Will the State Pension Be There When You Retire?

0:00If you've listened to the podcast for a while now, you'll know that in my early 20s, I had a lot of debt. Tens of thousands of pounds of the stuff. It wasn't really a great situation, but it did teach me a lot, and a lot of those lessons still shape how I think today. We've also had the pleasure of speaking to guests like Amy on the podcast, who pulled money out of an index fund during a market scare and then tried to stock pick to recover those losses. If you've had an experience with money that's changed the way that you think, we'd love to hear about it. There's a short form linked in the description, so if you're happy to share it, just fill that in.

0:31There's an evaluation done every five years, and that shows the balance of this National Insurance Fund falling to zero in the 2040s. So we need to get ahead of this now. We can't afford to wait years and years. Will today's pension system actually work for you when you retire? And if not, how should it be redesigned? These are the questions Al Miles, an investment actuary and senior DC strategist at Legal & General, set out to answer. I love the fact that you've costed a solution because I think most people will sit there and just say solutions that have absolutely no credibility. We do need to make some changes and tweaking maybe won't be enough.

1:05Yeah, we promise we're going to make this happy by the end. I find this with my work, there's no, yeah, it's not a positive news story yet. So, to start off, what is an actuary? That's a good question. So an actuary is somebody who is able to assign a value to risk in the future. So we're adept at making long term assumptions and then applying those to practical examples. So actories work in the field of investments, they work in the field of insurance, pensions, to name a few. you try and put a bit of certainty on uncertain things especially when there's lots of people and lots of money involved so like the value of all the risk to an insurance company and you go you've got enough money or you haven't got enough money to cover all your potential exactly yeah yeah okay to ensure you're covered all right whether that be personally or as a company and i think one of the things about actuaries are they typically work for big organizations looking at big amounts but what you've interestingly tried to do is is go to the micro to the individual and ask like how much might someone need for retirement yeah exactly can you tell us you know what you found there broadly so yeah my interest in the individual is I think driven me throughout my time working in the industry I do it's like who are we trying to serve ultimately what does good look like which sort of led to this work having a think about okay we're good at the macro level but individuals make their own decisions and how can we make sure that individuals are set up to make the most out of their lives whether that be themselves contributing to a pension or whether that be the state the government making sure that everyone has a fit retirement um so yeah driven by the individual and then grouping that up to a kind of macro societal level and many people we have sit there say that it's the hardest problem in finance or someone said that in the last one but we basically have spoken to so many people go how much money do people need for retirement i go oh well uh it depends and it's like a bit of a cop-out right you use something called the minimum income standard to help you answer this question so what is that yeah so it's a work that's been done for 20 years plus by professor matt padley and his team at loughborough university um and it's qualitative as well as quantitative number of focus groups up and down the country together with normal people normal citizens working out how much people believe they need to have dignity in retirement and quite interesting out of that it's not just things it's also being a full paid up member of society and what does that mean to stay as a fully functioning member of society so when we look at the breakdown of the costs It's not just kind of food and electricity.

3:56It's then social and cultural activities so that you can stay a part of community, society. And is that different in different parts of the country? Is it like by region or by city? How does it work? So there's quite a detailed spreadsheet that sits behind it where you can put in various categories or select different categories. So depending on age, how much your household needs in order to meet that minimum income standard, it's also split between single and couple, recognising that costs are slightly different. You used an example of someone called René. I believe this is, is this a real person, René, in the report?

4:37I don't know René, but I've read about René. Okay, yeah. Could you explain René's circumstances and what you found out about René in regards to this adequate retirement that we're discussing? Yeah. So Renée is supposed to represent those that are working on the national living wage throughout their employment. Renée has two children. So she's taken a bit of time out of paid employment to look after care for her two children. She privately rents and she has very minimal, if no savings. And she's saving through her employer, a private sector employer, into a pension, but at the minimal level. So we kind of take Renee through the current situation where she falls short.

5:24It's roughly 60 ,000 as we've calculated kind of back of the envelope figures. And then the whole report is about trying to make sure that Renee has enough when she gets to retirement to live in retirement with dignity. Does she have enough? Currently or after? After. Yes, we do. So make it right for Renee. You make it right for Renee. Yeah, that was always the goal to sort of articulate and work through some sums to make sure that Rene was okay in a better position. We'll get to making it right in the conversation so we can end on a high so it's not all too depressing. How many people are Rene?

