic-ballot">UCU is now the only union</a> in the education sector to secure a national mandate for strike action since the <a href="https://www.ier.org.uk/resources/trade-union-act-2016-what-says-what-it-means">2016 Trade Union Act</a> restricted unions’ ability to call a strike. The entire higher education sector could be brought to a standstill.</p>
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<a href="https://theconversation.com/strikes-how-do-they-work-194598">Strikes: how do they work?</a>
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<p>When staff in higher education went on strike in 2019, the dispute was mainly around pensions. There was also growing unrest in the sector around pay and working conditions. At the time, <a href="https://theconversation.com/university-strikes-why-theyre-happening-and-what-you-need-to-know-126706">I argued</a> that this unrest intensified following the introduction of higher student fees in 2010. </p>
<p>Since 2019, issues around pay and working conditions have now surpassed pensions and become the main driver for the strikes. </p>
<p>The UCU’s demands include a pay rise in recognition of the cost of living crisis, after a <a href="https://universitybusiness.co.uk/finance-legal-hr/employers-make-final-pay-offer-for-2022-23/">3% increase</a> in 2022, and an end to insecure contracts. On pensions, UCU wants employers to reverse the cuts imposed in 2022, which it claims will see the average member lose about 35% from their future retirement income.</p>
<p><a href="https://www.ucu.org.uk/article/12469/FAQs">The detailed demands</a> in the pay and working conditions dispute also include action to close gender, ethnic and disability pay gaps, action on excessive workloads and unpaid work, and a standard weekly full-time contract of 35 hours.</p>
<h2>The road to the strikes</h2>
<p>A wide range of factors within higher education in the UK, as well as in the union, have contributed to the decision to take industrial action. Beyond the ongoing pensions dispute, university staff have faced the effects of the increased marketisation of education, including a rise in precarious, short-term working contracts. </p>
<p>In parallel, the UCU has gained a more politicised and confrontational union leadership, as well as making a push towards workplace organising combined with a strong social media campaign and presence.</p>
<p><a href="https://www.ucu.org.uk/rising">In a press conference</a> giving the results of the ballots, UCU general secretary, Jo Grady, confirmed the union’s confrontational approach with three messages. The first was to employers: “The game has changed … now we will take you on as a collective.” Second was a message to politicians, that the sector should not be a “punch bag for cuts, right-wing attacks and political point scoring”. The third went to representatives and members: “I am UCU and proud, and I really hope you are too.”</p>
<p>The chief executive of the Universities and Colleges Employers Association (UCEA), Raj Jethwa, said there was “<a href="https://www.ucea.ac.uk/news-releases/8nov22/">disappointment</a>” across the sector at the decision to strike, taken despite discussions on bringing forward the 2023-24 pay negotiations in response to cost of living concerns. </p>
<p>A successful strike depends on whether arguments to take collective action resonate with workers – and the wider public. These arguments need to be circulated both internally within trade unions and externally to society as a whole. Internally, the union needs to create a collective identity. Externally, it needs to communicate effectively with journalists, politicians and the wider public. </p>
<p>Not all workers have decided to join the strike, and this might be because arguments do not resonate: they may not be subject to the same pay and working conditions issues as the majority of the sector. It is also worth saying that workers may not be participating because of pressure by their employers or for financial reasons. Taking strike action is a “<a href="https://theconversation.com/strikes-how-do-they-work-194598">last resort</a>” for most workers and these decisions are not taken lightly.</p>
<p><a href="https://onlinelibrary.wiley.com/doi/epdf/10.1111/ntwe.12205">Trade unions have been criticised</a> for being slow to fully exploit newer technologies like social media. The use of social media – combined with relentless campaigning and local meetings – has been a key mobilising tactic in the UCU dispute. This approach <a href="https://onlinelibrary.wiley.com/doi/epdf/10.1111/ntwe.12205">has the potential</a> to revitalise the political influence of trade unions. </p>
<p>The UCU has also tried to bring the needs of students into the frame, particularly by using the phrase “students know our working conditions are their learning conditions”. </p>
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<p>Gaining public support for a strike, though, requires winning the moral argument – especially problematic in a time of economic crisis where workers more generally are suffering from low pay and poor working conditions. This is difficult in higher education. The working conditions and workload of academics lack visibility: people wonder “what academics actually do”. The UCU will need to effectively explain the squeeze academics are facing, from increased teaching loads and pressure to meet student expectations to the need to secure funding and publish research.</p><img src="https://counter.theconversation.com/content/195073/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Heather Connolly currently works on an ESRC-funded research project.</span></em></p>University staff to walk out for three days in what may be the largest ever in the higher education sector.Heather Connolly, Associate Professor of Employment Relations, Grenoble École de Management (GEM)Licensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1878902022-08-05T15:41:23Z2022-08-05T15:41:23ZWhen do strikes work? History shows the conditions need to be right<p>There has been a <a href="https://www.theguardian.com/uk-news/2018/may/30/strikes-in-uk-fall-to-lowest-level-since-records-began-in-1893">significant decline</a> in union-led strike action in the 21st-century UK. But with <a href="https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/bulletins/averageweeklyearningsingreatbritain/july2022">average public sector pay</a> increasing by 1.5% between March and May 2022 (versus 7.2% in the private sector) and households facing a <a href="https://www.instituteforgovernment.org.uk/explainers/cost-living-crisis">cost of living</a> crisis, <a href="https://www.theguardian.com/uk-news/2022/apr/02/strikes-in-uk-at-highest-in-five-years-as-pay-is-hit-by-inflation">industrial disputes</a> are on the rise again in the UK.</p>
<p>Strike action has already picked up in <a href="https://www.rmt.org.uk/news/rmt-confirms-national-rail-strike-to-go-ahead22722/">recent months</a>, particularly among rail workers. Now <a href="https://www.dailyecho.co.uk/news/20513045.southampton-royal-mail-representative-confirms-strike-action-city/">unions in other sectors</a>, including those for <a href="https://metro.co.uk/2022/07/01/travel-summer-holidays-under-threat-from-airline-strikes-across-europe-16929191/">airlines</a>, <a href="https://www.bbc.co.uk/news/uk-england-suffolk-62332822">port workers</a> and <a href="https://schoolsweek.co.uk/aqa-staff-vote-in-favour-of-strike-action-over-pay/">exam markers</a>, are asking <a href="https://www.telegraph.co.uk/business/2022/07/25/british-airways-pilots-poised-launch-strike-action/">members to vote</a> on whether or not to follow suit. Unions are legally required to hold a ballot for members to approve industrial action.</p>
<p>Workers that vote in favour could look to history for insight into how to make a strike work. Some of the more successful campaigns waged by UK unions happened in the 1970s. Trade union membership had reached a peak of <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1077904/Trade_Union_Membership_UK_1995-2021_statistical_bulletin.pdf">13.2 million</a> by 1979, after years of sustained growth. Crucially, these unions also faced fragile governments and strong public support for striking workers. </p>
<p>On the other hand, many of the most famous national strikes in Britain are somewhat notorious for being unsuccessful. And even the victories have often been followed by greater restrictions on unions.</p>
<h2>The successful strikes of the 1970s</h2>
<p>In 1970, the Conservative prime minister Edward Heath had secured a <a href="https://www.bbc.co.uk/news/uk-politics-33772016#:%7E:text=expectations%20to%20win-,a%2030%2Dseat%20majority,-.%20Opinion%20polls%20had">30-seat parliamentary majority</a> but his government was beset by unemployment and inflation issues. In this environment, British coal miners struck for the first time in nearly 50 years in 1972. Polling showed <a href="https://core.ac.uk/download/pdf/30696148.pdf">55% of the public</a> were sympathetic to the miners’ pay demands and the strike ended following the publication of a government inquiry which recommended a <a href="https://www.theguardian.com/uk/2003/jan/01/past.politics1">27% pay increase</a>. </p>
<p>But action resumed in 1974 when wages failed to reach this level. This resulted in a <a href="https://www.dailymail.co.uk/news/article-10012345/When-lights-DID-1970s-Britain-plunged-darkness-three-day-working-week.html">three-day week</a> in Britain, with electricity to commercial premises rationed as strike activity affected fuel supply. The Conservative government called a general election and Labour emerged as the largest party in a hung parliament in February 1974. The miners secured a <a href="http://news.bbc.co.uk/onthisday/hi/dates/stories/march/6/newsid_4207000/4207111.stm">35% pay increase</a> under the new government.</p>
<p>By the end of the 1970s, the unions’ significant membership boosted their bargaining power, particularly against the fragile government of the day. (The narrow parliamentary majority Labour had secured in October 1974 had disappeared by 1976.) </p>
<p>But to combat economic difficulties – much like today, Britain was experiencing high levels of inflation – the Labour government introduced a <a href="https://link.springer.com/chapter/10.1007/978-1-349-15677-1_10?noAccess=true">social contract</a> to minimise pay rises. The trade union movement supported this deal until 1978 when then-prime minister James Callaghan attempted to introduce a further round of restraint with a <a href="https://www.cambridge.org/core/books/abs/winter-of-discontent/introduction/EFA36F1659546029FA89569172F7B81A">5% pay cap</a>. </p>
<p>Following the August 1978 Ford factory strikes, which secured a 16.5% pay rise for its workers, public sector workers began strike action in January 1979 across a variety of industries in what became known as the winter of discontent. In total, <a href="https://www.theguardian.com/politics/2022/jul/20/stuff-your-5-is-the-uk-facing-a-summer-of-discontent-and-what-can-we-learn-from-the-winter-of-1979">4.6 million workers</a> participated in the 1978-79 strikes. </p>
<p>Callaghan’s attempts to hold the line on the pay cap ultimately failed but might have worked with a more stable parliamentary majority, particularly since <a href="https://www.researchgate.net/publication/307570360_Institutional_Adaption_The_Trades_Union_Congress">84% of people</a> believed trade unions were too powerful at this time. </p>
<p>The results of the winter of discontent were mixed. Many sectors received pay rises, but the action encouraged a public backlash against trade unions. In March 1979, Callaghan’s government lost a no-confidence measure by one vote, paving the way for the May 1979 general election. Margaret Thatcher’s subsequent victory saw <a href="https://www.legislation.gov.uk/ukpga/1984/49/enacted">significant restrictions</a> placed on union activity, including limitations on picketing, a ban on sympathy strikes, the end of the closed shop and a requirement for secret ballots for all unions.</p>
<h2>Strong governments and less public support</h2>
<p>In contrast, several well-known strikes waged against strong, well-prepared governments, and amid little public support for striking workers, were ultimately unsuccessful. </p>
<p>For example, Britain’s first – and so far only – general strike nearly 100 years ago saw up to <a href="https://www.nationalarchives.gov.uk/cabinetpapers/themes/general-strike-cover-papers.htm">1.75 million workers</a> from various industries strike against pay cuts for miners. The government at the time enjoyed the support of the public, had a parliamentary majority of 209 and was prepared with alternative transport networks and volunteers to maintain services. </p>
<p>The Trades Union Congress called off the strike after 9 days with no major concessions granted to the miners. Indeed, the main impact of the strike was a clampdown on union activity by the government. The <a href="https://www.nationalarchives.gov.uk/cabinetpapers/themes/strike-consequential-legislation.htm#:%7E:text=Trade%20Disputes%20and%20Trade%20Union%20Act%201927">1927 Trades Dispute Act</a> banned general strikes, sympathy strikes and large-scale picketing.</p>
<p>Another well-known miners’ strike in 1984 played out under similarly difficult conditions for unions. After refusing a 5.2% pay rise in 1983 and fearing pit closures, the National Union of Mineworkers called an unballoted strike in March 1984. </p>
<p>At its height, <a href="https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/articles/thehistoryofstrikesintheuk/2015-09-21">142,000 miners</a> walked out, but all returned to work after a year without agreement. At this time, Margaret Thatcher’s conservative government had been re-elected by a landslide in 1983, while <a href="https://www.e-ir.info/2015/04/15/was-the-british-governments-handling-of-the-19845-miners-strike-brilliant/">opinion polls during 1984</a> indicated public sympathy lay with the employers.</p>
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<img alt="Group of protestors with signs about pensions outside UK houses of parliament" src="https://images.theconversation.com/files/476685/original/file-20220729-14-yd6eov.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/476685/original/file-20220729-14-yd6eov.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/476685/original/file-20220729-14-yd6eov.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/476685/original/file-20220729-14-yd6eov.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/476685/original/file-20220729-14-yd6eov.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=502&fit=crop&dpr=1 754w, https://images.theconversation.com/files/476685/original/file-20220729-14-yd6eov.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=502&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/476685/original/file-20220729-14-yd6eov.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=502&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Union members demonstrate outside UK parliament about government pension proposals, June 30 2011.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/london-june-30-unidentified-members-unions-80227009">Matt Gibson / Shutterstock</a></span>
</figcaption>
</figure>
<p>The most recent large-scale action taken by trade unions happened during a period of similar political stability. Public sector strikes held in 2011 in response to pension reforms involved up to <a href="https://www.theguardian.com/society/2011/nov/30/strikes-public-sector-pensions-impact">2 million workers</a>, according to unions, and resulted in 60% of schools closing and 6,000 cancelled hospital operations. But it did not lead to large scale changes to public sector pensions and did little to halt public sector <a href="https://www.theguardian.com/society/2020/mar/03/lost-decade-hidden-story-how-austerity-broke-britain">austerity cuts</a>.</p>
<p>David Cameron’s Conservative Party had formed a stable coalition government with the Liberal Democrats a year before. The public also <a href="https://yougov.co.uk/topics/politics/articles-reports/2011/06/30/strikes-divide-opinion">disapproved of industrial action</a> by teachers and civil servants, even though they opposed the government changes to public sector pensions that had led to the strike. </p>
<p>The Conservatives clamped down on such strike activity following their victory at the 2015 General Election. The <a href="https://www.legislation.gov.uk/ukpga/2016/15/contents/enacted">2016 Trade Union Act</a> introduced a 50% turnout requirement for strike action, alongside a 40% support threshold among all workers in key public service industries.</p>
<p>For ongoing strikes today to have any prospect of success, unions must carefully balance industrial action with negotiation to maintain public support. And the government must seriously engage with public sector pay claims, particularly during the cost of living crisis, to avoid a further slide in political opinion polls.</p><img src="https://counter.theconversation.com/content/187890/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Christopher Massey is a Principal Lecturer at Teesside University and a Labour Party Councillor for Redcar and Cleveland Borough Council.</span></em></p>The strength of the government and public support can make a crucial difference.Christopher Massey, Principal Lecturer (Programmes) - Humanities and Social Sciences, Teesside UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1837672022-06-09T20:44:08Z2022-06-09T20:44:08ZGender pay gap: It’s roughly half-a-million dollars for women professors across a lifetime<figure><img src="https://images.theconversation.com/files/467767/original/file-20220608-22-sxtm8t.jpg?ixlib=rb-1.1.0&rect=25%2C1086%2C5121%2C2733&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The gender pay gap for faculty in Canadian universities is significant and persistent.</span> <span class="attribution"><span class="source">(Shutterstock)</span></span></figcaption></figure><iframe style="width: 100%; height: 100px; border: none; position: relative; z-index: 1;" allowtransparency="" allow="clipboard-read; clipboard-write" src="https://narrations.ad-auris.com/widget/the-conversation-canada/gender-pay-gap--it-s-roughly-half-a-million-dollars-for-women-professors-across-a-lifetime" width="100%" height="400"></iframe>
<p>There are substantial, long-term impacts from the gender pay gap for faculty at Canadian universities. </p>
<p>Recent research from <a href="https://doi.org/10.47678/cjhe.vi0.189215">our multidisciplinary team</a>, which includes expertise in equity policy, political science and cognitive science with mathematical modelling, shows that over the course of a career and retirement, this pay gap leads to a difference of roughly half-a-million dollars.</p>
<p>The gender pay gap <a href="https://www.caut.ca/sites/default/files/caut_equity_report_2018-04final.pdf">for faculty in Canadian universities</a> is significant and persistent. Women professors earn <a href="https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=3710010801">on average 10 per cent (or $10,500 per year) less than men for the same work</a>. </p>
<p>This gender pay gap <a href="https://www.cigionline.org/articles/canadian-universities-must-stop-undervaluing-female-academics/">can result from bias in determining starting salaries and subsequent merit pay, from differing rates of promotion</a> and from the <a href="https://www.theglobeandmail.com/business/article-how-men-taking-more-paternity-leave-could-save-mothers-careers/">punitive effects of parental and caregiving leave</a>.</p>
<p>Focusing solely on pay differences, however, leads people to underestimate the long-term financial consequences of gender inequities as the pay gap also has implications for pensions. </p>
<h2>Case study</h2>
<p>Quantifying the effects of the gender pay and pension gap (<a href="https://doi.org/10.2307/135578">research not done in over 30 years</a>) poses a challenge, given the many variables at play.</p>
<p>To address this challenge, our team used King’s University College as a case study. Using King’s made the challenge more tractable because potential bias was confined to starting salary and promotion decisions. Unlike <a href="https://doi.org/10.7202/005282ar">many universities</a>, King’s does not offer merit pay, and faculty have a defined-benefit pension plan. </p>
<p>We were able to examine the effects of bias in starting salary, based on the determination of how many years of relevant experience people had at hire, and in promotion to full professor.</p>
<p>Women faculty at King’s <a href="https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=3710010801">made nine per cent less than men on average</a>. This calculation was based on all full-time professors, including both racialized and non-racialized faculty. We took this nine per cent average difference ($8,771) as our starting point. We then calculated the pay and pension gap across a 30-year career and 21-year retirement for different career trajectories.</p>
<figure class="align-center ">
<img alt="A doorway is seen in a university courtyard." src="https://images.theconversation.com/files/467596/original/file-20220607-20-no7x0g.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/467596/original/file-20220607-20-no7x0g.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=401&fit=crop&dpr=1 600w, https://images.theconversation.com/files/467596/original/file-20220607-20-no7x0g.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=401&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/467596/original/file-20220607-20-no7x0g.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=401&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/467596/original/file-20220607-20-no7x0g.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=504&fit=crop&dpr=1 754w, https://images.theconversation.com/files/467596/original/file-20220607-20-no7x0g.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=504&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/467596/original/file-20220607-20-no7x0g.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=504&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Differences in starting salaries for faculty add up significantly over time.</span>
<span class="attribution"><span class="source">(Pixabay/Pexels)</span></span>
</figcaption>
</figure>
<p>We calculated what would happen if a woman progressed through the ranks to become a tenured associate professor and remained so for the rest of her career, compared to a man in the same position. </p>
<p>We calculated what would happen if she was promoted to full professor, compared to a man in the same position. Promotion to full professor is based on one’s research contributions. Most professors don’t achieve this position, although men are far more likely to do so than women. </p>
<p>We found that a $9,000 difference in starting pay led to a cumulative pay and pension gap of $454,000 at the associate level, and a $468,000 gap at the full professor level. </p>
<p>We also calculated what would happen if a woman was not promoted to full professor compared to a man who was. In this more likely scenario, the pay and pension gap was $660,000. In retirement, this gap translates to a $7,000-$12,250 per year difference in pension, depending on the scenario.</p>
<h2>Racialized inequities</h2>
<p>Our research focused solely on gender, given that <a href="https://www23.statcan.gc.ca/imdb/p2SV.pl?Function=getSurvVariableList&Id=1395507">race was not a variable provided in the available Statistics Canada data</a> or at the institutional level. This ongoing issue has been highlighted with urgent <a href="https://www.thediversitygapcanada.com/uploads/1/3/0/4/130476297/1.perpetual_crisis.pdf">calls for better data collection</a>. </p>
<p>Data from the Canadian Association of University Teachers shows racialized professors experience <a href="https://www.caut.ca/sites/default/files/caut_equity_report_2018-04final.pdf">a 10 per cent pay gap relative to their non-racialized peers</a>. Racialized women professors, in particular, experience greater pay inequity. </p>
<figure class="align-center ">
<img alt="A professor stands at the front of a room." src="https://images.theconversation.com/files/467599/original/file-20220607-15494-q4t923.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/467599/original/file-20220607-15494-q4t923.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/467599/original/file-20220607-15494-q4t923.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/467599/original/file-20220607-15494-q4t923.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/467599/original/file-20220607-15494-q4t923.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/467599/original/file-20220607-15494-q4t923.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/467599/original/file-20220607-15494-q4t923.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Racialized women professors experience greater pay inequity than their non-racialized women counterparts.</span>
<span class="attribution"><span class="source">(Pexels/ICSA)</span></span>
</figcaption>
</figure>
<p>Given that the gender <a href="https://www.caut.ca/sites/default/files/caut_equity_report_2018-04final.pdf">pay gap for racialized women professors is double that of their non-racialized women counterparts</a>, it follows that racialized women professors face larger lifetime salary and pension gaps than our calculation for women professors overall.</p>
<p><a href="https://www.canada.ca/en/services/jobs/workplace/human-rights/overview-pay-equity-act.html">Pay equity legislation</a>, however, remains fixed on gender; it doesn’t currently address wage penalties faced by <a href="https://www.caut.ca/sites/default/files/caut_equity_report_2018-04final.pdf">Indigenous, racialized and 2SLGBTQ+ faculty</a>. </p>
<h2>Correcting imbalances</h2>
<p>Universities have used <a href="https://ocufa.on.ca/assets/OCUFA-Submission-on-the-Gender-Wage-Gap-FINAL.pdf">salary anomaly studies and wage adjustments to address the gender pay gap</a>. Corrections have been done either on an individual basis or across the board for women faculty, but without retroactive pay. King’s just completed its first study and awarded women one additional year of experience <a href="https://www.kings.uwo.ca/kings/assets/File/about/Salary%20anomaly%20report%202022.pdf">going forward (a $2,506-$2,770 per year boost, depending on rank, under the current contract)</a>. </p>
<p>Yet salary studies, while helpful, have tended to insufficiently address the problem. Without addressing the systemic bias that leads to pay differences, the gap is often reintroduced or increases over time with new hires and with promotion (or due to merit or market factors). Taking a gradual <a href="https://eric.ed.gov/?id=EJ501603">approach to pay equity also likely costs more over time than taking meaningful steps to close the gap</a>.</p>
<figure class="align-center ">
<img alt="Women are seen sitting at laptops." src="https://images.theconversation.com/files/467597/original/file-20220607-15494-ogv3vb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/467597/original/file-20220607-15494-ogv3vb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/467597/original/file-20220607-15494-ogv3vb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/467597/original/file-20220607-15494-ogv3vb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/467597/original/file-20220607-15494-ogv3vb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/467597/original/file-20220607-15494-ogv3vb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/467597/original/file-20220607-15494-ogv3vb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Employers should foster environments for women to thrive and encourage them to go up for promotion.</span>
<span class="attribution"><span class="source">(Pexels/Ketut Subiyanto)</span></span>
</figcaption>
</figure>
<h2>What universities can do</h2>
<p>So what additional steps can universities take to address the gender pay gap? First, they can provide greater transparency. Faculty should be made <a href="https://www.caut.ca/equity-toolkit/article/equitable-compensation">aware of the criteria being used to assess their experience and performance,</a> the variables and data available to measure the gender pay gap at their institution, and how their school is rectifying it. </p>
<p>They can foster environments for women researchers to thrive and encourage them to go up for promotion (<a href="https://www.theglobeandmail.com/canada/article-locked-out-of-the-ivory-tower-how-universities-keep-women-from-rising/">68 per cent of full professors in 2019 were men</a>). <a href="https://theconversation.com/university-survey-shows-how-covid-19-pandemic-is-hampering-career-progress-for-women-and-racialized-faculty-153169">Women and racialized faculty’s research and career progress were more negatively impacted by the pandemic</a>.</p>
<hr>
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<strong>
Read more:
<a href="https://theconversation.com/early-career-professors-want-changes-in-how-tenure-is-evaluated-in-wake-of-pandemic-effects-on-productivity-174590">Early-career professors want changes in how tenure is evaluated in wake of pandemic effects on productivity</a>
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<p>They can address <a href="https://www.theglobeandmail.com/canada/article-power-gap/">the power gap</a> in senior leadership: Despite ongoing equity, diversity and inclusion efforts, most senior leadership posts remain unaffected. In 2019, <a href="https://www.theglobeandmail.com/canada/article-locked-out-of-the-ivory-tower-how-universities-keep-women-from-rising/">men continued to make up 80 per cent of the presidents, 60 per cent of the provosts and vice-presidents, and 58 per cent of the deans in Canadian universities</a>. Only one in five of the top earners at Canadian universities were women, while only three in 100 were identified as racialized women. </p>
<h2>60 years to close gender pay gaps?</h2>
<p>Our research shows that the gender pension gap is substantial — <a href="https://doi.org/10.47678/cjhe.vi0.189215">with a third or more of the full gap (pay and pension) owing to pension</a>, leading to greater long-term inequities for women than previously estimated. </p>
<p>The World Economic Forum suggests that at this rate, both within and outside academia, <a href="https://www3.weforum.org/docs/WEF_GGGR_2021.pdf">it’ll take another 60 years to close the gap</a>. Sadly, our daughters will still be waiting for equity when they retire.</p><img src="https://counter.theconversation.com/content/183767/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Marcie Penner was past co-chair of the King's University College Salary Anomaly Committee and has previously received funding from the Natural Sciences and Engineering Research Council of Canada. </span></em></p><p class="fine-print"><em><span>Tracy Smith-Carrier receives funding from the Canada Research Chairs program, funded by the Government of Canada.</span></em></p>Over the course of a career and retirement, gender pay gaps lead to a difference of roughly half-a-million dollars for women professors relative to their male counterparts.Marcie Penner, Associate Professor of Psychology, King's University College, Western UniversityTracy Smith-Carrier, Associate Professor and Canada Research Chair (Tier 2) in Advancing the UN Sustainable Development Goals, Royal Roads UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1838512022-06-01T15:04:27Z2022-06-01T15:04:27ZZimbabwe’s 2023 elections: how to judge candidates’ social protection promises<figure><img src="https://images.theconversation.com/files/465668/original/file-20220527-17-v9r9jp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Traders examine bales of tobacco, which is among Zimbabwe's key exports, at a March 2022 auction in Harare.
</span> <span class="attribution"><span class="source">EFE-EPA/Aaron Ufumeli</span></span></figcaption></figure><p>Zimbabwe is heading for general polls <a href="https://www.eisa.org/calendar-comprehensive.php">in 2023</a> amid an ongoing macroeconomic crisis. In the decade starting from 2001, the state-led economy started to show <a href="https://www.reuters.com/article/us-zimbabwe-inflation-idUSL1992587420070919">signs of strain</a>. Unemployment <a href="https://documents.wfp.org/stellent/groups/public/documents/ena/wfp197654.pdf?iframe">reached 85%</a>. Inflation, which was a staggering <a href="https://www.cato.org/sites/cato.org/files/articles/Hanke_zimbabwe_091708.pdf">79,000,000%</a> in 2008, came down but has been rising in the <a href="https://take-profit.org/en/statistics/inflation-rate/zimbabwe/">past two years</a>. It is still <a href="https://tradingeconomics.com/zimbabwe/inflation-cpi">among the highest in the world</a>.</p>
<p>The economic crisis has heightened the vulnerability of households and the need for social protection to prevent hunger among poor households, complement the risk mitigation mechanisms of informal workers, and improve access to social services such as education, health and water.</p>
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<p>
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<strong>
Read more:
<a href="https://theconversation.com/how-informal-sector-organisations-in-zimbabwe-shape-notions-of-citizenship-180455">How informal sector organisations in Zimbabwe shape notions of citizenship</a>
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<p>It is highly unlikely that the formal economy will turn the tide soon to create formal employment, which is vital for the stability of household income, and reduce the need to support food insecure households. </p>
<p>In the last presidential election in 2018, several presidential candidates promised to provide social protection for citizens.</p>
<p>The ruling party, <a href="https://webcms.uct.ac.za/sites/default/files/image_tool/images/495/country_documents-2020/Zimbabwe/ZANU_PF_2018_MANIFESTO_ENGLISH_%20(39.51).pdf">Zanu-PF promised</a> to create safety nets and enhance access to health and education services. Safety nets are also called <a href="https://openknowledge.worldbank.org/handle/10986/29115">social assistance</a> and typically include cash and food transfers, public works, subsidies and fee waivers for education and health.</p>
<p>The Zanu-PF government’s safety net package includes cash transfers to <a href="https://social-assistance.africa.undp.org/data">52,049 households</a>, public monthly maintenance allowances in form of food and or cash to <a href="https://social-assistance.africa.undp.org/data">6,688 households</a> and paltry tuition grants and examination fee subsidies <a href="https://www.zimbabwesituation.com/news/outcry-over-paltry-beam-allocations/">for underprivileged students</a>. </p>
<p>The main opposition party, MDC-Alliance (now <a href="https://www.facebook.com/CitizensCoalition4Change">Citizens Coalition for Change</a>), promised to bolster social protection and <a href="https://t792ae.c2.acecdn.net/wp-content/uploads/2018/06/MDC-ALLIANCE-SMART-MANIFESTO.pdf">reform the National Social Security Authority</a>. The terms <a href="https://www.ilo.org/global/publications/books/WCMS_604882/lang--en/index.html">“social protection” and “social security”</a> are used interchangeably, and typically include social assistance and social insurance measures.</p>
<p>Little-known opposition parties also made promises. For instance, the <a href="https://www.pindula.co.zw/People%E2%80%99s_Rainbow_Coalition">People’s Rainbow Coalition</a> promised to <a href="https://www.slideshare.net/povonews/peoples-rainbow-coalition-2018-election-manifesto-idea">provide social security</a>, and the <a href="https://www.facebook.com/APAZimbabwe">Alliance for the People’s Agenda</a> undertook to <a href="https://t792ae.c2.acecdn.net/wp-content/uploads/2018/06/APA-Manifesto-2018.pdf">deliver social packages</a> such as support for education and health care.</p>
<p>As Zimbabwe heads for 2023 presidential elections, due to be held on <a href="http://www.news.cn/english/africa/2021-11/11/c_1310303313.html">23 April 2023</a>, new or recycled promises will be made to voters. </p>
<p>Voters must judge candidates by the soundness of their promises to improve the reach of cash and food transfers to poor households, extend social insurance coverage to informal workers, and facilitate access to education, health and water for all citizens.</p>
<h2>What’s in place</h2>
<p>I have <a href="https://www.undp.org/africa/publications/state-social-assistance-africa-report">researched</a> <a href="https://reliefweb.int/report/world/social-protection-operational-tool-humanitarian-development-and-peace-nexus-linkages">social protection</a> <a href="https://journals.sagepub.com/doi/pdf/10.1177/2516602620936028">in Zimbabwe and beyond</a> for the past decade. There are a few key social protection measures to consider. Among them are social insurance, such as pension, sickness, maternity and unemployment benefits. These depend on contributions from formal economy workers and their employers. </p>
<p>The coverage of the Harmonised Social Cash Transfers programme is <a href="https://social-assistance.africa.undp.org/data">limited to 52,049 households</a>. So, it covers only 6% of the food insecure households. But over four million Zimbabweans, out of a population of <a href="https://populationstat.com/zimbabwe/">15 million</a>, <a href="https://www.unicef.org/zimbabwe/press-releases/zimbabwe-rated-one-worlds-top-global-food-crises-new-united-nations-report">are food insecure</a>.</p>
<p>The flagship social assistance programme gives households between US$20-50 bimonthly, depending on household size.</p>
<p>Since inception in 2011, the programme has covered <a href="https://socialprotection.org/discover/programmes/harmonised-social-cash-transfer-hsct">less than 20 districts</a>. There are 59 districts in Zimbabwe and all have food insecure households. </p>
<p>Then there’s <a href="https://www.nssa.org.zw/news-blogs/talking-social-security/schemes-for-social-protection/">social insurance</a> which covers pensions and worker compensation. But this doesn’t cover the risks faced by most workers as it only applies to formal employment. Only 15% of Zimbabweans are employed in the formal economy while 85% work in the <a href="https://www.businesslive.co.za/bd/world/africa/2020-09-16-outlook-for-informal-economy-in-zimbabwe-is-dire-after-harsh-covid-19-response/">informal economy</a>. </p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/insights-from-zimbabwe-on-how-to-link-formal-and-informal-economies-182353">Insights from Zimbabwe on how to link formal and informal economies</a>
</strong>
</em>
</p>
<hr>
<p>Many informal workers create their own risk mitigation mechanisms such as <a href="https://journals.sagepub.com/doi/10.1177/0020872815611196">burial societies</a> or subscribe to funeral insurance policies to cover funeral expenses, which can be as high as their <a href="https://link.springer.com/article/10.1007/s11150-020-09498-8">yearly income</a>. </p>
<p>Another cost that could be covered by social protection is school fees. According to the Zimbabwe National Vulnerability Assessment Committee <a href="https://reliefweb.int/report/zimbabwe/zimbabwe-vulnerability-assessment-committee-zimvac-2020-rural-livelihoods-assessment">2020 report</a>, 50.3% of children of school-going age were sent away from school in the first term of 2020 because they could not pay fees. </p>
<p>The report also notes that 75% of all rural residents who are chronically ill miss their medication because they cannot afford it. </p>
<p>In the short-term, social protection must focus on fee waivers to improve access to education and health care services for all citizens. In the medium term, all these critical social services must be brought within acceptable travelling distances.</p>
<h2>Lessons from elsewhere</h2>
<p>A number of countries in Southern African Development Community region have national social cash transfers for all vulnerable people of a certain demographic group. For instance, in Botswana, Eswatini, Lesotho, Namibia and South Africa, older people receive an <a href="https://social-assistance.africa.undp.org/data">old age grant</a>.</p>
<p>Some governments in Africa complement the risk mitigation mechanisms of informal workers. For instance, the Rwandan government adds a matching contribution plus life and funeral insurance policies on the contributions that informal workers make <a href="https://ejoheza.gov.rw/ltss-registration-ui/landing.xhtml;jsessionid=BFC430CED41625AEB78C47507D381B8C">towards their pension</a>.</p>
<p>In Ghana, the government contributes 5% to the new national pension scheme, which <a href="https://www.ssnit.org.gh/faq/the-new-pension-scheme/#:%7E:text=The%20new%20National%20Pension%20Scheme,benefits%20as%20and%20when%20due.&text=The%20New%20Pension%20Scheme%20was,implementation%20started%20in%20January%202010">includes informal workers</a>.</p>
<p>Free access to education has had positive impact on enrolment in <a href="https://world-education-blog.org/2016/01/27/can-africa-afford-free-education/#:%7E:text=Among%20the%2053%20countries%20with,of%20Tanzania%20and%20Uganda%20show">Kenya, Malawi and Uganda</a>. There are fee waivers for health care in countries such as <a href="https://openknowledge.worldbank.org/handle/10986/29115">Eswatini and Burundi</a>.</p>
<h2>Conclusion</h2>
<p>It’s important to address two issues when it comes to social protection in Zimbabwe.</p>
<p>The first is the lingering view that social protection creates a dependency syndrome – not only in Zimbabwe, but Africa-wide. This <a href="https://academic.oup.com/wbro/article/33/2/259/5127165">myth has been busted</a> by scientific evidence showing that cash transfers do not lead to fewer people seeking jobs.</p>
<p>The second is whether the state can afford to finance the extension of social protection to all food insecure households. </p>
<p>In a constrained macroeconomic environment such as Zimbabwe’s, funding social protection among other competing needs is about budget priorities more than it is an issue of sourcing new revenue.</p>
<p>Where there is high unemployment and food insecurity, it is socially and legally justified for the poor to depend on social assistance as it is their right, for which the government must be held accountable.</p><img src="https://counter.theconversation.com/content/183851/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Gift Dafuleya does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>As Zimbabwe heads for 2023 presidential elections, there are key things voters should watch out for in the social protection promises made by candidates.Gift Dafuleya, Lecturer in Economics, University of VendaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1773952022-03-25T14:24:25Z2022-03-25T14:24:25ZWhat is it like to be destitute in Britain? ‘It makes you feel like some kind of underclass’<p><em>The increased cost of living, from food prices to energy costs, is expected to drive <a href="https://www.theguardian.com/politics/2022/mar/24/lack-of-help-from-rishi-sunak-for-struggling-uk-families-will-push-13m-into-poverty">many more households</a> into poverty or <a href="https://www.theguardian.com/business/2022/feb/09/national-insurance-rise-could-mean-1m-destitute-households-in-uk-says-thinktank">destitution</a>. Charities <a href="https://www.jrf.org.uk/blog/what-destitution">define</a> destitution as being unable to afford basic necessities like food, clothing and heating.</em></p>
<p><em>Destitution, and poverty in general, affect different people in different ways. We asked five experts who study poverty from a variety of perspectives to illustrate the many experiences of destitution in Britain.</em></p>
<h2>Housing and bills</h2>
<p><strong>Philip Brown, Professor of Housing and Communities, University of Huddersfield</strong></p>
<p>During the winter months, people living in poor housing conditions are <a href="https://www.instituteofhealthequity.org/resources-reports/fair-society-healthy-lives-the-marmot-review/fair-society-healthy-lives-full-report-pdf.pdf">more likely to die</a> as a result of respiratory, circulatory and cardiovascular diseases and are more likely to experience depression and anxiety. In certain parts of the UK, such as the <a href="https://www.northern-consortium.org.uk/wp-content/uploads/2018/10/The-Hidden-Costs-of-Poor-Quality-Housing-in-the-North.pdf">north of England</a>, this is made even worse by the prevalence of older, colder and poorly maintained properties. </p>
<p>But even if you are fortunate enough to have adequate accommodation, this does not insulate you from the spiralling cost of living, in particular rising energy prices. In <a href="https://pure.hud.ac.uk/en/publications/lockdown-rundown-breakdown-the-covid-19-lockdown-and-the-impact-o">research undertaken</a> at the start of the pandemic, we found people using their savings (where they were lucky enough to have them) and credit cards just to get by. In other cases, people were cutting back on food and heating their homes in order to pay their rent, fearing eviction by landlords. </p>
<p>As one single mother said:</p>
<blockquote>
<p>I don’t put my heating on as much as I should do. I sit there in the winter basically in my housecoat with my slippers on, quite often with a hat on, with a blanket over me to make sure that I can keep warm, and I’ve taught my daughter to do the same. On the coldest, coldest nights, we climb into bed just shortly after we’ve had hot food and stay there in my double bed cuddled up together underneath all the blankets to keep warm.</p>
</blockquote>
<h2>Food</h2>
<p><strong>Wolf Ellis, PhD candidate, Department of Geography, King’s College London</strong></p>
<p>Concerns about food insecurity are <a href="https://foodfoundation.org.uk/press-release/new-data-shows-food-insecurity-major-challenge-levelling-agenda">continuing to grow</a> after a decade of <a href="https://researchbriefings.files.parliament.uk/documents/CBP-8585/CBP-8585.pdf#page=5">skyrocketing</a> food bank use. The number of food parcels distributed reflects just a fraction of the people experiencing these problems.</p>
<p>I interviewed people who visited food banks or community meals in London shortly before the pandemic. One person said they had just been “eating a couple of squares of chocolate a day” while waiting to receive universal credit. Others described longer-term struggles to access sufficient food, inabilities to afford fruit and vegetables, and planning meticulously yet still eating less than they should.</p>
<p>Services like food banks are rarely a desirable means of food access. They may not provide the food people would buy for themselves, and serve as a reminder that more socially-accepted behaviour like buying food from a shop or going to a restaurant is out of reach. Some interviewees had preferred to shoplift (until caught), or resorted to other risky and stigmatised practices, such as eating food picked up from the street.</p>
<p>Crucially, food is only one part of the <a href="https://theconversation.com/food-bank-use-surged-during-the-pandemic-but-they-can-rarely-provide-all-the-help-people-need-154148">much wider equation</a>. In the most extreme cases I came across, benefit or immigration system quirks left people without any money for years. They were forced to rely entirely on piecemeal support and sofa-surfing accommodation from friends. </p>
<figure class="align-center ">
<img alt="Close up of volunteers' hands placing canned donations in cardboard boxes." src="https://images.theconversation.com/files/453846/original/file-20220323-23-1x4fquk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/453846/original/file-20220323-23-1x4fquk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/453846/original/file-20220323-23-1x4fquk.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/453846/original/file-20220323-23-1x4fquk.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/453846/original/file-20220323-23-1x4fquk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/453846/original/file-20220323-23-1x4fquk.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/453846/original/file-20220323-23-1x4fquk.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Services like food banks are of limited use to people experiencing destitution.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/midsection-group-volunteers-community-donation-center-1850301736">Halfpoint / Shutterstock</a></span>
</figcaption>
</figure>
<p>Many more interviewees experienced less extreme hardships that still caused them serious problems. Incomes were often far too low to cover their essential costs, and most people had outstanding debts or were overdrawn, leading to a range of other deprivations. For example, people told me:</p>
<blockquote>
<p>It’s still a constant working-out of where to prioritise my money … I’m having to choose between basic human necessities.</p>
<p>The quality of your life is depressing – really depressing, especially at this time of year when you can’t afford to put the heating on or have a hot bath.</p>
</blockquote>
<p>The difficulty making ends meet also exacerbated many interviewees’ poor mental health. As one man remarked: </p>
<blockquote>
<p>It does make me feel like some kind of underclass, even more on the periphery … Your sense of self-worth really suffers.</p>
</blockquote>
<h2>Ethnic minorities</h2>
<p><strong>Alita Nandi, Senior Research Fellow, Institute for Social and Economic Research, University of Essex</strong></p>
<p>Compared to the white majority, ethnic minorities in the UK are <a href="https://www.equalityhumanrights.com/sites/default/files/research-report-108-the-ethnicity-pay-gap.pdf">less likely to be employed</a> and more likely to be <a href="https://www.iser.essex.ac.uk/research/publications/working-papers/iser/2018-06">persistently unemployed</a> or in <a href="https://journals.sagepub.com/doi/10.1177/0950017012445095">lower paying jobs</a>, resulting in lower wages and earnings. Although ethnic minorities have made substantial progress in educational achievement over the last few decades, it has not translated in eliminating <a href="https://www.iser.essex.ac.uk/research/publications/working-papers/iser/2016-02">wage gaps</a>, and we know these problems are <a href="https://doi.org/10.1177%2F0038038520966947">linked to discrimination</a>.</p>
<p>As a result, ethnic minorities are <a href="https://doi.org/10.1080/1369183X.2018.1539241">more likely</a> to be <a href="https://www.jrf.org.uk/report/poverty-across-ethnic-groups-through-recession-and-austerity">living in poverty</a> and not be able to afford basic <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/85527/ethnic-women-poverty-summary.pdf">amenities</a>. They are more likely to live in deprived neighbourhoods with lack of access to mixed social networks, <a href="https://doi.org/10.1080/1369183X.2018.1481002">limiting</a> their employment opportunities. </p>
<figure class="align-center ">
<img alt="An elderly woman counts coins from a small purse" src="https://images.theconversation.com/files/453337/original/file-20220321-17-1gg9ymj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/453337/original/file-20220321-17-1gg9ymj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/453337/original/file-20220321-17-1gg9ymj.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/453337/original/file-20220321-17-1gg9ymj.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/453337/original/file-20220321-17-1gg9ymj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/453337/original/file-20220321-17-1gg9ymj.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/453337/original/file-20220321-17-1gg9ymj.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Poverty and destitution can affect different age groups and ethnic minorities in different ways.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/elderly-95-years-old-woman-sitting-1086254576">Matej Kastelic / Shutterstock</a></span>
</figcaption>
</figure>
<p>This vulnerability puts ethnic minorities at greater risk of loss of work, health issues or other financial problems during large scale societal crises like the <a href="https://www.economicsobservatory.com/how-crisis-affecting-inequalities-across-ethnic-groups">pandemic</a>. Ethnic minorities in general report poorer <a href="https://www.kingsfund.org.uk/publications/health-people-ethnic-minority-groups-england">health and wellbeing</a>, which again is tied to economic circumstances.</p>
<p>However despite all these common experiences, it’s also important to recognise there is considerable variation in these experiences between and within ethnic groups. For example, Pakistani and Bangladeshi people experience <a href="https://www.jrf.org.uk/file/46535/download?token=2HRRInND&filetype=full-report">higher poverty rates</a> (as well as higher persistent poverty rates) than other ethnic minority groups.</p>
<h2>Pensioner poverty</h2>
<p><strong>Ricky Kanabar, Assistant Professor of Social Policy, University of Bath</strong></p>
<p>Retirement is a period of life typically associated with leisurely activities and time with family. But for many, the picture is <a href="https://www.ageuk.org.uk/latest-press/articles/2021/new-age-uk-analysis-finds-one-in-five-uk-women-pensioners-now-living-in-poverty/">not so rosy</a>. Recent government estimates show that in 2019-20, poverty among pensioners <a href="https://www.jrf.org.uk/data/pensioner-poverty-rates">reached levels</a> not seen since 2006-07. </p>
<p><a href="https://www.jrf.org.uk/file/49368/download?token=cuV2Px06&filetype=full-report">Poverty rates among</a> older individuals are likely to be <a href="https://www.cambridge.org/core/journals/journal-of-pension-economics-and-finance/article/in-or-out-poverty-dynamics-among-older-individuals-in-the-uk/970DFE90EDC1FBDD2FDC2AF29CC1F7DC">even higher</a> once disability costs are accounted for. </p>
<p>Housing and health and social care costs are driving these disparities. While home ownership levels are <a href="https://www.ons.gov.uk/peoplepopulationandcommunity/birthsdeathsandmarriages/ageing/articles/livinglonger/changesinhousingtenureovertime">high among pensioners</a>, over 20% of people aged over 65 report residing in private or social <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1039214/2020-21_EHS_Headline_Report.pdf">rented accommodation</a>. Between 2011-17, average rents increased by 16%, but wages only <a href="https://www.theguardian.com/society/2018/aug/03/soaring-rents-rose-60-faster-than-pay-since-2011-shelter">increased 10%</a>. After adjusting for inflation, house prices have also far <a href="https://fullfact.org/online/house-prices-1990-2020/">outstripped</a> income growth.</p>
<figure class="align-center ">
<img alt="A To Let sign in front of a block of council flats" src="https://images.theconversation.com/files/453336/original/file-20220321-21-602lx2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/453336/original/file-20220321-21-602lx2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/453336/original/file-20220321-21-602lx2.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/453336/original/file-20220321-21-602lx2.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/453336/original/file-20220321-21-602lx2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/453336/original/file-20220321-21-602lx2.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/453336/original/file-20220321-21-602lx2.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Housing prices and rents have increased faster than incomes.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/let-sign-council-housing-flats-background-1754709518">I Wei Huang / Shutterstock</a></span>
</figcaption>
</figure>
<p>Even with the <a href="https://www.bbc.co.uk/news/business-53082530">triple lock</a> on state pensions, in real terms, pensioners’ incomes are unlikely to have risen as fast as current inflation or house price growth. Pensioners are also less likely to be in employment, so have limited means to increase their incomes. </p>
<p>Despite the reforms to adult social care announced in 2021, the <a href="https://www.theguardian.com/society/2021/sep/12/experts-warn-of-large-hidden-costs-in-uks-social-care-shake-up">average cost</a> of a place in a residential care home is estimated to be over £35,000. Moreover, older groups even prior to the pandemic were <a href="https://www.ageuk.org.uk/our-impact/policy-research/loneliness-research-and-resources">more likely to suffer</a> from mental health conditions and loneliness. Today, older households like all others in the UK are <a href="https://www.ageuk.org.uk/latest-press/articles/2022/astronomical-energy-price-rises-leaving-older-people-in-crisis/">especially vulnerable</a> to changes in energy costs. </p>
<h2>Migrants and refugees</h2>
<p><strong>Özlem Ögtem-Young, Research Fellow, Centre on Household Assets and Savings Management, University of Birmingham</strong></p>
<p>Migrants to the UK are <a href="https://www.npi.org.uk/files/1014/6978/4852/Foreign-born_people_and_poverty_in_the_UK.pdf">disproportionately represented</a> among those in poverty. Their economic status can be particularly shaped by <a href="https://www.birmingham.ac.uk/Documents/college-social-sciences/social-policy/iris/2014/working-paper-series/IRiS-WP-1-2014.pdf">hunger, heightened fear, depression and isolation</a>. Those who are seeking, granted or refused international protection –- or with insecure immigration statuses – are even more likely to risk destitution in the face of the rising cost of living. </p>
<p>The UK’s hostile border and <a href="https://www.runnymedetrust.org/blog/the-hostile-environment-and-pandemic-combined-refugees-and-asylum-seekers-experiences-of-life-the-uk">immigration policies</a> contribute to financial uncertainty by restricting or prohibiting access to employment, welfare and other services. Migrants seeking asylum are entitled to weekly support –- currently just £39.63 – with no access to employment while their claims are considered. Undocumented migrants are prohibited from accessing financial and other welfare support altogether. </p>