6:01Like what cohort of the UK are in that kind of position? So a sizable chunk of the UK workforce and increasingly so when we think about those that are working zero hour contracts. We've got 8 million people in the UK who work part time. We've got 6 million, roughly 6 million looking after others, kind of unpaid care roles. We've got a section of people who are joining the workforce, formal workforce a bit later. so that's having implications for how young or not they start saving into pension so yeah a sizable chunk of the UK I would say needs more attention and yeah the whole premise is that maybe the pension system we've got at the moment wasn't designed for the 21st century so it's re-examining whether what we have in place the system we have in place is fit for purpose and if not how we might make it more fit for purpose at an individual level employers and then also the role of the government we had the head of investment for nest who are one of the big auto enrollment posts sat there and he basically said that we're most of our clients will be renting but by the time and i was like this is the guy that's controlling the money for people you know it's it's crazy these shifts that we're going to see over that time so um you mentioned something there about people starting later and i know you did some modeling around that as well about if you start at 25 or 35 can you tell us what those figures show you as well around outcomes yeah so uh i guess a bit of context is in the uk auto enrollment came in in 2012 and that means that if you're age 22 or over you're auto enrolled into a pension by your employer if you meet certain criteria but every year a certain proportion opt out if they are

7:57Al Miles:enrolled 10 % and it might be getting slightly higher in recent time um so what are the implications of that um and so say a 10-year period without saving and that could be later on kind of middle career but we just picked it the start and that led to a kind of decrease in our model of about 300 ,000 pounds that 10-year gap yeah so people uh saving 500 ,000 rather than 800 000 it's the value of the state pension but i know that the state pension benefit in its current form assuming like four percent rule which is a weird rule would be about like 300 grand so you're basically saying you might be losing 12 grand a year in retirement income yes for those 10 years yeah which is a lot yeah which may be for good reason people don't realize um and opt out of their pension for various reasons um but what i'm keen to do is make sure that people realize the value future value of uh the pension savings the country the owner the owner of this house that we're in will is sat at the back of the room and when i first met him he he proudly boasted to me that he opted out of the pension because he wasn't that asked about it and the first way i ever changed his life financially before getting him to remortgage his house by the podcast was to get him back in that scheme um will's an intelligent bloke who's actually worked in finance as well he worked um at monzo monzo so you know if people like him are opting out there's lots of people that that don't have that don't encounter you know they have no one around them that is financially educated they might even have people that are supporting them to get out of pensions because their granddad got done over by a scandal in the 70s and he's like pensions are a scam don't touch them you know like the daily mail or whatever it was in the in the past or bhs or whatever yeah there's there's large sections of the uk where they really don't trust the pension system yeah trust comes up a lot in my research and work yeah and that may be getting worse not better over time well they keep messing with it they keep they keep implying that they're going to stick their hands in it and stuff and if you want to convince people to save into a product for 30 plus years don't change the rules every 12 months is probably my suggestion to the politicians um i yeah i also think i was surprised then when you said that it's going up but then i think cost of living crisis and it's a it's a trade-off isn't it of what's going up sorry the amount of people opting out of their pensions okay yeah i was like how the hell are we in a place where that's getting worse well yeah the cost of living crisis It's a cost of living crisis.

10:31Yeah, it's like people literally can't afford to pay into their pensions potentially, or they think they can't. Yeah. And I guess I'd flag it's not just the individual's contributions. It's also if they've got an employer, the employer's paying into it. And then you've got tax relief as well that tops it up a bit more. So, yeah, thinking more broadly than just your contribution and what you might be missing out on. what what are some of the like um consequences of people like self-employed people not saving enough in their pension and people opting out of their uh pensions as well like what what could happen in the long term in like maybe 40 years 50 years so self-employed is an area of current focus because what in the uk you've got four million self-employed people um and i reference auto enrolment earlier as a system of increasing participation in pensions which has been hugely successful but self-employed aren't caught by that auto enrolment system so the industry and government is having a big think at the moment and pensions commission has launched recently and they're looking at the pension system in the uk and what might be done to better adapt it so it is fit for purpose for the 21st century and one of the things that they're thinking about is self-employed and how might you get self-employed paying into pension i mean what i've read self-employed maybe do save for the long term but possibly do that in an isa rather than a pension because they don't know if they need the money yeah exactly um so is there anything we can do to pensions to make it more attractive to someone i mean there's lots of research that nest has done looking at sidecar savings and whether you can link short-term savings to long-term to make it more attractive so that you are able to get some of your money out i attended an event last week that was looking at housing and pensions and whether there might be an opportunity to open pensions up or have people access or be able to pledge their pension to help them get on the housing wasn't my idea i was talking about this about charges on pensions it'd improve engagement as well because the 20 year olds would start to like their pension a lot more if they thought oh it's just bought me a house or got me on the ladder you know there's also more discussions about state pension and whether people might be access be able to access a state pension a year's worth of state pension now when they're younger to again get on the housing ladder and then the payoff is that you or this side bit of that is that you um retire a bit later you trade a year So it sort of brings it forward, which, yeah, is an interesting...