<figure class="align-center ">
<img alt="A homeless man, covered by a blanket, sleeping on the street" src="https://images.theconversation.com/files/453347/original/file-20220321-15-fyspks.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/453347/original/file-20220321-15-fyspks.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/453347/original/file-20220321-15-fyspks.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/453347/original/file-20220321-15-fyspks.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/453347/original/file-20220321-15-fyspks.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/453347/original/file-20220321-15-fyspks.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/453347/original/file-20220321-15-fyspks.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Destitution means not being able to afford basic necessities, but can look different for everyone affected.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/homeless-man-covered-blanket-sleeping-on-699109498">Andrey_Popov / Shutterstock</a></span>
</figcaption>
</figure>
<p>Asylum seekers who receive refugee status still face destitution, and even the prospect of homelessness, as the financial and housing support afforded to them ends 28 days after they are granted refugee status. <a href="https://www.southampton.ac.uk/news/2022/02/migrant-poverty-risk.page">Recent research</a> shows even skilled migrant workers could face financial disadvantage and a higher risk of poverty than UK workers because of the new immigration system being proposed by the government.</p>
<p>Weekly support allowances for migrants within the asylum system are insufficient to meet their essential needs and to feed themselves and their families. The majority live <a href="https://www.birmingham.ac.uk/news/latest/2019/02/vulnerable-migrants-and-wellbeing-study-highlights-barriers-to-healthcare-for-migrants.aspx">below the poverty line</a>, often turning to support from charities to fill the gaps.</p><img src="https://counter.theconversation.com/content/177395/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Alita Nandi receives funding from UKRI. </span></em></p><p class="fine-print"><em><span>Özlem Ögtem-Young was affiliated with Citizens UK and Displaced Collective which are civil society organisations. </span></em></p><p class="fine-print"><em><span>Ricky Kanabar is an Advisory Board member at The Money and Mental Health Policy Institute</span></em></p><p class="fine-print"><em><span>Wolf Ellis' research was funded by a collaborative doctoral studentship from the Economic & Social Research Council (ESRC) and Evidence for Development.</span></em></p><p class="fine-print"><em><span>Philip Brown does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Experts on poverty in Britain explain how destitution affects different groups of people and aspects of life.Philip Brown, Professor of Housing and Communities, University of HuddersfieldAlita Nandi, Senior Research Fellow, Institute for Social and Economic Research, University of EssexÖzlem Ögtem-Young, Research Fellow, Centre on Household Assets and Savings Management, University of BirminghamRicky Kanabar, Assistant Professor of Social Policy, University of BathWolf Ellis, PhD researcher, Department of Geography, King's College LondonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1762892022-03-24T14:11:49Z2022-03-24T14:11:49ZFour ways pensions still fail to support staff who are young, low paid and part time<figure><img src="https://images.theconversation.com/files/454132/original/file-20220324-13-2u2jms.jpg?ixlib=rb-1.1.0&rect=93%2C79%2C4712%2C3004&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://unsplash.com/photos/UZe35tk5UoA">Unsplash/Helena Lopes</a></span></figcaption></figure><p>Financial advisers often say it’s never too early to start thinking about your pension. And with good reason. As recently as ten years ago, less than half of all UK employees were <a href="https://www.gov.uk/government/statistics/workplace-pension-participation-and-savings-trends-2009-to-2020/workplace-pension-participation-and-savings-trends-of-eligible-employees-2009-to-2020">saving</a> into a workplace scheme, leaving many at risk of poverty in retirement. </p>
<p>Then in 2012, <a href="https://www.gov.uk/government/news/what-is-auto-enrolment">automatic enrolment</a> was introduced. This meant employers were obliged to enrol eligible employees (aged over 22 and earning more than £10,000 a year) into a pension plan, with contributions from both sides. </p>
<p>Since then, pension savings have boomed, with 78% of employees (19.4 million people) actively saving in 2020, up from <a href="https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/workplacepensions/bulletins/annualsurveyofhoursandearningspensiontables/2020provisionaland2019finalresults">47% in 2012</a>. </p>
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<img alt="Quarter life, a series by The Conversation" src="https://images.theconversation.com/files/451343/original/file-20220310-13-1bj6csd.png?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/451343/original/file-20220310-13-1bj6csd.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=600&fit=crop&dpr=1 600w, https://images.theconversation.com/files/451343/original/file-20220310-13-1bj6csd.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=600&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/451343/original/file-20220310-13-1bj6csd.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=600&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/451343/original/file-20220310-13-1bj6csd.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=754&fit=crop&dpr=1 754w, https://images.theconversation.com/files/451343/original/file-20220310-13-1bj6csd.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=754&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/451343/original/file-20220310-13-1bj6csd.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=754&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<p><em>Working to make a difference in the world but struggling to save for a home. Trying to live sustainably while dealing with mental health issues. For those of us in our twenties and thirties, these are the kinds of problems we deal with every day. <strong><a href="https://theconversation.com/uk/topics/quarter-life-117947?utm_source=TCUK&utm_medium=linkback&utm_campaign=UK+YP2022&utm_content=InArticleTop">This article is part of Quarter Life</a></strong>, a series that explores those issues and comes up with solutions.</em></p>
<p><em>More articles:</em></p>
<p><em><a href="https://theconversation.com/would-you-bring-your-dog-to-a-shop-why-retailers-should-be-more-pet-friendly-178112?utm_source=TCUK&utm_medium=linkback&utm_campaign=UK+YP2022&utm_content=InArticleTop">Would you bring your dog to a shop? Why retailers should be more pet-friendly</a></em></p>
<p><em><a href="https://theconversation.com/news-of-war-can-impact-your-mental-health-heres-how-to-cope-178734?utm_source=TCUK&utm_medium=linkback&utm_campaign=UK+YP2022&utm_content=InArticleTop">News of war can impact your mental health — here’s how to cope</a></em></p>
<p><em><a href="https://theconversation.com/body-image-issues-affect-close-to-40-of-men-but-many-dont-get-the-support-they-need-179046?utm_source=TCUK&utm_medium=linkback&utm_campaign=UK+YP2022&utm_content=InArticleTop">Body image issues affect close to 40% of men – but many don’t get the support they need</a></em></p>
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<p>But the vast majority of those new savers are still doing so at levels unlikely to provide an adequate income later in life. While income needs vary, <a href="https://www.gov.uk/government/publications/automatic-enrolment-review-2017-analytical-report">evidence suggests</a> that up to 12 million people are currently not saving enough for their retirement.</p>
<p>And because pension entitlements are accumulated through the workplace, they tend to mirror the continuing inequalities of the labour market. Here are four ways in which workplace pensions are not as fair as they could be.</p>
<h2>1. Earnings and status</h2>
<p>Many people are excluded from workplace pension saving because they do not meet the criteria for automatic enrolment. <a href="https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/workplacepensions/bulletins/annualsurveyofhoursandearningspensiontables/2020provisionaland2019finalresults">Recent data</a> found that in 2020, full-time employees earning between £100 to £199 a week had the lowest workplace pension coverage at 41%, compared with 65% of those earning £200 to £299 a week. </p>
<figure class="align-center ">
<img alt="Child placing coin into a piggy bank." src="https://images.theconversation.com/files/453833/original/file-20220323-17-1e93c6i.jpg?ixlib=rb-1.1.0&rect=86%2C57%2C6293%2C4112&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/453833/original/file-20220323-17-1e93c6i.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/453833/original/file-20220323-17-1e93c6i.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/453833/original/file-20220323-17-1e93c6i.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/453833/original/file-20220323-17-1e93c6i.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/453833/original/file-20220323-17-1e93c6i.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/453833/original/file-20220323-17-1e93c6i.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Never too young to save.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/kid-putting-coin-into-pink-piggy-2066780159">Shutterstock/fizkes</a></span>
</figcaption>
</figure>
<p>Overall, women, ethnic minority groups, people with disabilities, carers and service workers are less likely to have access to workplace pensions due to <a href="http://www.pensionspolicyinstitute.org.uk/uploaded/documents/Briefing%20Notes/201601-BN87-PhD1-Impact-of-Auto-Enrolment-as-at-2016-final.pdf">underemployment and low wages</a>.</p>
<p>Part-time employees were also disadvantaged compared to full-time workers, who were 1.5 times <a href="https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/workplacepensions/bulletins/annualsurveyofhoursandearningspensiontables/2020provisionaland2019finalresults">more likely</a> to be part of a pension scheme. People with multiple part-time, low-paid jobs are likely to miss out on access to workplace pensions, even if they earn more than the £10,000 threshold in total. </p>
<h2>2. Costly breaks</h2>
<p>For most workplace pension savers, retirement income depends on the level of contributions made, as well as the investment returns over the lifetime of the pension. Not making regular contributions forgoes not just the amount in the pot, but the cumulative investment gains. </p>
<p>This means any breaks from work will have a significant affect on pension pot size at retirement. Research has found that not participating in a pension between the ages of 30 and 40 can reduce that pot <a href="https://www.pensionspolicyinstitute.org.uk/media/2168/20120209-ppi-closing-the-gap-report-for-napf.pdf">by up to 32%</a>. </p>
<p>Women are particularly affected. Not only do they take breaks to have children, but also a lack of affordable childcare often reduces their opportunities to return to work, which affects their eligibility for automatic enrolment. In 2019, almost 30% of mothers said they had reduced their working hours because of childcare, compared with just <a href="https://www.ons.gov.uk/releases/uklabourmarketnovember2019">5% of fathers</a>. </p>
<p>Even where they are eligible for automatic enrolment, many women opt out because of high childcare costs. <a href="https://doi.org/10.1080/17530350.2021.1927146">My research</a> argues for better financial solutions that account for all experiences of employment and caring responsibilities.</p>
<h2>3. Regressive tax relief</h2>
<p>Workplace pension savers benefit from tax relief on contributions made by themselves and their employer. They also benefit from a tax-free lump sum of up to a quarter of their pension pot. These tax breaks are widely held to be an incentive to encourage people to save. </p>
<p>But these forms of tax relief are regressive, as those with higher salaries benefit to a greater extent. About half of all tax relief on workplace pensions goes to those in the top 10% of earners; a tenth of that relief goes to <a href="http://doi.org/10.1017/S147474642000010X">the bottom 50%</a> of earners. </p>
<figure class="align-center ">
<img alt="Green shoots growing from small sack of coins." src="https://images.theconversation.com/files/453843/original/file-20220323-19-16ez28p.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/453843/original/file-20220323-19-16ez28p.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/453843/original/file-20220323-19-16ez28p.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/453843/original/file-20220323-19-16ez28p.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/453843/original/file-20220323-19-16ez28p.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/453843/original/file-20220323-19-16ez28p.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/453843/original/file-20220323-19-16ez28p.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Unequal growth.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/coins-sack-small-plant-tree-pension-1451010170">Shutterstock/TimeShops</a></span>
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<p>The tax regime for workplace pensions is effectively subsidising retirement security for those who are already well off. Given that the cost of foregone tax on workplace pensions is estimated to be worth over <a href="https://www.gov.uk/government/statistics/registered-pension-schemes-cost-of-tax-relief">£20 billion</a>, the money could be better targeted to those who need it. </p>
<h2>4. Challenges for young people</h2>
<p>As automatic enrolment only applies to people aged 22 and over, many young people are excluded from workplace pension saving. In 2020, <a href="https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/workplacepensions/bulletins/annualsurveyofhoursandearningspensiontables/2020provisionaland2019finalresults">only 20%</a> of those aged 16-21 had a workplace pension compared with 80% among those aged 22-29. </p>
<p>Despite the positive effect of automatic enrolment on participation rates among the 22-29 age group, the lack of defined benefit coverage among younger groups means they need to save more or save for longer than older groups to provide for an adequate retirement. Up to 36% of younger groups are thought to be <a href="https://www.gov.uk/government/publications/automatic-enrolment-review-2017-analytical-report">under-saving</a> for their retirement needs. </p>
<p><a href="https://doi.org/10.1080/17530350.2021.1927146">My research</a> shows that many young people decide to opt out of pension saving – or save at minimum levels – to focus on other essential financial goals such as paying off debts and bills or saving to buy a house. </p>
<p>Only after achieving these goals do they feel ready to invest in pensions. Yet again, certain groups are more likely to get to this point, usually when they are able to rely on family support (financial or otherwise). And because they are able to think about pensions earlier, they are also more likely to achieve an adequate income in retirement – projecting present-day inequalities into the future.</p><img src="https://counter.theconversation.com/content/176289/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Hayley James has received research funding from the Economic and Social Research Council (ESRC), the UK's leading research and training agency addressing economic and social concerns (grant number ES/J500094/1) and the Pensions Policy Institute, an educational, independent research organisation with a charitable objective to inform the policy debate on pensions and retirement income provision. </span></em></p>Savings are up, but inequality remains rife.Hayley Louise James, Postdoctoral Research Fellow, University College DublinLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1704702021-12-26T20:27:49Z2021-12-26T20:27:49ZShould I pay off the mortgage ASAP or top up my superannuation? 4 questions to ask yourself<figure><img src="https://images.theconversation.com/files/430648/original/file-20211107-17-1ax4spl.jpg?ixlib=rb-1.1.0&rect=9%2C4%2C2994%2C1985&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>At a certain point in life, many wonder what’s better: to pay off the home loan ASAP or top up your superannuation?</p>
<p>If your emergency cash buffer looks OK and you have enough to cover you for around three to six months if you lost your job, the super versus mortgage question is a good one to ponder. There’s no one-size-fits-all answer.</p>
<p>On the face of it, there’s a compelling case for building up your super; you can take advantage of the <a href="https://moneysmart.gov.au/budgeting/compound-interest-calculator">magic of compound interest</a> (and, potentially, some <a href="https://moneysmart.gov.au/grow-your-super/super-contributions">tax breaks</a> as well) – all while interest rates on mortgages are low. </p>
<p>If you’re getting <a href="https://www.superannuation.asn.au/media/media-releases/2021/media-release-29-june-2021">8% compound interest on super</a> and paying only 3% on your mortgage, building up super might seem a good option. </p>
<p>But financial decisions are about psychology as well as numbers. Much depends on your debt comfort zone.</p>
<p>It’s best to seek professional assistance from a <a href="https://moneysmart.gov.au/managing-debt/financial-counselling">financial counsellor</a> or adviser. But here are some questions to consider along the way.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/why-your-ex-may-be-able-to-claim-half-your-superannuation-even-if-you-arent-married-169465">Why your ex may be able to claim half your superannuation, even if you aren't married</a>
</strong>
</em>
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<h2>1. Am I ‘on track’ to have enough super upon retirement?</h2>
<p>Use the government’s Moneysmart <a href="https://moneysmart.gov.au/retirement-income/retirement-planner">retirement planners</a> or your super fund’s calculator to check. </p>
<p>If it’s looking sparse – perhaps due to career breaks or part-time work – you might consider <a href="https://www.ato.gov.au/individuals/super/growing-your-super/adding-to-your-super/salary-sacrificing-super/">salary sacrificing</a> extra into your super (on top of what your employer already puts in there). </p>
<p>An additional A$50 a week, for example – even just for a few years – can help remedy your meagre super projections. </p>
<p>According to <a href="https://moneysmart.gov.au/grow-your-super/super-contributions">Moneysmart</a>:</p>
<blockquote>
<p>The payments, called concessional contributions, are taxed at 15%. For most people, this will be lower than their marginal tax rate. You benefit because you pay less tax while you boost your retirement savings […] The combined total of your employer and salary sacrificed concessional contributions must not be more than $27,500 per financial year.</p>
</blockquote>
<p>Try the <a href="https://www.industrysuper.com/understand-super/salary-sacrifice-calculator/">Industry Super</a> or <a href="https://moneysmart.gov.au/grow-your-super/super-contributions-optimiser">Moneysmart</a> calculators to see how much extra you’d have at retirement if you salary sacrificed into super for a few years. Consider seeking advice from your super fund on your super investment options and Age Pension entitlements.</p>
<p>You might also consider an after-tax <a href="https://www.ato.gov.au/individuals/super/growing-your-super/adding-to-your-super/personal-super-contributions/">personal super contribution</a> (that is, putting extra money from savings or from your take-home pay into super). The contributions may be <a href="https://www.ato.gov.au/individuals/super/in-detail/growing-your-super/claiming-deductions-for-personal-super-contributions/">tax deductible</a>, but even if not, the returns in super are tax friendly.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/430652/original/file-20211107-9872-q6fqib.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="A middle aged couple do financial planning together on a laptop." src="https://images.theconversation.com/files/430652/original/file-20211107-9872-q6fqib.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/430652/original/file-20211107-9872-q6fqib.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/430652/original/file-20211107-9872-q6fqib.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/430652/original/file-20211107-9872-q6fqib.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/430652/original/file-20211107-9872-q6fqib.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/430652/original/file-20211107-9872-q6fqib.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/430652/original/file-20211107-9872-q6fqib.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Are you ‘on track’ to have enough super upon retirement? Use online calculators to find out.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
</figcaption>
</figure>
<h2>2. What about the pension?</h2>
<p>Are you expecting a full Age Pension? To find out if you’re likely to qualify for one, use an <a href="https://www.superguide.com.au/in-retirement/age-pension-calculator">online calculator</a> or ask your super fund. People with “too much super” don’t get the pension (although most retirees get some part pension). For some, the more you put into super, the <a href="https://grattan.edu.au/wp-content/uploads/2020/03/Grattan-Institute-sub-balancing-act-retirement-income-review.pdf">less you get in Age Pension payments</a>. </p>
<p>For single homeowners, the total asset threshold for a full Age Pension is $270,500 (including super but excluding your main residence), while the part-Age Pension threshold is $593,000. For couple homeowners, the combined total asset threshold for a part-Age Pension is $891,500 (also including super but excluding the main residence).</p>
<p>If you’re on a median income and your super balance is predicted to land between the lower and upper asset thresholds for the pension, <a href="https://grattan.edu.au/wp-content/uploads/2020/03/Grattan-Institute-sub-balancing-act-retirement-income-review.pdf">some models predict</a> that for every extra $1,000 put into super at age 40, you would only be around $25 per year better off in terms of retirement income (due to the tapering off in eligible Age Pension income). </p>
<p>For people on low incomes, extra super contributions may not be the answer at all if the result is more financial stress during your working life and immediate housing security risk. </p>
<h2>3. If I retired with a mortgage, could I cope?</h2>
<p>Many people end up retiring earlier than planned, due to health or other issues.</p>
<p>If you were still paying off your mortgage at retirement, would you feel comfortable about that? Or would it be a source of worry?</p>
<p>Traditionally, most people enter retirement having paid off their home loan but now <a href="https://theconversation.com/more-people-are-retiring-with-high-mortgage-debts-the-implications-are-huge-115134">more are approaching retirement</a> with some mortgage remaining. It might not be the end of the world if you had $100,000 left on the mortgage when you stop working. After all, most people can draw out <a href="https://moneysmart.gov.au/retirement-income/super-lump-sum">some (or if over 60 potentially all) of their super</a> tax free at retirement to pay off mortgage debt. Doing so carries risks but for some people it could even increase their Age Pension entitlement (as your primary residence is exempt from pension assets tests while super is not). </p>
<p>The wealth accumulation in superannuation is going to outpace the interest on a mortgage in most cases for some time, even after you retire. Even so, you might feel it’s worth making the last vestiges of your debt go away in retirement so you can stop worrying about it.</p>
<figure class="align-center ">
<img alt="An older same sex couple laugh together in the garden." src="https://images.theconversation.com/files/430653/original/file-20211107-10121-1tkhmjc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/430653/original/file-20211107-10121-1tkhmjc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=401&fit=crop&dpr=1 600w, https://images.theconversation.com/files/430653/original/file-20211107-10121-1tkhmjc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=401&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/430653/original/file-20211107-10121-1tkhmjc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=401&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/430653/original/file-20211107-10121-1tkhmjc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/430653/original/file-20211107-10121-1tkhmjc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/430653/original/file-20211107-10121-1tkhmjc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">If you and your partner retired with a mortgage debt, would you feel OK about that or would it be a source of worry?</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
</figcaption>
</figure>
<h2>4. Will the choices I make today cost me later – and am I OK with that?</h2>
<p>Australian property values have skyrocketed and many have borrowed more to pay for renovations. The full “cost” of a renovation may not be apparent at first. </p>
<p>The true cost of a $150,000 renovation over the next 20 years could be more like $700,000. How? Well, if that $150,000 was put into a balanced allocation in super for a couple of decades, it would likely grow to be about $700,000. That’s compound interest for you. You’d hope to get that in capital gains from the renovation.</p>
<p>But it’s never just about the finances. The extra mortgage might be worth it because it paid for a home that brings comfort and joy (as well as the capital gains).</p>
<p>Likewise, paying off your mortgage ASAP might mean forgoing the extra you’d get if you’d put it in super. But for some, wiping out a mortgage will be worth it to be debt-free. Perhaps after the mortgage is gone, you can maximise salary sacrificing into super until retirement, while also reducing your tax bill. </p>
<h2>At least do the sums</h2>
<p>There’s always more than one solution. To know what’s right for you, you’ll need to get advice for your personal circumstances. </p>
<p>But it’s good to look at where your super is now and where it’s heading, and <a href="https://www.canstar.com.au/home-loans/debt-income-ratio/">calculate your debt-to-income ratio</a> (debt divided by income). It’s often used to guage how serious (or not) your debt is. Lenders and regulators might consider a debt-to-income ratio over <a href="https://www.apra.gov.au/sites/default/files/2021-09/Quarterly%20authorised%20deposit-taking%20institution%20property%20exposure%20statistics%20-%20Highlights%20June%202021.pdf">six times your income to be “high”</a>, but your personal debt comfort zone might be much lower. </p>
<p>Emotions play a bigger part in financial planning than many like to admit. Desire to pay off a mortgage quickly can be influenced by how you were raised, feelings of anxiety and stigma that often come with debt, and Australia’s cultural bias toward debt-free home ownership.</p>
<p>Depending on circumstances though, it may be time to rethink the bias to paying down housing debt over wealth accumulation in super. At least do the sums, so you can make an informed choice.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/my-super-fund-just-failed-the-apra-performance-test-whats-next-166956">My super fund just failed the APRA performance test. What's next?</a>
</strong>
</em>
</p>
<hr>
<p><em>Correction: an earlier version of this article included a specific amount that can be withdrawn from superannuation at retirement, however this changes depending on retirement age so it was removed.</em></p><img src="https://counter.theconversation.com/content/170470/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Di Johnson has received research funding in the past from the Financial Planning Education Council (FPEC), and contributed to projects partly funded or supported by financial planning industry partners. She is a Fellow of the Higher Education Academy, an academic member of the Financial Planning Association (FPA), a member of FPEC (Australia), the US Academy of Financial Services (AFS), and the Economics Society of Australia (ESA) including the Women in Economics Network (WEN). This story is part of a series on financial and economic literacy funded by Ecstra Foundation.</span></em></p>Depending on circumstances, it may be time to re-think the bias to paying down housing debt over wealth accumulation in super. At least to do the sums, so you can make an informed choice.Di Johnson, Lecturer in Finance, Griffith UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1689662021-10-05T15:46:13Z2021-10-05T15:46:13ZClimate change: convincing people to pay to tackle it is hard – treating it like a pension could help<figure><img src="https://images.theconversation.com/files/424013/original/file-20210930-22-1f666vj.jpg?ixlib=rb-1.1.0&rect=44%2C7%2C4876%2C3245&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/green-trees-on-dry-land-tall-401694145">Shutterstock/24Novembers</a></span></figcaption></figure><p>Energy prices across the world have <a href="https://theconversation.com/electricity-prices-have-reached-record-highs-and-the-time-poor-could-suffer-most-163610">soared in recent weeks</a>, hitting households and businesses hard. Combined with the costs of dealing with the pandemic, this may make political leaders think twice about making the case for expensive environmental policies that could further raise taxes or bills at next month’s <a href="https://theconversation.com/climate-fight-the-worlds-biggest-negotiation-introducing-a-new-podcast-series-168801">COP26 global climate summit</a>. </p>
<hr>
<iframe id="noa-web-audio-player" style="border: none" src="https://embed-player.newsoveraudio.com/v4?key=x84olp&id=https://theconversation.com/climate-change-convincing-people-to-pay-to-tackle-it-is-hard-treating-it-like-a-pension-could-help-168966&bgColor=F5F5F5&color=D8352A&playColor=D8352A" width="100%" height="110px"></iframe>
<p><em>You can listen to more articles from The Conversation, narrated by Noa, <a href="https://theconversation.com/uk/topics/audio-narrated-99682">here</a>.</em></p>
<hr>
<p>But one way or another, climate change will eventually have to be paid for. Put simply, we can pay now by replacing our cars and gas boilers with greener alternatives; or we can pay later, by funding the replacement of flooded infrastructure and dealing with natural disasters. </p>
<p>It’s a bit like saving for retirement. An employee knows that sooner or later they will have to pay to support themselves when they are no longer working. They can choose to pay that price sooner, by putting aside money for a pension or they can pay later, with a reduction in living standards when they stop working. </p>
<p>For both climate change and retirement, the less costly option is to pay now. With retirement, interest on savings generates its own interest, with larger <a href="https://onlinelibrary.wiley.com/doi/full/10.1111/ecin.12792?casa_token=Nm7qh0XoQ0AAAAAA%3Ay0IxRvCCg2vU3o_2Zy4u-TExCZqqN4NtroOOpUQQtOklBGUByYarRhhbZRm7TygVN1AXMyPktvGdYCs">financial benefits than many people anticipate</a>. For the climate, allowing damage to continue <a href="https://www.climatecentral.org/news/report-climate-pile-up-global-warmings-compounding-dangers">makes the problem worse</a>. </p>
<p>Yet despite this, people generally <a href="https://www.sciencedirect.com/science/article/pii/S0047272702000415?casa_token=BrC54k5ffu8AAAAA:j5ALA-kySMiJLnJi3OWnP4O39drlKCIoASDwgLctOSHKzi9lfhstHrQ_eMqd40vZsQKEj_Rw1d0">under-save for retirement</a> and households under-invest in reducing energy consumption. For instance, they often end up <a href="https://pubs.aeaweb.org/doi/pdfplus/10.1257/jel.20161360">spending more on powering inefficient appliances</a> than it would cost to replace those machines with newer, more efficient models. </p>
<p>Behavioural economists have made numerous contributions to understanding why people seem <a href="https://ojs.victoria.ac.nz/pq/article/view/5153">unwilling to save adequately for retirement</a>. And some of their insights can helpfully be applied to climate change mitigation. </p>
<p>One famous example is a pensions <a href="https://www.journals.uchicago.edu/doi/full/10.1086/380085?casa_token=FhSSxeEryOoAAAAA%3Awn47jhpiib66-7TeDmNz2axJoxZ7fed4K1OG_zPB7VXv8mAfPCCBc_rt4gMF3VUPOUssjiUMiTmr">saving scheme</a> designed by the economists Shlomo Benartzi and Richard Thaler, which takes into account two commonly held attitudes: “loss aversion” and “present bias”.</p>
<p><a href="https://journals.sagepub.com/doi/abs/10.1177/0956797613496436">Loss aversion</a> refers to the fact that people tend to feel the pain of loss more acutely than they feel equivalent gains. For example, they are more upset by losing a £50 note than they are pleased to have found one. </p>
<p><a href="https://www.aeaweb.org/articles?id=10.1257/aer.p20151085">Present bias</a> refers to the observation that people can be far less patient about immediate delays than they are about delays of the same duration that will postpone future events. To see if you are present biased, ask yourself the following questions: would you choose £10 today or £11 next week? And would you choose £10 in 52 weeks or £11 in 53 weeks?</p>
<p>If you chose £10 today and also chose £11 in 53 weeks then you are present-biased. You are more impatient about the here and now than you are about the future. </p>
<p>Benartzi and Thaler recognised that people who display loss aversion and present bias would probably resent shelling out for a pension. The benefits feel far off and vague, while the pain of payment feels immediate, so saving for a pension feels like a bad deal. Since loss aversion and present bias are <a href="https://www.sciencedirect.com/science/article/pii/S0378426617302777?casa_token=IvFRLg65EB0AAAAA:W9ER4BHMxdy1WWWWO6zIyQD_OYMxbriqKhGShhIJ3cwcVIvkmN4Zj6OtuBsCXUZe4IvvQxhqdiI">widespread</a>, under-saving is the norm.</p>
<h2>Saving (for) the future</h2>
<p>With climate change, there may be a similar lack of motivation. Though the costs of climate change mitigation are experienced here and now, the benefits can seem distant and uncertain. </p>
<figure class="align-center ">
<img alt="A clock and coins." src="https://images.theconversation.com/files/424032/original/file-20210930-26-1qxom58.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/424032/original/file-20210930-26-1qxom58.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=401&fit=crop&dpr=1 600w, https://images.theconversation.com/files/424032/original/file-20210930-26-1qxom58.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=401&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/424032/original/file-20210930-26-1qxom58.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=401&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/424032/original/file-20210930-26-1qxom58.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/424032/original/file-20210930-26-1qxom58.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/424032/original/file-20210930-26-1qxom58.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Time is money.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/time-money-value-concept-coins-vintage-709230724">Shutterstock/William Potter</a></span>
</figcaption>
</figure>
<p>To overcome the bias against pension saving induced by loss aversion and present bias, Thaler and Benartzi created a plan called “<a href="http://www.shlomobenartzi.com/save-more-tomorrow">Save More Tomorrow</a>”. The idea was for people to commit to paying into their pension when they next received a pay rise. </p>
<p>With each subsequent pay rise, the proportion of income allocated to pension saving would increase. By paying for pension investment out of future pay increases, the scheme means people can accumulate pension wealth without having to sacrifice their current lifestyle.</p>
<p>Again, there is an analogy with climate change policy and current costs. Now that energy prices are unprecedentedly high, we can commit to paying the costs of mitigating climate change as soon as wholesale energy prices fall. </p>
<p>Governments could make clear that the current energy prices are not a temporary blip, but are in fact the new normal. In this model, consumers would still have to pay the current high prices even when wholesale prices fall. The difference between wholesale price and the price consumers pay would be a carbon tax. </p>
<p>This would not necessarily be easy or popular, but could also bring several benefits. For example, the certainty that carbon-intensive energy will be expensive for consumers will make energy-intensive products less attractive. That will encourage firms to develop the sort of greener technologies that consumers will demand. </p>
<p>Consumers would be more likely to ditch wasteful habits and instead adopt more efficient lifestyles. Governments could use the tax revenues to support less well off households make changes to reduce their energy consumption.</p>
<p>A further advantage of linking carbon taxes to high wholesale energy prices is that it gets around an obstacle to government action. No government wants to make its voters feel like they are the only ones paying to deal with a global threat. But because energy prices are now high worldwide, this is a rare opportunity for global coordination.</p>
<p>The “Save More Tomorrow” scheme proved enormously successful when it was trialled in firms in the US. At the outset of the program, participants had been saving 3.5% of their income towards retirement. After 40 months, on average they were saving <a href="https://asset-pdf.scinapse.io/prod/2108946685/2108946685.pdf">13.6%</a>. </p>
<p>If the system worked for investing in pensions, it could work for investing in the environment. Save More Tomorrow started out as a plan to help workers – now is the perfect time to apply the same theory to secure the future of the planet.</p><img src="https://counter.theconversation.com/content/168966/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>David Comerford receives funding from UKRI for research on Covid-19. </span></em></p>Saving for the future is an expense we have to budget for.David Comerford, Senior Lecturer of Economics and Behavioural Science, University of StirlingLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1606482021-05-11T12:57:00Z2021-05-11T12:57:00ZGender pension gap: why women save less - and why that’s changing dramatically<figure><img src="https://images.theconversation.com/files/400011/original/file-20210511-15-zfd0uc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Gaps, gaps and more gaps.</span> <span class="attribution"><a class="source" href="https://unsplash.com/photos/Hdb68dyMGo8">a befendo</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span></figcaption></figure><p>One issue <a href="https://www.scottishwidows.co.uk/knowledge-centre/gender-pension-gap/">that has</a> attracted <a href="https://prospect.org.uk/article/what-is-the-gender-pension-gap/#:%7E:text=The%20gender%20pension%20gap%20is,gap%20that%20year%20(17.3%25).">growing attention</a> in <a href="https://www.aviva.co.uk/aviva-edit/your-money-articles/women-know-gender-pension-gap/">recent years</a> is the “gender pension gap” – the fact that on average, women have lower private pension wealth and lower income in retirement than men. But before rushing to conclusions about how to “fix” this, it is crucial to understand what lies behind any pension differences between men and women. </p>
<p>There are three main potential drivers behind this phenomenon:</p>
<ol>
<li><p>Different labour market experiences: the “<a href="https://www.ifs.org.uk/publications/10358">gender pay gap</a>”, and the fact that <a href="https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Duration_of_working_life_-_statistics#:%7E:text=In%202019%2C%20the%20estimated%20expected,aged%2015%20years%20and%20more">men have</a> longer paid working lives than women;</p></li>
<li><p>Different investment strategies: when it comes to <a href="https://www.gov.uk/pension-types">defined contribution pensions</a>, <a href="https://s-h-w.com/news-articles">men choose</a> to invest in portfolios with a higher expected rate of return.</p></li>
<li><p>Different saving rates: as <a href="https://www.ifs.org.uk/publications/15425">we investigate</a> below, men and women may also differ in how likely they are to be offered a pension in their job, or tend to work for employers that contribute more or less to a pension, or tend to make different contributions themselves.</p></li>
</ol>
<p>Importantly, the role of these potential drivers will have changed over time for various reasons. Mothers <a href="https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/articles/familiesandthelabourmarketengland/2019#:%7E:text=In%20April%20to%20June%202019%2C%20three%20in%20four%20mothers%20with,mothers%20in%20employment%20in%202000.">have increasingly participated</a> in the labour market over the years, for example. Final salary pensions have been reformed to career average schemes, which in particular reduced the generosity for long stayers and those with stronger pay growth, <a href="https://www.pensionspolicyinstitute.org.uk/sponsor-research/research-reports/2013/17-05-2013-the-implications-of-the-coalition-governments-public-service-pension-reforms/">affecting men</a> more than women. Also, <a href="https://www.pensionsadvisoryservice.org.uk/about-pensions/pensions-basics/automatic-enrolment">automatic enrolment</a> has been introduced for workplace pensions, which affected everyone’s participation in them. </p>
<p>Gaps in pension income today may therefore reflect labour markets and pension arrangements from many years ago, and the gap in pension income for current working-age individuals may be quite different when they reach retirement. In an ongoing programme of work at the Institute for Fiscal Studies, funded by the <a href="https://www.nuffieldfoundation.org/">Nuffield Foundation</a>, we are examining in detail differences in pension saving rates between men and women that will contribute to a future “gender pension gap” for today’s working age individuals. </p>
<h2>Making sense of the gap</h2>
<p>In a <a href="https://www.ifs.org.uk/publications/15421">first publication</a>, we have documented differences in average pension saving between male and female employees before the introduction of <a href="https://www.pensionsadvisoryservice.org.uk/about-pensions/pensions-basics/automatic-enrolment">automatic enrolment</a> in 2012. We found that on average across all employees (whether saving in a pension or not), women of all ages actually contributed more as a proportion of their earnings each year than men. </p>
<p>However, this was driven by the fact that women were more likely to work in the public sector, where contribution rates are typically higher. Examining average pension saving among men and women within each sector reveals a different pattern. The average saving rates of male and female employees were similar until around age 35 but then diverged, with average contributions continuing to increase with age for men but not changing for women. </p>
<p>The graphs below unpick what was driving this pattern among private-sector employees in Great Britain (though the pattern was broadly similar for public-sector employees). It was caused by the extent to which men and women participated in a pension. </p>
<p>The proportion of men and women saving anything in a private pension was similar until around age 30 but then diverged, with men increasingly likely to be saving in a pension as they get older, while women’s pension participation plateaued. On the other hand, average contribution rates for those saving in a pension were actually slightly higher as a share of earnings among women than men. </p>
<p><strong>Pension participation in overall savings</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/399796/original/file-20210510-5687-3wwi5s.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Graph showing more men than women have workplace pensions after age 30 (explained above)" src="https://images.theconversation.com/files/399796/original/file-20210510-5687-3wwi5s.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/399796/original/file-20210510-5687-3wwi5s.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=491&fit=crop&dpr=1 600w, https://images.theconversation.com/files/399796/original/file-20210510-5687-3wwi5s.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=491&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/399796/original/file-20210510-5687-3wwi5s.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=491&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/399796/original/file-20210510-5687-3wwi5s.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=617&fit=crop&dpr=1 754w, https://images.theconversation.com/files/399796/original/file-20210510-5687-3wwi5s.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=617&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/399796/original/file-20210510-5687-3wwi5s.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=617&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Estimated age profiles for private-sector employees using data from the Annual Survey of Hours and Earnings, controlling for differences in saving by year and between generations; x-axis = age.</span>
<span class="attribution"><span class="source">IFS</span></span>
</figcaption>
</figure>
<p><strong>Average contribution rates in pension savings</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/399795/original/file-20210510-13-ui7nr2.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Graph showing women contribute slightly more to pensions throughout their lives (explained above)" src="https://images.theconversation.com/files/399795/original/file-20210510-13-ui7nr2.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/399795/original/file-20210510-13-ui7nr2.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=453&fit=crop&dpr=1 600w, https://images.theconversation.com/files/399795/original/file-20210510-13-ui7nr2.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=453&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/399795/original/file-20210510-13-ui7nr2.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=453&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/399795/original/file-20210510-13-ui7nr2.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=569&fit=crop&dpr=1 754w, https://images.theconversation.com/files/399795/original/file-20210510-13-ui7nr2.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=569&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/399795/original/file-20210510-13-ui7nr2.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=569&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Estimated age profiles for private-sector employees using data from the Annual Survey of Hours and Earnings, controlling for differences in saving by year and between generations; x-axis = age.</span>
<span class="attribution"><span class="source">IFS</span></span>
</figcaption>
</figure>
<p>What might have been driving differences in pension participation? The timing of the divergence in people’s lives mirrored the evolution of the gender gaps <a href="https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/bulletins/genderpaygapintheuk/2020">in pay</a>, <a href="https://www.ifs.org.uk/publications/13673">commuting</a> and <a href="https://www.ifs.org.uk/publications/14032">firm productivity</a>, and suggested that the arrival of children and related employment decisions was an important factor. </p>
<p>So in our ongoing programme of research we are examining whether the gap in pension participation is associated with the arrival of children, and the extent to which female employees received a different pension offer from their employer, or made different saving decisions when presented with the same offer as male employees. </p>
<h2>Effect of automatic enrolment</h2>
<p>The introduction of automatic enrolment into workplace pensions has substantially changed pension-saving behaviour – in particular, substantially increasing pension participation among employees targeted by the policy. The graph below shows the proportion of male and female employees of different ages who were saving in a private workplace pension in 2012 and 2019 in Great Britain. </p>
<p>The pattern in 2012 is represented by the two sets of dashed lines, with men again in blue and women in purple. It is similar to that estimated in the first graph in this article. </p>
<p>But the pattern in 2019 is totally different. Rather than participation diverging at a particular age, women are now slightly less likely to be in a pension at all ages than men (but the level of participation among both is considerably higher). Automatic enrolment will therefore have fundamentally changed the nature of the gender gap in pension-saving rates going forwards. </p>
<p><strong>Pension participation 2019 vs 2012</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/399953/original/file-20210511-20-vke54l.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Graph showing pension participation has increased and the gender gap narrowed following automatic enrolment (explained above)." src="https://images.theconversation.com/files/399953/original/file-20210511-20-vke54l.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/399953/original/file-20210511-20-vke54l.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=373&fit=crop&dpr=1 600w, https://images.theconversation.com/files/399953/original/file-20210511-20-vke54l.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=373&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/399953/original/file-20210511-20-vke54l.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=373&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/399953/original/file-20210511-20-vke54l.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=468&fit=crop&dpr=1 754w, https://images.theconversation.com/files/399953/original/file-20210511-20-vke54l.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=468&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/399953/original/file-20210511-20-vke54l.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=468&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Authors’ calculations using Annual Survey of Hours and Earnings, 2012 and 2019.</span>
<span class="attribution"><span class="source">IFS</span></span>
</figcaption>
</figure>
<p>This highlights the importance of examining gender differences in saving rates, rather than just accrued pension wealth or pension income. Focusing on the latter risks developing policies to fix a perceived problem that has already changed.</p><img src="https://counter.theconversation.com/content/160648/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Laurence O'Brien is writing as part of an ongoing programme of research on ‘Pension Saving over the Lifecycle’ that is funded by the Nuffield Foundation. The views expressed are those of the authors and not necessarily the foundation. This work was produced using statistical data from the Annual Survey of Hours and Earnings, provided by ONS. The use of the ONS statistical data in this work does not imply the endorsement of the ONS in relation to the interpretation or analysis of the statistical data.