13:11People are thinking... Are they easy changes to make? Or do you think it will be like a 10-year, 20-year project? Or could it be like a two - to five-year project? Like in pensions, probably everything moves... Decades. ...quite slowly. Which doesn't help us right now. We're self-employed and people... Well, you make people that are self-employed pay tax on account. You make them pay a bill in July for their next year. So why not just add a bit to that and then be like, you know, oh, there's your pension savings or whatever. or whenever you offer someone a rebate you go if you put this rebate into this account will give you a bit extra yeah i don't think you can start moving it the right way there's been talk as well about having it as part of the tax return at the end of the year so whether you have a box in there that's already filled in with a nominal pension contribution and people have to actively turn that to zero that's a good idea be a way of um yeah behaviorally getting people to save a bit and and hopefully making it a bit straightforward for them to do so.

14:07Yeah, we promise we're going to make this happy by the end. We're going to fix René. I find this with my work. There's no, yeah, it's not a positive news story yet. No, but we're going to fix it for René. But there's lots of, yeah, potential. Let's keep diving into the depths of despair for a bit, shall we? So one thing that I found pretty alarming in your research and stuff that I've already looked at before is the age gap that exists across the UK in terms of like quality of life, healthy life expectancy. I live near Blackpool in a place called Southport. Blackpool has the lowest healthy life expectancy in the UK.

14:43They die nearly 20 years before the highest, which is... Kensington and Chelsea. Not far from where we are right now, probably. I mean, it's all London to me. You'll be like, oh, it's the other part of London. It's a completely different postcode. No, it's not. It's a different postcode, but it's still... Different. Is it North London? Different. Southwest, West London, Southwest. southwest sw1 sw6 yeah guys you gotta argue with me about chelsea mate sw6 is it south of the river no so how is it southwest london i didn't make the post coast how is it southwest london if it's not if it's not south of the river it's sw6 sw3 it's in the north it's north anyway they're doing well yeah yeah yeah yeah yeah yeah yeah we should all go yeah so but how are you how how can you model solutions around averages when like large portions of the population will never hit that average yeah and this is something we touched on i've looked at um in some detail is as you say the huge disparity between those that live for a long time and those that don't and that disparity is increasing over time not decreasing um which is quite interesting a kind of caveat on that healthy life expectancy, which is on average 19 year difference, is that that is self-reported data.

16:01So it may be slightly different from 19, but it's all that we have to go on. And actually the difference in actual life expectancy is about nine years. So even that is quite shocking. And when we have a think about when people might retire, those differences really have a huge difference. And when we have a think about when people have access to the state benefits, And I think everyone's heard that state pension age is rising. It's currently 67 due to rise again to 68 and then not sure. That really brings into question, I think, the equity. Because lots of people won't actually make it to state pension age.

16:46Yeah, 14 % already don't. And it's like the people who rely on it the most are the people that it gets pulled away from. Yeah. So it's interesting when you ask people about the state pension, people do see it as a right. They've paid into the system over a certain number of years. They've got their credits and so they're due it when they get to retirement, which is different to how we think about state benefits during working life. I find that difference quite interesting. And if we think about state pension as social insurance, maybe that slightly changes how we think about it moving forward.

17:21And the fact is that when we look to the future, increasing numbers due to average life expectancy is increasing, increasing numbers will make it and so it will be paid out and so it becomes increasingly unaffordable, which is what I'm really interested in. How do we make the sums add up? And it's not sustainable and it's not equitable. So how do we make it more fair looking to the future in aging populations we know that the demographics only lean one way and in quite short order so we need to get ahead of this now we can't afford to wait years and years but it doesn't surprise me that people see it as a right because i feel the government have positioned it in that way whilst behind the scenes the legislation has described it as a benefit so the pension act calls it a benefit but people have been it's your right to have a state pension we need to protect the pensioners we need to increase it you've collected your stamps you know every every outward message from the government and policymakers has been that it's a right it's the social contract it's so you know and now they're like oh why do people think that it's do you know i mean but then increasingly people do think that it is unaffordable and so the kind of discussions you have with your friends stop for them no and there was a yougov survey done just before christmas last year that asked specific questions about the current state pension, not just in the UK, across Europe and the US.

18:47And it was quite interesting, the difference in response between those that retired, currently retired, and those that were working. And the retired saying, yes, it is affordable in far greater numbers. Yes, we should continue. And those of working age, the reality was biting and they were having a question about whether it would be there for them when they got to retirement themselves. And then there was a question in the survey about, you know, what can we do to fix it? And to your point, people don't like the answers, the possible solutions because it's, yeah, it's not great news. Tomein, I know you've been setting up your business recently.

19:31So how has that been going? Pretty cool. T Unlimited is out and about. One thing I have found, I was looking for a bank account and a lot of the big players in the game, they're not covered by the financial services compensation scheme. So a little bit worrying because I wanted my money to be safe. So I think I'm going to go with Tide because they cover up to£120 ,000. It's a little bit worrying to me that you think you're ever going to have£120 ,000

19:54Al Miles:in your business account, bro. I use Tide's Instant Saver account because I can earn interest on the money in my business account that I don't need day to day. With a Tide Instant Saver account, you can get up to 4 % AER variable. Plus you'll get£100 cash back if you deposit£5 ,000 into your account in the first 30 days. If you want to try it out, you can use the code MAKINGMONEY, or one word, or just use the QR code that's on screen. We've also left a link in the description where you can find the terms as well. Variable rate is correct as of the 15th of January, 2026. So T, tell me the riskiest thing you've ever done.

20:30Mate, the cameras are rolling. I can't do that. You're trying to get me cancelled. I mean, most of my risky things were probably my teenage years. But one thing I could say about finance risks, definitely invested in stocks with zero research, just because my friend told me to, his research was, trust me, it didn't go well. Wow. So clearly risk affects you in both your personal and business life. And that's why we're really happy today to be partnering with Vanta. They automate a lot of risk processes and help you see the risks in a centralized platform so you know what really needs your attention.

21:00Besides risk, the main thing Vanta does is automate compliance with security protocols that you need if you want to do business with larger companies or grow internationally. This is stuff like GDPR, HIPAA, ISO 27001 and SOC2. The beauty of Vanta is they make it easy to prove you're compliant with these standards, saving up to 90 % of the time it takes and on average half a million dollars. You can get started at vanta.com forward slash making money. There's a link in the description. yeah triple lock these points i mean obviously you support the systems that benefit you don't you this is that's really what a democracy is you vote in your own self-interest and it kind of on that point it's quite interesting aging populations i keep coming back to this is my pet subject but aging populations if the average age is increasing then you're going to get increasing cohorts voting a certain way and actually at the moment the people who turn out to vote are typically older um and so do you get a self-reinforcing mechanism where you're not going to vote for a benefit that you're currently drawing or it's for you're very close to drawing which i think is quite interesting to work through the dynamics of that well you look at like the french system where if they try and increase the state pension age the 20 year olds riot because in their heads they think i want to retire at 60 what they don't realize is that the scheme won't exist if they don't increase the state pension age because it's unsustainable because it's 14 % of GDP or whatever out there.