</span></em></p><p class="fine-print"><em><span>Rowena Crawford is writing as part of an ongoing programme of research on ‘Pension Saving over the Lifecycle’ that is funded by the Nuffield Foundation. The views expressed are those of the authors and not necessarily the foundation. This work was produced using statistical data from the Annual Survey of Hours and Earnings, provided by ONS. The use of the ONS statistical data in this work does not imply the endorsement of the ONS in relation to the interpretation or analysis of the statistical data.</span></em></p>Men save more for retirement than women, but it has been changing over time.Laurence O'Brien, Research Economist, Institute for Fiscal StudiesRowena Crawford, Senior research economist, Institute for Fiscal StudiesLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1508752020-11-25T14:59:29Z2020-11-25T14:59:29ZSpending Review 2020: the experts react<p>“The health emergency is not yet over, and the economic emergency has only just begun.” With a global pandemic for a backdrop, Chancellor Rishi Sunak has announced a short-term spending review for the year 2021. With a freeze on public sector pay, an economy declining more than it has in 300 years and no mention of Brexit, experts from across the country share their reactions. </p>
<hr>
<h2>Economy</h2>
<p><strong>Drew Woodhouse, Senior Lecturer in Economics, Sheffield Hallam University</strong></p>
<p>Rishi Sunak <a href="https://www.gov.uk/government/news/spending-review-to-fight-virus-deliver-promises-and-invest-in-uks-recovery">announced</a> £280 billion in his spending review to be spread across several sectors, with little mention of Brexit or the climate crisis. This included £18 billion for COVID-19, £250 million for rough sleepers, £2 billion for transport and £3 billion to local councils.</p>
<p>This came in the context of the <a href="http://cdn.obr.uk/CCS1020397650-001_OBR-November2020-EFO-v2-Web-accessible.pdf">highest levels</a> of borrowing “in peacetime”. What was most stark was that the government cut more channels to growth than it did create them. This spending review focused on short-term government spending policy “plasters”, with considerations of longer-term sustainability measures. </p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1331581105208750087"}"></div></p>
<p>The most important question in the review was how bad economic forecasts are looking. Economic output is expected to contract by 11.3% this year - the worst result for <a href="http://cdn.obr.uk/CCS1020397650-001_OBR-November2020-EFO-v2-Web-accessible.pdf">300 years</a>. With no expectations to match our pre-crisis trend level until late 2022 and the “<a href="https://obr.uk/box/the-equilibrium-unemployment-rate/">natural level of unemployment</a>” not being met until 2024, this is indeed dire. </p>
<p>There was an undertone in the chancellor’s comments that, to improve the economy’s health, his response should target real growth through indirectly supporting the productive “supply” <a href="https://www.bakermckenzie.com/en/newsroom/2020/10/outlook-for-trade-after-brexit">capacity</a> of the economy – the amount businesses and workers can produce. There was also a formal acceptance that deeply ingrained structural issues, that have gripped the UK for years, should also be at the forefront of a “reform” effort. </p>
<p>At the heart of the crisis is the <a href="https://www.icaew.com/technical/economy/economic-insight/coronavirus-uk-economic-outlook-differences-across-regions">uneven</a> effect it has on regions and communities. So introducing a levelling up fund and <a href="https://www.nationalhealthexecutive.com/articles/spending-review-infrastructure-bank-nhs">an infrastructural bank</a> based in the north of England is a welcome approach.</p>
<p>Then there was contradiction on wages. He announced measures to protect wages of those who earn lower incomes, citing that this could fuel some “marginal” growth, whilst also accepting that this recession has been far worse for low-paid workers than anyone else. Yet by freezing public sector wages (except for NHS nurses and doctors), Sunak restricted a source of economic stimulus at the time we need it most. </p>
<p>Private sector wages <a href="https://www.niesr.ac.uk/publications/dynamics-public-and-private-sector-wages-pay-settlements-and-employment">decline quicker</a> and do not pick up the demand slack, while public sector wages can act as an “automatic stabiliser” in a downturn because they typically <a href="https://www.niesr.ac.uk/publications/dynamics-public-and-private-sector-wages-pay-settlements-and-employment">grow more quickly during recessions</a>. The freeze will also have a worse affect on regions with a <a href="https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/publicsectorpersonnel/bulletins/publicsectoremployment/march2019">higher proportion</a> of public sector jobs, which are the same regions already <a href="https://www.ifs.org.uk/inequality/the-geography-of-the-covid-19-crisis-in-england/">worst affected</a> by the crisis.</p>
<p>While effective economic support is vital, it must be part of a wider plan to get the economy going again, restarting growth and supporting job creation. </p>
<hr>
<h2>Jobs</h2>
<p><strong>Ernestine Gheyoh Ndzi, Senior Lecturer, York Business School, York St John University</strong></p>
<p>Early on in his speech, the chancellor stated that, despite the pandemic, the UK still has one of the lowest unemployment rates in Europe. But this statement is highly misleading as, in the UK, people in precarious and insecure work – such as those on zero-hours contracts – are considered employed. Indeed, these types of <a href="https://theconversation.com/zero-hours-contracts-have-a-devastating-impact-on-career-progression-labour-is-right-to-ban-them-123066">contracts can have</a> a hugely devastating impact on people’s lives – yet a ban on them has been ignored by the government.</p>
<p>But the headline statement of the day was the pay freeze for all public sector workers – apart from nurses and doctors in the NHS. The chancellor talked of restraining public sector pay levels to retain consistency with the private sector. Yet compared to the private sector, public sector pay has <a href="https://www.ifs.org.uk/uploads/BN263-public-sector-pay-and-employment1.pdf">fallen drastically in the past decades</a>. </p>
<p>Employees in the public sector, especially frontline services, have worked incredibly hard throughout this pandemic. And a pay freeze would likely affect <a href="https://www.iaeme.com/MasterAdmin/uploadfolder/IJMHRM_08_04_005/IJMHRM_08_04_005.pdf">worker morale and performance</a>. </p>
<p>The pay freeze will be interpreted as a lack of recognition and appreciation for the work public sector employees are doing. There is also the risk that this will affect <a href="https://theconversation.com/emergency-service-workers-are-already-at-high-risk-of-burnout-coronavirus-will-make-this-worse-136006">frontline staff’s mental health</a> – which has already been impacted during the pandemic. </p>
<p>The government needs well motivated workers to rebuild the economy that has been hit hard by COVID-19. But this will not be achieved by damaging the morale of workers. </p>
<p>There’s also the fact that the public sector has, for some years, been struggling to recruit and retain staff in areas like the NHS and teaching, and this pay freeze will most likely exacerbate difficulties with <a href="http://www.smith-institute.org.uk/wp-content/uploads/2016/02/From-pay-squeeze-to-a-staffing-crisis.pdf">recruitment and retention of workers</a>. </p>
<p>In this sense, it seems the government still hasn’t learnt its lesson from the impact of the <a href="https://www.epsu.org/sites/default/files/article/files/Impact_of_cuts_final_report.pdf">two-year pay freeze</a> imposed across the public sectors in 2010, that resulted in increased gender inequality and widened the gender pay gap. With the UK economy in its steepest decline for centuries, while a pay freeze may seem like a good solution, it’s likely to create more problems in the long run.</p>
<hr>
<h2>Personal finance and pensions</h2>
<p><strong>Jonquil Lowe, Senior Lecturer in Economics and Personal Finance, The Open University</strong></p>
<p>Income is the key driver of personal finances. The chancellor has announced an income freeze for all public sector workers apart from NHS doctors and nurses and a small flat-rate increase of £250 for those earning less than £24,000 a year. </p>
<p>The lowest earners who are on the national living wage or minimum wage will also see an increase in their hourly rate from April of 19p to £8.91 an hour. But this still trails behind the <a href="https://www.livingwage.org.uk/what-real-living-wage">“real” living wage</a> that people are estimated to need to meet their living costs of £9.50 an hour (£10.85 in London).</p>
<p>The income tax personal allowance and national insurance thresholds and bands are being increased from April in line with inflation (0.5%). This will give most benefit to people on modest earnings.</p>
<p>The government has also confirmed that changes to the <a href="https://www.ons.gov.uk/search?q=retail%20price%20index">retail prices index</a> (RPI), a commonly used measure of inflation, will go ahead – though not until 2030. This will see the formula for calculating RPI brought into line with the more commonly used <a href="https://www.ons.gov.uk/economy/inflationandpriceindices">consumer price index</a> (CPI) that typically records inflation rates around 1% a year lower than RPI. The retired, in particular, will be affected, if they have private pensions and annuities that are “increased” each year in line with the RPI. </p>
<figure class="align-center ">
<img alt="Row of terraced brick houses." src="https://images.theconversation.com/files/371353/original/file-20201125-23-y9e4y4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/371353/original/file-20201125-23-y9e4y4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/371353/original/file-20201125-23-y9e4y4.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/371353/original/file-20201125-23-y9e4y4.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/371353/original/file-20201125-23-y9e4y4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/371353/original/file-20201125-23-y9e4y4.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/371353/original/file-20201125-23-y9e4y4.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Consumers will be enouraged to decarbonise their homes.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/english-row-terraced-house-spring-season-601569743">Pompaem_Gogh/Shutterstock</a></span>
</figcaption>
</figure>
<p>On the spending side of household budgets, the spending review confirmed funding for the government’s <a href="https://www.gov.uk/government/publications/the-ten-point-plan-for-a-green-industrial-revolution">ten point plan</a> for green recovery <a href="https://theconversation.com/the-uk-has-bold-plans-to-reach-net-zero-emissions-but-it-must-go-beyond-just-turning-off-the-co-taps-150399">recently announced</a> by the prime minister. In addition to the big push towards electric vehicles, this includes encouraging homes – whose heating and cooking account for around a <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/875485/2019_UK_greenhouse_gas_emissions_provisional_figures_statistical_release.pdf">fifth of the UK’s carbon dioxide emissions</a> – to give up their gas boilers in favour of ground and air-heat pumps. But it seems likely that, even with the current <a href="https://www.gov.uk/guidance/apply-for-the-green-homes-grant-scheme">Green Homes Grant</a>, most households will eventually find they need to invest heavily in “greening” their home heating system – though running costs thereafter may be lower.</p>
<p>Overall, personal finances are likely to come under pressure over the next few years as the government starts to bring its finances back to more sustainable levels. But at last it seems this government is taking the need to tackle climate change seriously, which is important as the green industrial revolution holds the promise of jobs and incomes to replace those lost in the pandemic.</p>
<hr>
<h2>Infrastructure and levelling up</h2>
<p><strong>Anupam Nanda, professor of urban economics and real estate, University of Manchester</strong></p>
<p>Infrastructure is key for unlocking economic opportunities and supporting prosperity. Infrastructure investments tend to have very long-term implications for the economy and society. Today’s announcements have put emphasis on using infrastructure spending to support and accelerate economic recovery from the pandemic. </p>
<p>Sunak has tried to address concerns of funding inequality across and within regions with the creation of a £4 billion “Levelling Up Fund”. Local areas can bid directly for support for projects from this fund. </p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1331585229522415623"}"></div></p>
<p>Using national and regional infrastructure investments to close the regional inequality gap is welcome, as areas such as the north of England continue to suffer heavily from the ongoing pandemic. However, whether this is enough remains to be seen and will depend on how the fund is administered. </p>
<p>The creation of a new infrastructure bank – to be headquartered in the north of England – is good news. This will replace the UK’s involvement with the European Investment Bank and, by encouraging private sector involvement in infrastructure projects, will lead to more streamlined investment. </p>
<p>The spending review also placed emphasis on green and digital infrastructure and renewable energy use. This is very much needed.</p>
<p>Much will depend on the choices and types of specific infrastructure projects, as well as the mixture of national, regional and local investment. The success of these projects will rely on skill development and cooperation across the government departments and agencies involved. It will also demand collaboration across all government levels, down to local authorities.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/why-local-governments-will-feel-aggrieved-by-this-spending-review-150695">Why local governments will feel aggrieved by this spending review</a>
</strong>
</em>
</p>
<hr>
<h2>COVID-19</h2>
<p><strong>Alex de Ruyter, Professor of Economics and Director of the Centre for Brexit Studies, Birmingham City University</strong></p>
<p>For this fiscal year, the government is still very obviously in “whatever it takes” mode. That remains partially true in certain areas for 2021-22, although in other respects the government is very much looking to scale back support.</p>
<p>Total support due to COVID-19 is estimated to be around £280 billion this financial year. The largest portion is job support – an estimated £53.7 billion on the furlough scheme and a further £19.6 billion on support for the self-employed. A total of £113 billion has been allocated to government departments, of which almost half is for health. A further substantial amount goes directly to the devolved administrations, who have the power to decide how it is spent.</p>
<p>However, this is misleading, since the vast majority is being spent on COVID-related procurement rather than frontline services. Test and trace, operated by the private sector, has been allocated £22 billion (a very large increase from the initial £12 billion). A further £15 billion is for personal protective equipment (PPE), which is eye-catching given the government’s poor record in getting value for money on this. Likewise £2.7 billion is being spent on developing and procuring vaccines. </p>
<p>Next year sees COVID-related support scaled back to a “mere” £55 billion, with nearly half set aside as contingency. The additional recovery money for the NHS seems miserly – that only £1 billion is being spent on addressing the backlog for elective treatments is particularly concerning.</p>
<p>Funding for councils – £5.4 billion in 2020-21 and £3 billion in 2021-22 – likewise seems tiny relative to increases in demand.</p>
<p>All of the money will be borrowed, although the spending review suggests this won’t be a problem, with government spending on debt interest actually expected to fall very substantially over the next few years.</p>
<hr>
<h2>Armed forces and foreign aid</h2>
<p><strong>Simon J. Smith, Associate Professor of Security and International Relations, Staffordshire University</strong></p>
<p>The chancellor claimed the spending review “strengthens the United Kingdom’s place in the world”, and that the UK will remain “open and outward looking”. However, the financial resources required to make a convincing case for a global Britain were lacking.</p>
<p>Rishi Sunak said the foreign aid budget would be cut to 0.5% of national income (down from 0.7%) in 2021, as retaining the current budget would be “difficult to justify to the British people”. Some of these savings, however, will be allocated to defence. It was announced soon after that there would be £24 billion investment in defence over the next four years, “allowing us to provide security not just for our country but around the world”. </p>
<p>Although it is not stated as such, it would seem there has been a reduction to the foreign aid budget in order to provide savings to boost defence investment. Neither of these announcements came as a surprise, as the prime minister signalled “the biggest defence investment since the end of the cold war” <a href="https://www.ft.com/content/684a9881-c964-478b-b87b-84aa697810f2">on November 19</a>, saying that “the defence of the realm must come first”.</p>
<p>There is no doubt that this is a serious escalation of investment and a demonstration that defence secretary Ben Wallace and chief of the defence staff General Sir Nick Carter have <a href="https://rusi.org/commentary/britain-defences-biggest-spending-boost-cold-war">convinced the Prime Minister to confirm four-year funding for the military</a>.</p>
<p>What will be prioritised for investment? Current suggestions are that the money is for a national cyber force, a space command and an artificial intelligence agency. An even larger question is for what grand strategic purpose these capabilities will be used.</p>
<p>In any case, tough decisions will need to be made in terms of pursuing savings elsewhere in the force. As Michael Clarke, former director general of the Royal United Services Institute thinktank <a href="https://www.ft.com/content/684a9881-c964-478b-b87b-84aa697810f2">put it</a>, which older areas of the armed forces are going to “have to be cut to be able to afford the new bells and whistles”? Moreover, will the British people think these eye-watering costs are justified in the age of COVID and when the government <a href="https://www.bbc.co.uk/news/live/uk-politics-55062425">is set to borrow £394 billion this year alone</a>.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/cuts-to-uk-foreign-aid-budget-are-shortsighted-and-could-damage-british-interests-150899">Cuts to UK foreign aid budget are shortsighted and could damage British interests</a>
</strong>
</em>
</p>
<hr>
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<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/339451/original/file-20200603-130917-1phwlgk.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/339451/original/file-20200603-130917-1phwlgk.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=150&fit=crop&dpr=1 600w, https://images.theconversation.com/files/339451/original/file-20200603-130917-1phwlgk.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=150&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/339451/original/file-20200603-130917-1phwlgk.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=150&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/339451/original/file-20200603-130917-1phwlgk.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=189&fit=crop&dpr=1 754w, https://images.theconversation.com/files/339451/original/file-20200603-130917-1phwlgk.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=189&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/339451/original/file-20200603-130917-1phwlgk.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=189&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<p><em>Listen to Recovery, a series from <a href="https://theconversation.com/uk/topics/the-anthill-podcast-27460">The Anthill Podcast</a>, to hear more about how the world recovered from crises including the Lisbon earthquake, world wars, the collapse of the Soviet Union and the 2008 financial crisis. Start here with <a href="https://theconversation.com/how-europe-recovered-from-the-black-death-recovery-podcast-series-part-one-139896">episode one on the recovery after the Black Death</a>.</em></p>
<hr><img src="https://counter.theconversation.com/content/150875/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Anupam Nanda's research has been sponsored by UK and international public and private funding bodies and companies, including UKRI/Innovate UK, the Real Estate Research Institute in the US, UK Foreign and Commonwealth Office, UK Department of Energy and Climate Change, the Investment Property Forum and the Royal Institution of Chartered Surveyors. He is a board member of the European Real Estate Society.</span></em></p><p class="fine-print"><em><span>Simon J Smith received funding from the Economic and Social Research Council for research on the Drivers of Military Strategic Reform.</span></em></p><p class="fine-print"><em><span>Alex de Ruyter, Drew Woodhouse, Ernestine Gheyoh Ndzi, and Jonquil Lowe do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The chancellor’s spending review and what it means for you.Alex de Ruyter, Professor of Economics and Director of the Centre for Brexit Studies, Birmingham City UniversityAnupam Nanda, Professor of Urban Economics & Real Estate, University of ManchesterDrew Woodhouse, Senior Lecturer in Economics, Sheffield Hallam UniversityErnestine Gheyoh Ndzi, Senior Lecturer at York Business School, York St John UniversityJonquil Lowe, Senior Lecturer in Economics and Personal Finance, The Open UniversitySimon J Smith, Associate Professor of Security and International Relations, Staffordshire UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1320622020-07-16T11:36:34Z2020-07-16T11:36:34ZYour pension has a huge role to play in combating climate change – here’s how to make it sustainable<figure><img src="https://images.theconversation.com/files/345768/original/file-20200706-21-16toh5z.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Sustainable investment.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/hands-watering-young-plants-growing-germination-548268577">Shutterstock.com</a></span></figcaption></figure><p>The onus to live sustainably has never been greater. It drives everyday actions from making sure we recycle our rubbish to carrying reusable cups and bottles with us wherever we go. But there’s an enormous part of many people’s lives that they probably don’t pay much attention to and that’s where their pension money is invested. </p>
<p>While you might be cutting meat out of your diet <a href="https://theconversation.com/is-a-vegetarian-diet-really-more-environmentally-friendly-than-eating-meat-71596">to save the planet</a>, it is very likely that your pension is contributing to its destruction by being invested in companies that are destroying forests, producing unrecyclable plastics, or contributing to high carbon emissions via the fossil fuels, aviation or big food retail industries, to name but a few.</p>
<p>People can end up in an absurd situation where they are willing to make significant lifestyle changes to reduce their carbon footprint but have no clue as to whether the companies involved in these products or services feature predominantly in their retirement or employees savings-investment portfolio.</p>
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Read more:
<a href="https://theconversation.com/combating-climate-change-why-investors-should-keep-their-shares-in-fossil-fuel-companies-141476">Combating climate change – why investors should keep their shares in fossil fuel companies</a>
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<p>It is difficult to know how our money is actually invested when it’s in a pension fund. Accessing this information is difficult since many of the financial service providers that manage pension funds do not provide this level of financial reporting. </p>
<p>If you’re an employee, you can start asking questions and demanding more clarity from your employer <a href="https://shareaction.org/pensions/">about your pension provider</a>. But our individual effort alone is unlikely to make the cut without additional collective action coming from the pension funds, the broader asset management industry and policymakers.</p>
<p>Thankfully, we are witnessing a series of events in the UK that could lead to a transformation in this regard. Prominent UK investment groups, <a href="https://www.ft.com/content/56291334-8e98-11e8-b639-7680cedcc421">such as the Church of England</a>, have been at the forefront of the fight against climate change through disinvestment from fossil fuels. Meanwhile, some pension funds are pushing their asset managers <a href="https://www.ft.com/content/988b5378-7dd8-4902-82e6-a7dcc96e2524">to reduce their exposure to climate change</a>, recognising the business case for sustainable investments. </p>
<p>Research also <a href="https://www.unpri.org/download?ac=4637">shows</a> that pension funds have considerable power to influence the activity of the companies they invest in – to decrease their carbon footprints and adopt new business models that <a href="https://theconversation.com/combating-climate-change-why-investors-should-keep-their-shares-in-fossil-fuel-companies-141476">can help address the climate change challenge</a>.</p>
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<img alt="" src="https://images.theconversation.com/files/345802/original/file-20200706-4000-1e5mftd.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/345802/original/file-20200706-4000-1e5mftd.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=338&fit=crop&dpr=1 600w, https://images.theconversation.com/files/345802/original/file-20200706-4000-1e5mftd.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=338&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/345802/original/file-20200706-4000-1e5mftd.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=338&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/345802/original/file-20200706-4000-1e5mftd.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=424&fit=crop&dpr=1 754w, https://images.theconversation.com/files/345802/original/file-20200706-4000-1e5mftd.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=424&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/345802/original/file-20200706-4000-1e5mftd.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=424&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Green investments are on the rise.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/businessman-composing-successful-financial-chart-arrow-556478710">Shutterstock</a></span>
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<h2>Government pressure</h2>
<p>Governments have a big role to play in ensuring financial markets become more sustainable. We showed this recently in <a href="https://www.cambridge.org/core/journals/business-ethics-quarterly/article/orchestrating-governmental-corporate-social-responsibility-interventions-through-financial-markets-the-case-of-french-socially-responsible-investment/2E21CCC578FEB20EF5C6D68429D1F169">research</a> which shows how France introduced regulation that got its entire pension funds industry to address its climate change impact. This was notably done by the end of 2015 when the French government made it mandatory for large retirement funds <a href="https://www.frenchsif.org/isr-esg/wp-content/uploads/Understanding_article173-French_SIF_Handbook.pdf">to disclose their climate change risks and opportunities</a>.</p>
<p>Policymakers in the UK are taking similar steps. The Financial Reporting Council, one of the country’s main financial regulators, published a <a href="https://www.burges-salmon.com/news-and-insight/legal-updates/corporate/esg-and-the-uk-stewardship-code-2020/">new stewardship code in 2020</a> for <a href="https://www.frc.org.uk/investors/uk-stewardship-code/uk-stewardship-code-statements/asset-managers">asset managers</a> and <a href="https://www.frc.org.uk/investors/uk-stewardship-code/uk-stewardship-code-statements/asset-owners">asset owners</a>. For the first time, it introduces an obligation to systematically integrate climate change “to fulfil their responsibilities” as signatories. But the code remains a <a href="https://www.fca.org.uk/publication/feedback/fs19-7.pdf">voluntary reporting scheme</a>. While it can help identify UK institutional investors that are transparent, it will not necessarily name the ones performing badly. </p>
<p>Meanwhile, a new pensions funds bill is progressing <a href="https://services.parliament.uk/bills/2019-21/pensionschemes/stages.html">through the House of Lords</a>. Amendments to this bill <a href="https://www.wsj.com/articles/u-k-moves-to-require-pensions-to-disclose-climate-change-plans-11581508142">were proposed in February</a> that could make it mandatory for large UK pension funds to assess climate risks and opportunities. If passed, funds will have to report climate risks clearly to scheme members or see their funds face fines of up to £50,000.</p>
<p>Our research into France’s experience suggests that this kind of regulation that forces firms to disclose their climate risks is necessary but not sufficient to trigger enough change. Governments can play a more active role by supporting public investment funds to develop in-house expertise on climate-change friendly investments to give them more insight on what asset managers can offer.</p>
<p>As often in the sustainability domain, <a href="https://www.theguardian.com/environment/2019/oct/12/top-three-asset-managers-fossil-fuel-investments">the risk of greenwashing remains high</a> – it can be hard to know if funds aren’t just talking about climate change and whether their sustainable investment innovations are genuine. One way of preventing this in <a href="https://www.novethic.com/fileadmin/user_upload/divers/labels/1605-LabelTEEC_Referentiel-ENG.pdf">France</a> and <a href="https://susproc.jrc.ec.europa.eu/Financial_products/index.html">Europe more broadly</a>, is the use of clear labels that designate the level of carbon impact that various investment products have. So, when given the choice of how and where to invest, it is easy to see how carbon-friendly different products are.</p>
<p>Creating these labels requires agreement on what activities should be considered as green and monitoring tools that will convincingly measure their ecological impact. Part of this involves a discussion between businesses and civil society. We found this fostered important debates about what’s involved in making business practices sustainable. It’s something other countries, including the UK, would benefit from. This way we can ensure our savings, along with our everyday consumption, are sustainable.</p><img src="https://counter.theconversation.com/content/132062/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>How to ensure your savings, as well as your everyday consumption, are sustainable.Stephanie Giamporcaro, Associate Professor, Sustainable Finance, Nottingham Trent UniversityJean-Pascal Gond, Professor of Corporate Social Responsibility, City, University of LondonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1414762020-06-29T12:22:42Z2020-06-29T12:22:42ZCombating climate change – why investors should keep their shares in fossil fuel companies<figure><img src="https://images.theconversation.com/files/344516/original/file-20200629-155308-1pjubif.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Contradictory messaging.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/brisbane-queensland-australia-january-10-2020-1612870882">Alex Bee / Shutterstock.com</a></span></figcaption></figure><p>As we begin to engage with the climate emergency and the impact of carbon dioxide emissions, calls have grown to stop investing in companies engaged in fossil fuel production – a practice known as divestment. </p>
<p>The University of Oxford became one of the latest institutional investors to pledge to drop all fossil fuel companies <a href="https://www.independent.co.uk/news/education/education-news/oxford-university-fossil-fuels-net-zero-student-campaigns-investment-a9478431.html">from their £3 billion endowment</a>. Enormous pressure from students and staff alike has been put on other universities to follow suit, creating a culture of shame on those <a href="https://www.independent.co.uk/news/education/education-news/university-fossil-fuels-divest-russell-group-climate-change-crisis-a9281566.html">that continue to hold these shares</a>. </p>
<p>Many scholars in the UK may be horrified to hear that one of the largest university pension schemes, the University Superannuation Scheme (or USS) has the oil company Shell <a href="https://www.uss.co.uk/how-uss-invests/the-fund/investments/uss-top-100-listed-equities">as its largest holding</a> of £500 million. Recent <a href="https://www.uss.co.uk/members/members-home/retirement-articles/2020/investment-changes-and-new-opportunities">changes to the USS investment strategy</a> ended its investment in a number of controversial holdings, including tobacco manufacturing, coal mining, cluster munitions (a form of explosive) and landmines. But USS continues to invest in a number of fossil fuel companies saying they intend to engage with them as a “force for good”.</p>
<p>So long as they do wield this influence, we believe this is the right approach for investors who want to combat climate change. Many of those lobbying for divestment will have good intentions. Divesting from fossil fuel companies is likely to make investors feel morally cleansed, having washed their hands of dirty investments that make profits from environmental damage. But it may act as a diversion tactic, allowing the lobbyists and investors who follow their lead to feel good about themselves. And yet they will have done <a href="https://theconversation.com/fossil-fuel-divestment-will-increase-carbon-emissions-not-lower-them-heres-why-126392">little to combat climate change</a>. </p>
<p>Divestment, leading to the selling of fossil fuel company shares, should put downward pressure on the share price, making it harder for the company to raise new capital. But for the majority of them, even in the face of substantial divestments, it will be very much business as usual, having no effect at all <a href="https://www.sciencedirect.com/science/article/abs/pii/S2214629618306881">on their day-to-day operations</a>.</p>
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<img alt="" src="https://images.theconversation.com/files/344520/original/file-20200629-155353-1y1zbr8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/344520/original/file-20200629-155353-1y1zbr8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=397&fit=crop&dpr=1 600w, https://images.theconversation.com/files/344520/original/file-20200629-155353-1y1zbr8.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=397&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/344520/original/file-20200629-155353-1y1zbr8.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=397&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/344520/original/file-20200629-155353-1y1zbr8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=498&fit=crop&dpr=1 754w, https://images.theconversation.com/files/344520/original/file-20200629-155353-1y1zbr8.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=498&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/344520/original/file-20200629-155353-1y1zbr8.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=498&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Dirty investment?</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/emission-coal-power-plant-130778297">Shutterstock.com</a></span>
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<p>If more people want to sell shares than buy them, this will affect the share price – but most oil companies are well beyond the situation where it would cause them significant issues. Neither BP nor Shell, for example, are likely to need to raise new financing in the foreseeable future <a href="https://www.fidelity.co.uk/markets-insights/daily-insight/why-bp-profit-hit-should-sober-us/">as they have large cash reserves</a>. Both have share repurchase schemes, where they are able to use dips in their share prices to buy their own shares back, allowing investors to benefit without paying taxable dividends. </p>
<p>But if a company’s shares become sufficiently cheap relative to its profit stream, it will be ripe for a takeover. Most likely this will come from an even bigger, non-European oil company or by a wealth fund. It is highly likely in either case that the new purchaser will be less concerned about minimising the company’s environmental impact than those divesting. And any such commitments could easily be dropped in favour of a more concentrated focus on profits. </p>
<p>More worryingly, divestment is highly likely to constitute a small step in a chain of events that will perversely lead to precisely the opposite of the lobbyist’s desired outcome. When the University of Oxford (for example) sells its shares, they won’t simply disappear – rather they will be sold on the market to another investor. And the investors that are actively buying oil shares right now are unlikely to be those who are concerned about the environment. </p>
<h2>Shareholder rights</h2>
<p>The divestor also gives up the opportunity for shareholder activism – something USS does with the fossil fuel companies <a href="https://www.uss.co.uk/how-uss-invests/responsible-investment/activities/climate-change">in which it holds investments</a>. This is where shareholders can put pressure on companies they part own to introduce more sustainable ways of doing business. Although there is still much to be done, there is growing evidence that this kind of activism is having <a href="https://www.desmog.co.uk/2018/05/16/power-shift-how-shareholder-activism-forcing-corporate-change-over-climate-profiteering">a positive effect on fossil fuel companies</a>. </p>
<p>Many European oil companies are much better than their peers when it comes to environmental performance. While oil extraction and refinement is by its nature a dirty business, Shell, for instance, has a strong commitment to climate change mitigation. It aims to cut its net carbon footprint by 30% by 2035, <a href="https://www.shell.co.uk/a-cleaner-energy-future/our-response-to-climate-change.html">and by 65% by 2050</a>, meanwhile increasing the role of renewables in its energy production. Contrast this with some oil majors in the US whose only commitment is to the development of more effective extraction processes and more efficient fuel. </p>
<p>A counter-intuitive strategy for divestment activists would be for them to actually encourage the maintenance of large equity holdings in fossil fuel companies by sympathetic institutional investors, such as universities and USS. Then, by working together with other large shareholders and shareholder activist groups, bring real ownership pressure to bear in order to reduce the polluting activities of these companies. This would work by hitting them where it hurts – for instance, by blocking the awards of executive pay rises and bonuses.</p>
<p>Divestment puts shares in big oil into the hands of those who don’t give two hoots about the climate emergency, discourages such companies from taking mitigating steps and does nothing whatsoever to curb fossil fuel usage. If the question is how to tackle climate change, divestment is not even part of the answer. </p>
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<p><em><a href="https://theconversation.com/imagine-newsletter-researchers-think-of-a-world-with-climate-action-113443?utm_source=TCUK&utm_medium=linkback&utm_campaign=TCUKengagement&utm_content=Imagineheader1126392">Click here to subscribe to our climate action newsletter. Climate change is inevitable. Our response to it isn’t.</a></em></p><img src="https://counter.theconversation.com/content/141476/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Adrian R. Bell receives funding from the Arts and Humanities Research Council (AHRC) and previously from the Economic and Social Research Council (ESRC).</span></em></p><p class="fine-print"><em><span>Chris Brooks receives funding from the ESRC. </span></em></p>Investors who care about the environment are better off holding shares in and exercising their influence over fossil fuel companies.Adrian R Bell, Chair in the History of Finance and Research Dean, Prosperity and Resilience, Henley Business School, University of ReadingChris Brooks, Professor of Finance, Henley Business School, University of ReadingLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1323962020-03-10T21:44:43Z2020-03-10T21:44:43ZCoastal GasLink and Canada’s pension fund colonialism<figure><img src="https://images.theconversation.com/files/318749/original/file-20200304-66060-bk9t4o.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C4500%2C2977&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Supporters of the Wet'suwet'en hereditary chiefs who oppose the Coastal GasLink pipeline set up a support station near Gidimt'en checkpoint near Houston B.C., in January 2020.</span> <span class="attribution"><span class="source">THE CANADIAN PRESS/Jason Franson</span></span></figcaption></figure><p>As the RCMP continue to enforce an injunction in favour of the proposed Coastal GasLink Pipeline, it’s important to ask questions about whose capital is being secured by the ongoing police presence in Wet'suwet'en territories.</p>
<p>The purpose of the pipeline is to produce and accelerate value for investors as it moves gas to export markets. </p>
<p>The Coastal GasLink pipeline and the related exploitation of the <a href="https://www2.gov.bc.ca/assets/gov/farming-natural-resources-and-industry/natural-gas-oil/petroleum-geoscience/oil-gas-reports/hydrocarbon_western_canadian_sedimentary_basin.pdf">Western Sedimentary Basin</a> that will feed it exist to generate interest income on investments, dividends for shareholders and to otherwise grow the value of the capital invested. The basin encompasses southwestern Manitoba, southern Saskatchewan, Alberta, northeastern British Columbia and the southwest corner of the Northwest Territories.</p>
<p>The past 20 years of pension securitization in Canada have meant that the retirement savings of Canadian workers have become increasingly dependent on the market value of oil and gas infrastructure, publicly traded oil and gas equities and securities, and the success of the resource economies that sustain them.</p>
<p>It also means income security for working Canadians is increasingly dependent on the <a href="https://theconversation.com/wetsuweten-blockades-no-more-business-as-usual-in-canada-131961">underlying conditions that make these assets valuable</a> — including the <a href="https://www.cbc.ca/news/indigenous/wet-suwet-en-coastal-gaslink-pipeline-1.5448363">militarized police repression</a> of Indigenous jurisdiction.</p>
<h2>AIMCo bought large interest in pipeline</h2>
<p>On the eve of the British Columbia Superior Court injunction against the Wet’suwet’en First Nation Hereditary Chiefs in favour of Coastal GasLink in late 2019, AIMCo (the Alberta Investment Management Corporation), one of Canada’s largest institutional investment fund managers, <a href="https://www.newswire.ca/news-releases/aimco-announces-investment-in-tc-energy-coastal-gaslink-pipeline-project-848394253.html">purchased a 65 per cent equity interest, alongside global equity investor KKR, in the pipeline from TC Energy, previously Trans Canada.</a></p>
<p><a href="https://www.aimco.alberta.ca/">AIMCo</a> manages funds on behalf of several of Alberta’s large public sector pension plans, including the Special Forces, Public Service and Local Authorities pension plans. It will soon manage the nearly $60 billion Alberta Teachers Retirement Fund. </p>
<p>It also manages the investment of government funds, including general revenues, used for education, health care, infrastructure and social programs for Albertans.</p>
<p>British Columbia Investment (BCI) manages B.C.’s large public sector pension funds, including the B.C. Teachers and Public Service pensions. </p>
<p>It has considerable exposure to LNG, including to all five members (Royal Dutch Shell, Petronas, Petro China, Mitsubishi and Korea Gas) of the $40 billion dollar consortium LNG Canada, which owns the terminal intended to liquefy, store and export gas transported by the Coastal GasLink pipeline.</p>
<h2>Billions invested</h2>
<p>The consortium is also backing the pipeline’s construction with up-front cash from recently signed, 25-year transportation service agreements. <a href="https://uberflip.bci.ca/i/1173270-investment-inventory-2019">According to its December 2019 inventory of public equity holdings</a>, BCI has well over a billion dollars of equity invested in Canada’s top Western Sedimentary gas producers, including Canadian Natural Resources, Tourmaline, Encana, Cenovus, Seven Generations Energy, Prairie Sky, Arc and Fortis.</p>
<p><a href="https://www.cdpq.com/en">The Caisse de dépôt et placement du Québec (CDPQ)</a> has billions of dollars of exposure to gas companies with interests in the Western Sedimentary Basin and supporting LNG infrastructure. According to its <a href="https://www.cdpq.com/sites/default/files/medias/pdf/en/ra/ra2018_renseignements_add_en.pdf">most recent statement of holdings, these include</a>: Alta Gas ($291 million), Canadian Natural Resources ($479 million), Cenovus ($217 million), Seven Generations, Storm, Tourmaline and Chevron, and more than $600 million invested in TC Energy, which retains a 35 per cent controlling interest in Coastal GasLink. </p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/318752/original/file-20200304-66112-1lq45kz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/318752/original/file-20200304-66112-1lq45kz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/318752/original/file-20200304-66112-1lq45kz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=472&fit=crop&dpr=1 600w, https://images.theconversation.com/files/318752/original/file-20200304-66112-1lq45kz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=472&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/318752/original/file-20200304-66112-1lq45kz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=472&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/318752/original/file-20200304-66112-1lq45kz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=593&fit=crop&dpr=1 754w, https://images.theconversation.com/files/318752/original/file-20200304-66112-1lq45kz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=593&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/318752/original/file-20200304-66112-1lq45kz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=593&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">TransCanada president and CEO Russ Girling addresses the company’s annual meeting after shareholders approved a name change to TC Energy in Calgary in May 2019.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Jeff McIntosh</span></span>
</figcaption>
</figure>
<p>These records indicate that as of December 2018, the CDPQ had considerable exposure to LNG Canada Consortium members Korea Gas, Petronas and Royal Dutch Shell.</p>
<p>In Ontario, the Teachers Pension <a href="https://www.otpp.com/news/article/-/article/739022">owns outright HRG Royalty, a $3.3 billion dollar subsidiary of Chevron</a> that holds <a href="https://homeguides.sfgate.com/fee-simple-ownership-mean-57263.html">fee simple</a> oil and gas titles and royalty interests in the basin. A fee simple represents absolute ownership of land, and therefore owners can do whatever they like with it.</p>
<p>According to its <a href="https://cdn3.cppinvestments.com/wp-content/uploads/2019/11/Canadian-Public-Equity-Holdings-Mar2019-EN.htm">most recent disclosure of publicly traded equities</a> and of <a href="https://www.cppinvestments.com/the-fund/our-investments/investment-real-assets">real asset investments</a>, the Canada Pension Plan Investment Board (CPPIB), which manages the retirement savings of millions of Canadians, has billions invested in natural gas companies operating in the basin. </p>
<p>More than $1.5 billion is invested in Canadian Natural Resources, Seven Generations Energy and Black Swan alone. CPPIB also has more than $200 million invested in TC Energy.</p>
<h2>Investing in colonialism</h2>
<p>What does this mean? To grow retirement savings in pipelines and LNG terminals is to literally invest in colonialism. </p>
<p>The social reality of this moment of <a href="https://theconversation.com/unistoten-and-the-limits-of-reconciliation-in-canada-109704">so-called reconciliation</a> is therefore one in which we are actually deepening, at the dizzying speed of capital markets, workers’ personal and economic stakes in the extension and expansion of Indigenous dispossession.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/318750/original/file-20200304-66060-1e2g2bw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/318750/original/file-20200304-66060-1e2g2bw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=407&fit=crop&dpr=1 600w, https://images.theconversation.com/files/318750/original/file-20200304-66060-1e2g2bw.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=407&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/318750/original/file-20200304-66060-1e2g2bw.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=407&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/318750/original/file-20200304-66060-1e2g2bw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=511&fit=crop&dpr=1 754w, https://images.theconversation.com/files/318750/original/file-20200304-66060-1e2g2bw.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=511&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/318750/original/file-20200304-66060-1e2g2bw.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=511&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">A woman wears a bandana over her face reading ‘Land Back’ as protesters march to block a road used to access the Port of Vancouver during a demonstration in support of Wet'suwet'en Nation hereditary chiefs.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Darryl Dyck</span></span>