22:24Yeah and it's unfunded. State pension is unfunded so it relies on people paying in their NI contributions to pay the benefits straight out the door the other side to people currently drawing. So only a small change in the age can flip that the wrong way. You know there's an evaluation done every five years of the National Insurance Fund which is where national insurance contributions flow in, state pensions payments are paid out and that shows the balance of this national insurance fund falling to zero in the 2040s i mean it's the balance and there's big numbers coming in and out so it doesn't mean there's no money but it just shows how soon things might get a bit trickier is it is it like um so part of the aging population is the boomers which are like the biggest cohort of humans ever someone once described it as the meal passing through the snake to us they're like this big block of big people do you mean it's like a lump of people is it like a time problem of not to be morbid but when they die does the problem go away um so yeah it's definitely more pressing at the moment because of this cohort i mean as they increase in the age you know there are costs more costs involved as they age so somebody aged 80 say needs far more care and costs the system more than somebody age 60 um so the balance of those kind of older ages is quite important as well as just you know retired versus not retired but i mean there's declining fertility rates so people having less children so the population is shrinking anyway um and that dynamic is happening quite quickly and there doesn't seem to be anything that anybody can do to kind of get people to have more children.

24:07So, yeah, I don't think it's one that's going to be fixed once the baby boomers have moved off. The state pension age, let's talk about some of the solutions around the pension age and what you've modelled them because, like you say, you've costed up some options that might work. Whether they're politically palatable is another question, right? Yeah. Would you say so? Do you think they're going to be popular, what you're about to say? If they're phased in over a number of years. Okay. I mean, we weren't aiming to have something that would totally work. It's more exploring the art of the possible.

24:41And we explore what other countries are doing and try and look, take inspiration from others, noting that you can't carbon copy what somebody does over there and just place it here because it's not as easy as that. So in the paper, we explore Iceland, which I first got interested in because they have the lowest gender pensions gap. across OECD. They had one of the lowest pay gaps in broadly because they gave maternity rights to the men at the same level. So they're very equal. You lose it, you lose it, paternity rights. Yeah, ring-fenced benefit. So the men were like, I might as well not work.

25:16They went off as well, didn't they? Yeah, whereas when it was me, it was two weeks. My friend just did two weeks. And my boss was like, you're only going to do a week of it, right? Because, you know, you need to sell. Well, yeah, and shared parental leave here There has not been a policy that's flown off the shelves. When it was launched, it had a target 25 % take up. And it has been like 2%, 2.5 % of eligible fathers who've taken it. So yeah, it's not been a huge success for no reasons. Sorry to break your flow though. So go on, you were looking at the Iceland system. Yeah, Iceland. So Iceland has a 5 % gender pensioners gap.

25:52So that's so much smaller than we have in the UK. So interested in what's going on there. looking at the pension system and they have a really interesting premise philosophy of getting everybody over a certain level and they have a poverty uh metric that they aim to hit um and they do it by looking across people's or taking into account people's workplace pension so that's mandatory and at 12 so they look at how much you've saved through your employer and if you haven't saved as much you get less support from the state if you haven't saved as much you get less support sorry okay you get more support that is pretty novel because i would be throwing money in you know i mean maybe that would work but go on apologies yeah so if you save less into your workplace pension you get more state support so that everybody gets a certain level of state support uh which is 15 of median income and then there are a range of means tested supplements that build on that to get everybody over above uh that 45 kind of metric so there's an interesting single metric so if you live by yourself life is more expensive so they take account of that um and yeah and range of other means tested supplements and how how well costed and sustainable is that scheme at the minute do you think like do they face similar demographic i mean they've got population the tiny population in comparison to us.

27:20Yeah, which is why it's kind of the population of Leicester. So again, it's not like, okay, we've found the solution, this will work perfectly. But the premise of it and the moving parts, the mechanism I think is interesting to explore. And you might think that with that, given state support, people don't work as much, but actually the reverse is true. So Iceland has the highest employment metrics across OECD countries. are most telling at the older ages so they have the highest employment at 65 to 69 so it feels like that then you get into a reaffirming positive loop where people know the support's there so they work a bit longer or feel able to and it's more complex than that but it seems to work so what is their state pension age do you know uh 67 so it's the same as ours yeah so this element of means testing just uh it's still there's still a guarantee there's still a social contract or kind of there's an element that everyone gets even if you become a billionaire you're entitled to your 15 percent of average pay i don't know what the uk system sorry median is it about 20 odd 25 percent of median pay is the current state pension 12k and the average wage is 36 yeah it's like a third i mean our state pension is uh rated 18th out of ocd in terms of generosity yeah so it's not like we're flying and everyone's doing really well our base pension isn't yeah isn't top of the charts no and relative to other european countries is particularly 18th out of How many?