</figcaption>
</figure>
<p>This means that the interests of settler workers and corporate capital are increasingly aligned against Indigenous rights and jurisdiction.</p>
<p>This is a deeply structural form of racialized oppression; one that accounts for how value accrues through financial transactions that are based on Indigenous dispossession and the systemic denial of Indigenous rights.</p>
<p>The flip side of this, of course, is that the income security of working Canadians is deeply exposed to the financial liabilities of settler colonialism, since the value of income invested in LNG far exceeds what it’s actually worth when Wet’suwet’en and other Indigenous title-holders successfully defend their rights.</p>
<p>That means that as Indigenous peoples become increasingly successful at defending their lands, pension funds will be left sitting on a huge pile of stranded assets.</p><img src="https://counter.theconversation.com/content/132396/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Anna Stanley does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The fact that so many Canadian pension funds are tied to oil and gas companies is a deeply structural form of racialized oppression and a denial of Indigenous rights.Anna Stanley, Assistant Professor, Department of Geography, Environment and Geomatics, University of GuelphLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1284032019-12-05T15:15:44Z2019-12-05T15:15:44ZWhy France is striking over Macron’s pension reforms<p>Workers across France are striking as part of a national wave of industrial action, that has seen protests against <a href="https://www.bbc.co.uk/news/world-europe-50643323">reforms to the state pension system</a>. Train and bus drivers, air traffic controllers, energy workers, truck drivers, teachers, students, police officers, lawyers, judges and street cleaners are all threatening to stay off work for an indefinite period from December 5. </p>
<p>French rail transport is being hit hard, with 82% of drivers on strike and at least 90% of regional trains cancelled. In Paris, 11 out of 16 metro lines have shut completely. In other sectors, 30% of domestic flights have been cancelled and 70% of primary teachers are on strike, which means around 40% of schools are closed. Truck drivers planned to blockade roads and tollbooths. </p>
<p>The strikes are against government plans to remove 42 “special” pension schemes and switch to a universal points-based pension system for all workers, public and private. The finer details of the reforms are still unclear, but the direction points towards workers having to work for longer, with less generous pensions when they retire. </p>
<p>The reform would mean pensions are based on a career average rather than a final salary calculation, as it currently is. And workers would have to accumulate a number of points (based on time worked) in order to start taking their pension. </p>
<p>Under current pension regimes, some workers such as train drivers can take their pension from the age of 52, which was originally seen as compensation for tough working conditions such as difficult hours and shift work. The changes would mean a rise in the retirement age, currently to 62, and would end differential treatment. </p>
<h2>Public support</h2>
<p>The strike has a relatively high level of public support. <a href="https://www.ifop.com/publication/les-francais-et-la-reforme-des-retraites-9/">According to one</a> opinion poll, 46% support the strikes but other reports show <a href="https://www.bbc.co.uk/news/world-europe-50643323">69%</a> backing. But polls also show that <a href="https://www.ifop.com/wp-content/uploads/2019/12/116939_Rapport_Ifop_JDD_Retraites.pdf">76% of French people</a> are in favour of pension reforms. This is because the strike is more broadly viewed as protest action against the president, Emmanuel Macron and the government in general. </p>
<p>Over the last 15 years, France has introduced radical changes into its labour law, which has accelerated under Macron. He was elected in 2017 with a clear <a href="https://www.theguardian.com/world/2017/aug/31/france-reveals-measures-to-overhaul-working-life">manifesto to reform</a>, and put a halt to, the “régimes spéciaux” (special employment schemes) that exist mainly in France’s public sector, which has more advantageous employment rights than the private sector. </p>
<p>In 2018 the government was able to <a href="http://speri.dept.shef.ac.uk/2018/04/18/macrons-railway-reforms-the-ultimate-test-for-french-trade-unionism/">push through reforms</a> to change the protected status of railway workers. There was a showdown but the government won this battle. Now, it is looking to carry through one of the most controversial reforms set out by Macron. His government is holding firm, saying that the changes “<a href="http://www.rfi.fr/en/france/20191201-french-cabinet-sunday-crisis-meeting-5-december-strike-pension-reform-transport">will go through because they are necessary and fair</a>”.</p>
<h2>Chances of success</h2>
<p>French trade unions have had <a href="https://theconversation.com/macrons-woes-french-unions-are-gearing-up-for-major-strikes-81719">several battles</a> with the government in the last 15 years, but apart from protests in 2006 – which halted the introduction of a <a href="https://www.lemonde.fr/campus/article/2016/03/09/il-y-a-dix-ans-les-jeunes-obtenaient-le-retrait-du-cpe_4879453_4401467.html">new employment contract for young workers</a> – governments have managed to push through changes to the labour market. </p>
<p>The inability of railway workers to stop Macron’s reforms in 2018 was a big defeat for trade unions. But in the current strike, railway workers have been joined by a number of other public and private sector groups, which strengthens the movement and lends itself more to public sympathy. The scale of the strike has been compared to <a href="https://www.bing.com/videos/search?q=French+strikes+in+1995&view=detail&mid=BA52D89C8DABEE4B4C39BA52D89C8DABEE4B4C39&FORM=VIRE">the movement in 1995</a>, also against pension reform, which forced the government of then Prime Minister Alan Juppé to reverse plans to change the system. </p>
<p>Since the emergence of the yellow vests in November 2018, <a href="https://www.lemonde.fr/politique/article/2019/12/04/greve-du-5-decembre-le-rapport-de-force-est-different-de-1995_6021627_823448.html">some argue</a> that this has given workers a renewed confidence in the effectiveness of collective action. The <a href="https://theconversation.com/gilets-jaunes-one-year-on-how-the-yellow-vest-movement-has-changed-french-citizens-lives-127178">yellow vest movement</a> proved that protesting could still make the government back down. While the yellow vest movement has dissipated somewhat and the demands have become more fragmented, the underlying sense of injustice has not. This provides a perfect set of conditions for a mass protest movement to emerge. </p>
<p>Despite a stereotype of its being a heavily unionised nation, France has one of the lowest levels of trade union membership density among OECD countries. Only <a href="https://www.worker-participation.eu/National-Industrial-Relations/Countries/France/Trade-Unions">around 8% of workers</a> are members of a union. But trade unions in France are still embedded in a number of institutions and 90% of workers are covered by a collective agreement, which means most workers terms and conditions are regulated by agreement between employers and trade unions. </p>
<p>Unions also benefit from a high level of worker representation in organisations. Elected representatives participate and negotiate at all levels of organisations and enjoy a <a href="https://www.economist.com/the-economist-explains/2014/03/17/why-french-trade-unions-are-so-strong">legal framework for employee representation</a> that is the envy of trade unions in other countries such the UK, including a right to strike enshrined in the French constitution. </p>
<p>Nonetheless, the current strikes are a test of strength for the French trade union movement, which has been more defensive since the 2008 economic crisis. It reflects a return to the <a href="https://www.peterlang.com/view/title/35442">more radical history</a> of French unions, fighting to improve and maintain worker rights. They have long seen it as their responsibility to neutralise what they view as a <a href="http://speri.dept.shef.ac.uk/2016/06/15/resisting-labour-reforms-in-france/">neoliberal project</a>, which aims to reduce employment protections and increase labour market flexibility and employer discretion in the workplace. And to defend the hard won rights (“aquis sociaux”) – like decent pensions – that public sector workers enjoy. But they are faced with a French government and president intent on carrying out the reforms that are central to their mandate.</p><img src="https://counter.theconversation.com/content/128403/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Heather Connolly is a member of the UCU. </span></em></p>French rail transport is grinding to a halt. Teachers, truck drivers, lawyers and judges are also threatening to strike indefinitely.Heather Connolly, Associate Professor of Employment Relations, University of LeicesterLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1275352019-11-27T04:19:36Z2019-11-27T04:19:36ZUniversity strikes: yes, students should get compensation – but not in the form of monetary payment<figure><img src="https://images.theconversation.com/files/302940/original/file-20191121-479-cda53x.jpg?ixlib=rb-1.1.0&rect=7%2C22%2C4985%2C3308&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/london-uk-march-14-2018-academy-1047254494?src=299978c3-456f-4ac9-8e19-be8ceff2f480-1-76">shutterstock/Ajit Wick</a></span></figcaption></figure><p>Some students, many of who pay up to £9,250 in tuition fees a year, are <a href="https://wonkhe.com/blogs/unpicking-strikes-tuition-fees-and-possible-refunds/">demanding tuition fee refunds</a> for the university strikes that are currently taking place. Members of the University and College Union (UCU) <a href="https://www.ucu.org.uk/article/10408/UCU-announces-eight-days-of-strikes-starting-this-month-at-60-universities">are on strike</a> for eight days between November 25 and December 4. </p>
<p>Like the last strikes in 2018, this latest strike in some institutions is about pensions. But it’s also about pay, equality, casualisation and workloads within <a href="https://theconversation.com/we-are-losing-sight-of-higher-educations-true-purpose-73637">higher education</a>.</p>
<p>Despite the <a href="https://theconversation.com/in-the-race-to-turn-higher-education-into-a-market-were-ignoring-lessons-from-history-35792">marketisation</a> of the higher education sector, the value of a <a href="https://network23.org/freeunisheff/files/2015/07/Mike-Molesworth-Richard-Scullion-Elizabeth-Nixon-The-Marketisation-of-Higher-Education-and-the-Student-as-Consumer-book.pdf">student’s university experience</a> is something that cannot be easily quantified in monetary terms. The primary concern of which should be good quality education. And this amounts to much more than a group of lecturers not being present at work for a week. Nevertheless, as customer aware students raise their concerns, it’s worth thinking about this refund request properly. </p>
<h2>The case for why</h2>
<p>As an economist, but also as an educator, I believe students should get a refund – but not in the form of monetary payments. I’ll talk you through why.</p>
<p>Busting the myth that university education is based on lectures and seminars, a fully rounded <a href="https://theconversation.com/why-universities-will-have-to-pay-more-attention-to-the-quality-of-their-teaching-47186">university experience</a> is about much more than contact time. Indeed, students today are taught in many different ways. Yes there are seminars and lectures, but also digital and self-paced training. </p>
<p>Beyond the classroom, universities also offer a much wider range of services. These include libraries, careers advice, student support services, well-being programmes and counselling. It also includes financial advice, English language and maths support, as well as bespoke support for students affected by learning difficulties or disabilities. </p>
<p>Equally important determinants of a good university education are the <a href="https://theconversation.com/five-ways-artificial-intelligence-will-shape-the-future-of-universities-94706">physical spaces</a> – think classrooms, accommodation, recreational areas, and sports facilities. And the social spaces – student societies, volunteering initiatives – as well as the staff and student academic community as a whole. </p>
<p><a href="https://theconversation.com/missing-from-the-tuition-fees-debate-student-well-being-and-the-public-benefits-of-higher-education-80921">Student fees</a> finance this whole apparatus, not just lectures. This includes the heating of buildings, water supply, carbon emission abatement and much more. While some lecturers will be on strike, and part of the student experience will be disrupted, it’s also true that universities will continue to run all other services.</p>
<p>Another important aspect to be considered is how contact time will be impacted for different degrees. For instance, students attending courses with a lot of teaching time will be deprived of lectures. But students on placements might only be marginally affected by the strike.</p>
<h2>The nature of student fees</h2>
<p>There’s also the fact that although some students (mostly internationals) face the cost of education upfront, many finance their university degree through government loans. When considering services sold against an upfront payment, it might make sense to claim for compensation if the service is suspended. But when universities receive student fees from government loans, the idea that students could claim for compensation against future repayments of a loan becomes more difficult to rationalise. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/302953/original/file-20191121-467-e81sf1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/302953/original/file-20191121-467-e81sf1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/302953/original/file-20191121-467-e81sf1.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/302953/original/file-20191121-467-e81sf1.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/302953/original/file-20191121-467-e81sf1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/302953/original/file-20191121-467-e81sf1.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/302953/original/file-20191121-467-e81sf1.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Many universities have taken the position that no refunds for lost teaching will be issued to students.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/newcastle-uk-dec-9-university-college-66903121?src=299978c3-456f-4ac9-8e19-be8ceff2f480-1-77">Shutterstock/ Smart7</a></span>
</figcaption>
</figure>
<p>Further complicating the matter, is the fact that <a href="https://theconversation.com/most-graduates-will-never-pay-off-their-student-loans-80582">some students will never have to repay their university loan</a>. Graduates are expected to make payments against their loans when their income exceeds a given threshold. But figures show that not all students will ever earn enough – or not consistently over the 30 years before the loan is written off. </p>
<p>From the end of 2018, the Office for National Statistics started to consider <a href="https://obr.uk/box/accounting-treatment-and-policy-developments-affecting-student-loans/">part of student loans as public spending</a>. This decision takes into account that student debt will be written off in the future and implies that if students will not be repaying debt, the taxpayer will. So in theory, taxpayers could also rightfully claim compensation for the university strikes.</p>
<p>Ultimately though, computing the monetary value of compensation students could be entitled is far too complex. And it does not account for the fact that students will be affected by the strikes differently. </p>
<h2>Different kind of compensation</h2>
<p>I am fully supportive of the idea that students should see remedial actions for the disruption they are facing. But it’s important to emphasise that <a href="https://theconversation.com/the-top-five-reasons-the-rich-like-to-donate-to-universities-69434">universities are charities</a>. They do not maximise profits but re-invest any excess of revenue over costs on improvements of their facilities and recruitment of additional labour. </p>
<p>Since lecturers participating in strike actions will give up pay, universities will find themselves in the position of accumulating extra funds from unpaid wages. So here is an opportunity for students. These funds could be reinvested in interventions to <a href="https://theconversation.com/for-9-000-students-expect-their-classes-to-go-digital-22775">improve student learning</a> and teaching. This could include refurbishing classrooms, updating technology, investing in better mental health provision and so on. </p>
<p>There is another important advantage of this kind of compensation: since these extra funds are accrued locally, student representation and university management can negotiate how to allocate such funds on the basis of specific needs. And they could even take into consideration which groups of students will be most disrupted by the strike. </p>
<p>Many UK university lecturers are now on strike until December 4. During this time, many students will also stand in solidarity with their teachers. But this doesn’t take away from the fact that students are concerned about missing teaching time. From an economic perspective, fee refunds are not a consistent or fair option. And with the quality of their education at stake, students would not gain much from obtaining a fees refund – teaching enhancement claims are a better way.</p><img src="https://counter.theconversation.com/content/127535/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Fabio Aricò has received funding from HEA (now AdvanceHE) and HEFCE (now OfS).</span></em></p>Should students get refunds during strike action? An education economist gives his thoughts.Fabio Aricò, Associate Professor in Macroeconomics, University of East AngliaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1163402019-11-04T12:13:25Z2019-11-04T12:13:25ZAs the coal industry shrinks, miners deserve a just transition – here’s what it should include<figure><img src="https://images.theconversation.com/files/299742/original/file-20191031-187925-b1o4o8.jpg?ixlib=rb-1.1.0&rect=0%2C7%2C5021%2C3074&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Coal miners return on a buggy after working a shift underground at the Perkins Branch Coal Mine in Cumberland, Oct. 15, 2014.</span> <span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/When-Coal-Is-Over/92a5b0bc9ba44d30a2cf67c2b9de59d9/162/0">AP Photo/David Goldman</a></span></figcaption></figure><p>Murray Energy, one of the biggest private U.S. coal companies, has become the <a href="https://www.washingtonpost.com/business/2019/10/29/coal-giant-murray-energy-files-bankruptcy-coals-role-us-power-dwindles/">fifth coal company to file for bankruptcy in 2019</a>. Union leaders and many elected officials worry that in addition to the 7,000 miners on Murray’s payroll, this step could threaten the solvency of the United Mine Workers of America pension fund, which supports <a href="https://www.newsandsentinel.com/news/local-news/2019/10/murray-energy-bankruptcy-spells-woes-for-miner-pensions-lawmakers-say/">over 100,000 retired miners and fully vested workers</a>. </p>
<p>Whether people support or oppose the Trump administration’s efforts to <a href="https://theconversation.com/macrons-pledge-to-wipe-out-coal-is-just-as-meaningless-as-trumps-plan-to-revive-it-90729">prop up the coal industry</a>, one point of agreement is that shifting from coal to cleaner fuels threatens <a href="https://theconversation.com/trumps-policies-will-harm-coal-dependent-communities-instead-of-helping-them-82632">struggling coal-dependent communities</a>. Murray Energy’s bankruptcy is the latest reminder that it is past time to discuss a just transition for coal miners. </p>
<p><a href="https://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=2362140">My legal scholarship</a> examines environmental decision-making processes, with a focus on law and the urban-rural divide. In my recent research, I’ve dug into the <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3281846">origin and meaning</a> of the idea of a just transition for workers. </p>
<p>My findings suggest that there is a strong ethical case for pursuing just transitions through policy. The challenge is to ensure that these policies nurture programs and institutions with lasting effects, rather than merely offering short-term band-aids.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/299744/original/file-20191031-187938-nm2ivr.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/299744/original/file-20191031-187938-nm2ivr.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/299744/original/file-20191031-187938-nm2ivr.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=299&fit=crop&dpr=1 600w, https://images.theconversation.com/files/299744/original/file-20191031-187938-nm2ivr.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=299&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/299744/original/file-20191031-187938-nm2ivr.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=299&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/299744/original/file-20191031-187938-nm2ivr.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=376&fit=crop&dpr=1 754w, https://images.theconversation.com/files/299744/original/file-20191031-187938-nm2ivr.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=376&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/299744/original/file-20191031-187938-nm2ivr.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=376&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">More than half of the U.S. coal mines operating in 2008 have closed.</span>
<span class="attribution"><a class="source" href="https://www.eia.gov/todayinenergy/detail.php?id=38172">EIA</a></span>
</figcaption>
</figure>
<h2>What is a just transition?</h2>
<p>There is no single definition of a just transition, but in the coal context it generally means finding alternative ways to support struggling communities that are losing their traditional livelihoods. </p>
<p>The concept was popularized in the 1970s by progressive labor activist <a href="https://www.uswtmc.org/about/about-tony-mazzocchi">Tony Mazzocchi</a>, who worked in the auto, steel and construction industries before becoming an organizer. He believed that workers who had contributed to the public welfare through hazardous work deserved help in transitioning away from their difficult jobs. He first called for <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3281846">“full income and benefits for life”</a> for such workers, but eventually changed his demand to four years of income and education benefits. Even then, his efforts met substantial opposition.</p>
<p>Mazzochi had ties to labor and the environmental movements, and his activism <a href="https://www.chelseagreen.com/product/the-man-who-hated-work-and-loved-labor/">blended these concerns</a>. Today scholars are embracing the idea that government should <a href="https://ir.lawnet.fordham.edu/elr/vol29/iss2/4/">consider the economic impacts</a> of transitions such as the shift to low-carbon fuels, especially when workers are displaced by public initiatives.</p>
<p>In my view, it’s unfortunate that it has taken so long for mainstream attention to focus on the fate of coal workers. For communities dependent on fossil fuels, particularly in regions like Appalachia with few other major industries, today’s job losses are just the latest phase of a <a href="https://www.press.uillinois.edu/books/catalog/45xed4rh9780252009853.html">long decline</a>.</p>
<h2>No simple formula</h2>
<p>There is no road map for transitioning communities away from coal, but there are lessons from history. For example, American workers faced losses from international competition when the U.S. joined liberalized trade agreements in the second half of the 20th century. </p>
<p>In response, Congress passed legislation in 1974 that established the <a href="https://www.doleta.gov/tradeact/">Trade Adjustment Assistance Program</a>, which still operates today. It provides aid primarily to factory workers who can show that they have lost jobs or wages because of increased international competition. Eligible workers petition the U.S. Department of Labor for benefits administered through state agencies, including cash payments, retraining and assistance with relocation and job searches.</p>
<p>However, research shows that even with this support, affected workers were substantially worse off than they had been before the shift in trade policy. Scholars have criticized trade adjustment programs as <a href="https://heinonline.org/HOL/Page?handle=hein.journals/rutlr58&div=27&g_sent=1&casa_token=&collection=journals&t=1556647639">an ineffective band-aid</a>. In 2008 one of the program’s directors called it “<a href="https://www.piie.com/sites/default/files/publications/papers/20081217presidentmemo.pdf">too little assistance too late to those in need</a>.” </p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/hYEEBpHJMAQ?wmode=transparent&start=30" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">Funding for environmental cleanup and business development can help Appalachian communities diversify away from coal.</span></figcaption>
</figure>
<p>Another example, the Clinton administration’s 1994 <a href="https://www.fs.usda.gov/detail/r6/landmanagement/planning/?cid=fsbdev2_026990">Northwest Forest Plan</a>, was developed in connection with the decision to provide federal protection for the <a href="https://www.allaboutbirds.org/evidence-of-absence-northern-spotted-owls-are-still-vanishing-from-the-northwest/">Northern spotted owl</a>. Officials recognized that restrictions on logging would hurt the Pacific Northwest timber industry, which was already declining. </p>
<p>The plan provided direct federal subsidies to traditional timber counties to offset logging reductions on public lands. However, these payments have been <a href="https://www.hcn.org/issues/45.7/seeking-balance-in-oregons-timber-country">declining since 2006</a>, contributing to a <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2579369">fiscal crunch in rural Oregon</a>. Local opposition to tax increases, which could support local government services and community planning, <a href="https://www.hcn.org/issues/45.7/seeking-balance-in-oregons-timber-country">hasn’t helped</a>.</p>
<p>Another initiative, the <a href="https://www.usatoday.com/story/money/2015/09/02/thousands-farmers-stopped-growing-tobacco-after-deregulation-payouts/32115163/">Tobacco Transition Payment Program</a>, achieved more mixed results. In 1998 the four largest U.S. tobacco companies executed a <a href="https://www.stateag.org/initiatives/the-tobacco-settlement">major legal settlement</a> with states suing them to recover tobacco-related health costs. The agreement required tobacco companies to provide billions of dollars in economic assistance to farmers to ease their transition away from growing tobacco. </p>
<p>Each participating farmer received an average of US$17,000 through the program, which ran from 2005 to 2014. The top 10% of recipients received 75% of the payments. Some assessments concluded that these cash injections <a href="https://www.usatoday.com/story/money/2015/09/02/thousands-farmers-stopped-growing-tobacco-after-deregulation-payouts/32115163/">boosted struggling rural communities</a>. But farmers arguably have more autonomy than many other kinds of workers, since they can opt to grow different crops, so this example may have limited relevance for coal miners.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/299751/original/file-20191031-30397-f6po09.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/299751/original/file-20191031-30397-f6po09.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/299751/original/file-20191031-30397-f6po09.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=657&fit=crop&dpr=1 600w, https://images.theconversation.com/files/299751/original/file-20191031-30397-f6po09.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=657&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/299751/original/file-20191031-30397-f6po09.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=657&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/299751/original/file-20191031-30397-f6po09.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=826&fit=crop&dpr=1 754w, https://images.theconversation.com/files/299751/original/file-20191031-30397-f6po09.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=826&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/299751/original/file-20191031-30397-f6po09.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=826&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">County economic status in Appalachia, fiscal year 2020.</span>
<span class="attribution"><a class="source" href="https://www.arc.gov/research/MapsofAppalachia.asp?MAP_ID=149">Appalachian Regional Commission</a>, <a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a></span>
</figcaption>
</figure>
<h2>Recent transition aid for coal communities</h2>
<p>The most defined federal effort so far to help coal communities economically is the <a href="https://obamawhitehouse.archives.gov/sites/default/files/omb/budget/fy2017/assets/fact_sheets/Investing%20in%20Coal%20Communities.pdf">POWER Plan</a>, launched by the Obama administration. This program directs funds into Appalachian communities to assist displaced workers, build regional institutions’ capacity and fund economic development programs. </p>
<p>From 2015 through 2019 the <a href="https://www.arc.gov/">Appalachian Regional Commission</a>, an economic development agency supported by federal, state and local governments, has <a href="https://www.arc.gov/funding/POWER.asp">invested over $190 million</a> in 239 projects across Appalachia. Although President Trump often calls himself a <a href="https://theconversation.com/invoking-noble-coal-miners-is-a-mainstay-of-american-politics-94281">friend to coal miners</a>, his first budget request proposed <a href="https://www.theatlantic.com/politics/archive/2017/05/here-are-the-independent-agencies-trump-wants-to-stop-funding/519786/">terminating the commission</a>. Congressional supporters <a href="https://www.wkyufm.org/post/mcconnell-aide-takes-appalachian-regional-commission-role#stream/0">restored its funding</a>.</p>
<p>It is popular for commentators to propose initiatives such as <a href="https://theconversation.com/an-alternative-to-propping-up-coal-power-plants-retrain-workers-for-solar-101961">retraining coal workers for solar</a> or <a href="https://www.rollcall.com/news/politics/trump-doubles-coal-west-virginia-lawmakers-natural-gas">natural gas</a> jobs. In my view, this approach is simplistic: A just transition should focus on sustainably rebuilding regional economies, and should be informed by input from people who are affected. </p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1190002378499604483"}"></div></p>
<p>Subsidies to local governments and benefits for individuals are a start, but should be better funded and implemented than trade adjustment assistance. They should build local institutions, such as schools and planning agencies, that can contribute to sustainable economic diversification – something the Northwest Forest Plan failed to do. And they should distribute benefits more equitably than the compensation program for tobacco farmers.</p>
<p>Along with job retraining programs, POWER is funding <a href="https://www.arc.gov/images/grantsandfunding/POWER2019/ARCPOWERAwardSummariesbyStateOctober2019.pdf">infrastructure development, public services and new educational institutions</a>. But a just transition will require substantial resources and effort. It remains to be seen whether federal efforts will rise to the challenge.</p>
<p>[ <em>You’re smart and curious about the world. So are The Conversation’s authors and editors.</em> <a href="https://theconversation.com/us/newsletters?utm_source=TCUS&utm_medium=inline-link&utm_campaign=newsletter-text&utm_content=youresmart">You can read us daily by subscribing to our newsletter</a>. ]</p><img src="https://counter.theconversation.com/content/116340/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Ann Eisenberg does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Economic and political trends are driving a shift away from coal. What kind of assistance do coal workers and communities need?Ann Eisenberg, Assistant Professor of Law, University of South CarolinaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1253872019-10-17T10:28:08Z2019-10-17T10:28:08ZHow much do you need to retire? £10,200 a year at a minimum<figure><img src="https://images.theconversation.com/files/297466/original/file-20191017-98674-p303kv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The earlier you start saving for retirement, the better.</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>Retirement is changing. Following more than a century of increases in life expectancy, one in every five people in the UK <a href="https://www.ons.gov.uk/peoplepopulationandcommunity/populationandmigration/populationestimates/articles/overviewoftheukpopulation/august2019">is 65 years and over</a>. This ageing population presents some big challenges, not least when it comes to financial planning.</p>
<p>To provide people with a sound basis on which to make decisions about the kind of life they want in retirement – and how much they will need to pay for it – colleagues and I have spent the past year and a half working out <a href="https://www.retirementlivingstandards.org.uk/developing_rls_research_report.pdf">two different levels of retirement living standards</a>. We’ve spoken to 250 people, building on our <a href="http://www.minimumincomestandard.org/">wider research</a> into what income is required for people to meet their material needs and participate in society.</p>
<p>For single retirees who want a minimum standard of living – to meet their basic needs and have a little left over for fun – we estimate that they need an annual income of about £10,200. For what people would consider a comfortable retirement, where you have more financial security and flexibility, they need an annual income of £33,000. </p>
<p>To work this out, our research asked a series of groups to discuss and agree detailed lists of goods and services that are needed to live at each living standard. This is not just what is needed, but how long each item lasts, where it would be bought and the kind of quality it is reasonable to expect.</p>
<h2>Three different living standards</h2>
<p>If you are a single retiree, we calculate that you’d need to spend about £10,200 to have a minimum standard of living. As well as covering essential needs such as shelter and groceries, this includes £15 to eat out once a fortnight as well as £10 a month for a takeaway. It is based on buying reasonably inexpensive clothing at supermarkets and cheaper high street shops, but looking after your feet with good quality shoes. </p>
<p>It includes the cheapest contract smartphone, an entry level laptop and the internet, all of which allows you to participate in the world and not feel excluded. It doesn’t include a car, but does include a budget of £20 for social activities each week as well as two short UK holidays each year.</p>
<p>This minimum living standard provided the starting point for discussions with groups about what higher standards would include. We asked members of the public to agree the key features of two living standards above the minimum, which were then discussed by our group participants.</p>
<p>A moderate retirement living standard is where you “know full well you can always maintain [the] minimum”. But is also about having greater freedom to do more of the things that you would like to do. As one participant put it: “You need to plan, but you don’t have to think about every penny.” </p>
<p>With this in mind, groups agreed that at this level a single retired person would need £20,200 a year. This includes a budget of £75 each month to cover eating out, takeaways and coffee and cake while out shopping. It also includes the cost of a pre-paid funeral plan – something not included at the minimum – as it was important for them to avoid being a financial burden on family and having peace of mind that this cost was covered. As one retired man put it, “having enough to bury yourself” is crucial. </p>
<p>A moderate standard also features a car, a £60 a month Sky package and £35 for social activities each week, all of which give greater choice and flexibility than at the minimum. Holidays at this level are a holiday in Europe each year as well as a UK city break.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/297342/original/file-20191016-98640-5pp64v.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/297342/original/file-20191016-98640-5pp64v.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/297342/original/file-20191016-98640-5pp64v.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=375&fit=crop&dpr=1 600w, https://images.theconversation.com/files/297342/original/file-20191016-98640-5pp64v.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=375&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/297342/original/file-20191016-98640-5pp64v.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=375&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/297342/original/file-20191016-98640-5pp64v.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=471&fit=crop&dpr=1 754w, https://images.theconversation.com/files/297342/original/file-20191016-98640-5pp64v.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=471&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/297342/original/file-20191016-98640-5pp64v.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=471&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><span class="source">Pensions and Lifetime Savings Association</span></span>
</figcaption>
</figure>
<p>Groups described the next level up from this as a comfortable retirement living standard. This is a standard that allows flexibility, particularly in terms of financial security and having the opportunity to help others. People were clear that retiring at this level would mean peace of mind, with a financial buffer so that if, for example, your fridge stopped working you could replace it without worrying about making spending cuts elsewhere. A single retiree would need £30,000 a year to achieve this.</p>
<p>Being comfortable in retirement means being able to do a lot of what you want to do, but groups were clear that this was not about limitless choice or unfettered spending. There was a clear sense that you were likely to be able to retire at this standard as a result of careful financial planning and that maintaining this level in retirement would require the same approach.</p>
<p>At this level, groups decided that a single retiree would need £50 a week for eating out, takeaway and more spontaneous spending such as lunch out after shopping. It might include help around the house, such as a gardener to cut the grass in the spring and summer and a window cleaner once a month. Holidays at this level add up to three weeks in Europe each year, and critically at this level, groups included a budget of £1,000 each year for helping others.</p>
<h2>Starting point</h2>
<p>These three levels provide a starting point to think about both what we want life to look like when we retire – and how much is needed to cover it. They’ve already been adopted by a number of high-profile pension providers <a href="https://www.retirementlivingstandards.org.uk/">and advisers</a>, and we hope they will become an accepted element of pension planning.</p>
<p>Considering the full new state pension <a href="https://www.gov.uk/new-state-pension/what-youll-get">is currently £8,767.20</a>, which you only get if you’ve made national insurance contributions for 35 years, it’s incredibly important to think about the future and plan accordingly. The earlier you start the better.</p>
<p>At the same time, we should not lose sight of the growing number of people already retired that do not have enough to meet <a href="https://www.jrf.org.uk/file/52023/download?token=W-sBJuOp&filetype=full-report">their minimum needs</a> – materially, socially, emotionally and psychologically. Society – and government – must step in to help them, as well as encouraging and making it easier for people to better financially plan for their futures.</p><img src="https://counter.theconversation.com/content/125387/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Matt Padley received funding for this project from the Pensions and Lifetime Savings Association. The research on the Minimum Income Standard is funded by the Joseph Rowntree Foundation. </span></em></p><p class="fine-print"><em><span>Claire Shepherd received funding for this project from the Pensions and Lifetime Savings Association. The research on the Minimum Income Standard is funded by the Joseph Rowntree Foundation.</span></em></p>That’s to meet your basic needs and have a little leftover for fun.Matt Padley, Research Fellow, Centre for Research in Social Policy, Loughborough UniversityClaire Shepherd, Research Associate, Centre for Research in Social Policy, Loughborough UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1249352019-10-15T13:13:08Z2019-10-15T13:13:08ZSouth African study shows how unhealthy ageing takes its toll on health and income<figure><img src="https://images.theconversation.com/files/296851/original/file-20191014-135513-rp018q.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The relationship between income and health underlines the need for strong government policies to break the cycle.</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>Population ageing is often associated with health-related challenges. But its effects also reach other spheres of life. In particular, an ageing population has a big impact on countries’ economies. <a href="https://www.nber.org/papers/w16705">Research</a> shows how it can influence a country’s economic growth. And a similar effect can be found at the <a href="https://www.cambridge.org/core/journals/ageing-and-society/article/ageing-income-and-living-standards-evidence-from-the-british-household-panel-survey/3825CF5F118D6AFC9C3F0A9BFBFDE592">household level</a>. </p>
<p>This is of greater relevance given there is a greater share of the population reaching older age across the world. This had made it even more important to understand how ageing influences household well-being, what challenges exist, and – more crucially – how policies can be designed to improve general welfare. </p>
<p>Our <a href="https://www.sciencedirect.com/science/article/pii/S2212828X18300768">research</a> in South Africa seeks to understand how different social policies can influence health and income at older ages. The idea is to contribute to the development of evidence based policy making. We believe that our findings are relevant to other developing countries too. </p>
<p>Our research has been conducted under the umbrella of the <a href="https://haalsi.org/">Health and Aging in Africa: A Longitudinal Study of a community in South Africa</a>. It’s been conducted in 31 villages in rural northeast South Africa, close to the border with Mozambique since 2013. The study, which is ongoing, has involved collecting income and health information on older people approximately every two years. </p>
<p>This is the first study of its kind in Africa but joins a large family of studies that follow the same methodology to explore the links between ageing, income, and health across many countries.</p>
<h2>Ageing, jobs and health</h2>
<p>Ageing can influence a households’ economic well-being because it has a bearing on employment. In our study we have seen employment rates drop off even before people reach retirement age. In South Africa there is no legal retirement age, but men and women qualify for an <a href="https://www.sassa.gov.za/Pages/Older-Persons-Grant.aspx">old age grant at 60</a>.</p>
<p>This means that a large share of older people who are still in active age do not participate in the labour force. </p>
<p>There are two potential explanations for this. One is the very high levels of <a href="https://www.statssa.gov.za/publications/P0211/P02112ndQuarter2017.pdf">unemployment</a> in South Africa. This is affecting older people too. Being out of the labour force is strongly associated with lower incomes and thus a lower capacity to consume.</p>
<p>Health is the other factor affecting the economic well-being of households. This can happen in two ways. First, unhealthy ageing is strongly associated with greater need for health services. This, in turn, is often coupled expenditure that reduces the amount of income available for other needs like food. This can even lead to medical impoverishment – when a household’s income falls below the poverty line due to the fact that money has been spent on health services. </p>
<p>In our research we found that most of the people living in the study communities are already living below the South African poverty line. </p>
<p>Unhealthy ageing can also impact economic well-being by forcing other household members out of work to provide care for the elderly – compounding the burden on the household. </p>
<p>It’s also important to remember that economic well-being itself can have an impact on health. It’s evident from our research that while health influences economic well-being, the inverse is also true - economic well-being influences health. </p>
<p>Results from the baseline wave of the our study show that individuals in the highest wealth quintiles – defined either by wealth or consumption – are more likely to be in better health. For example, an individual in the <a href="https://www.sciencedirect.com/science/article/pii/S2212828X18300768">highest wealth quintile </a>is approximately two times less likely to be in the bottom quintile of disability. </p>
<p>And there’s <a href="https://link.springer.com/article/10.1007%2Fs00038-018-1173-8">evidence</a> that individuals in the lower wealth quintile are less likely to access health care or follow the correct guidelines for disease prevention. This can be either due to knowledge or financial capacity reasons. </p>
<p>This implies that already impoverished households can be made worse due to the health consequences of their economic position.</p>
<h2>Breaking the cycle</h2>
<p>The relationship between income and health underlines the need for strong government policies to break the cycle. </p>
<p>A myriad of policies could be considered. In South Africa the focus has been on establishing an extensive social grant net. The country’s old age pension system is one of the largest and <a href="https://www.oecd.org/finance/private-pensions/42052117.pdf">more generous</a> – in proportion to local income – in the developing world.</p>
<p>South Africa has three social grants to protect households from the financial consequences of ageing: </p>
<ul>
<li><p>Old age state grant provided to all individuals over the age of 60, </p></li>
<li><p>disability grant to those that have a disability that prevents them from working and,</p></li>
<li><p>carer grant which is provided to individuals that need to care for disabled adults. </p></li>
</ul>
<p>These grants have become strong pillars in the South African welfare system and most importantly a valuable tool for <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1754420">tackling poverty</a> among older people. Over <a href="https://www.sassa.gov.za/Statistics/Documents/Fact%20Sheet%20-%20Issue%20No.21%20-%20September%202018.pdf">17 million</a> grants are paid out every month.</p>
<p>But there are still important challenges. The main one is that administration isn’t perfect – some people who are eligible aren’t getting them. For example, around 10% of those eligible for the old age grant aren’t receiving it. This number increases to over 85% for both the disability and carer grant according to our estimates in the town of Agincourt, Mpumalanga province. The reasons for this sub-optimal uptake are either lack of knowledge, stigma, or lack of the required documentation such as a national identity card. </p>
<p>What’s clear is that there’s a need to improve access.</p>
<h2>What’s needed</h2>
<p>As the population ages in developing countries like South Africa it is vital to remember the dual relationship between health and income. This can prove helpful in the development of strong social policies that contribute to healthy ageing as well as protect and improve the economic well-being of households. This is important given that that poverty rates and bad health are often greater for older people. </p>
<p>Evidence gathered in South Africa suggests where policy interventions can have a larger impact. And it can be a source of knowledge for other developing countries.</p><img src="https://counter.theconversation.com/content/124935/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Carlos Riumallo Herl receives funding from the European Union’s Horizon 2020 research and innovation programme under the Marie Sklodowska Curie grant agreement No 707404</span></em></p><p class="fine-print"><em><span>David Canning receives funding from National Institutes of Health of the USA.</span></em></p><p class="fine-print"><em><span>Mark A. Collinson receives funding from the National Department of Science and Innovation</span></em></p>It’s evident from research that while health influences economic well-being, the inverse is also true, economic well-being influences health.Carlos Riumallo Herl, Assistant Professor, Erasmus University RotterdamDavid Canning, Richard Saltonstall Professor of Population Sciences, Harvard UniversityMark A. Collinson, Reader in Population and Public Health, MRC/Wits Rural Public Health and Health Transitions Research Unit, School of Public Health, University of the WitwatersrandLicensed as Creative Commons – attribution, no derivatives.