29:0220 plus countries. Generosity is a weird word though because it's what do you get in return on the other side. Generosity means people pay a lot more tax to fund that scheme. So is it generous to the people that are paying for the scheme? Yeah, it's complex. It's a generous amount. You might look at France and go, oh, well, they get 75 % or whatever. But yeah, you pay way more in tax for it. So generous is a weird term in that sense. But, okay, did you model that then, that Iceland system of a smaller universal with a means-tested element for the UK? Yeah, we did, looking at and getting data from the Wealth and Asset Survey, looking at different groupings of income in the UK.

29:47And, yeah, we had the current system, state benefits, and then we scratched that and then started again with the Iceland system rebuilding, Using the case studies that we explore in the report, so René and a guy called Paul. Okay, yeah, yeah, yeah. To see how they would bear with the switching system. How did they do it? So it worked well, but I'm guessing I would say that because it's in the report and we wanted to get to a good conclusion. But the main thing was to get René over this minimum income standard, including private rent. So using the Iceland system, we got her there. Paul got less from the state system, but was still doing fine.

30:35What is Paul? What's Paul's incomes? Like, who is he? He is, he works in financial services as a consultant. He's got a reasonable pension. He's got his own house. He's doing okay. Paul is, but isn't mega, mega wealthy. What kind of income would you say would be in today as well, roughly? Where would you pitch him? Like a higher earner? A higher earner, yeah. Yeah. Under 100K? Like 80, 90K maybe? Yeah, under 100K. Okay. But he's doing okay. Yeah, yeah. Yeah. And there still was a difference between René and Paul. I think the whole premise of the report is we know there are differences in wealth and that's okay.

31:15But when the differences in wealth become so great that one person doesn't make it to a dignified retirement, And that brings into question the societal contract. Yeah. One thing I'm interested in as well is those incentives to work. And I also think, you know, I like the fact that the UK state pension is for everyone because I feel it's kind of like a patriotic element to it. If you've paid into the system, you get the full state pension. Paul, I'm guessing, was better off. So got less out is what you're saying. Do you know how dramatic that effect is across the earnings range? At what point would someone start to be worse off under your suggested scheme than they would be better off?

32:00So worse off relative to the current system? Yeah, like anyone above 40K in income, 50K in income, who are the worse off people as a result? Oh, well, pensions wealth in the UK is like the most unequal form of wealth, which I found really interesting. So the top 10 % hold 64 % of the overall pensions wealth and the bottom 50 % have less than 1%, which is huge and it's greater than overall net worth. And in the report, we break down wealth into its underlying components. So look at pensions wealth, property, financial wealth and physical wealth. And we use a Lorenz curve, which measures levels of inequality.

32:42and physical wealth is the least unequal and the most unequal is financial wealth closely followed by pensions wealth so everyone's got an iphone so like there's a democratization of physical wealth there and a car maybe yeah or a tv and what you see is wealthy people there's an upper limit isn't there there's only so far you can go with it and then they just start to buy assets essentially no one needs 10 phones and you know an iphone 16 is pretty good yeah but okay and the difference between that top 10 you know the top 1 is hugely different from the top 10 so it accelerates quite quickly even within the 1 the 0.1 probably control a large portion of the total you know you talk about inequality inequality within the top 1 is massive there's billionaires all the way down to millionaires within that range as well.

33:33Well, I guess the premise of the report wasn't to fix overall inequality. It was just to bring everybody up to that level of dignity. In retirement, that was the aim. But we articulate the levels of wealth and income inequality, and wealth's a lot higher than income inequality. I want to play devil's advocate here and risk getting cancelled in the comments. Should people who have opted out of pensions then be carried by the rest of people? and is it fair to say to someone who's committed their whole life to working and saving and doing the right thing you've done well so you're going to get less so we can support this person over here who opted out at 20 and has just lived like bald on that budget basically and now got nothing um so it's complicated isn't it and these sort of public policy measures it the devil's in the detail but you don't want to make it too detailed too complicated uh so there's a fine line i mean something i bring out with pensions is that often we think about it as an individual asset yeah which maybe compared to housing you maybe don't think i mean if you've got other people living in your house it's a household it's a shared asset so i think that's something i'd like to do more work on is understanding the dynamics of individual versus household when it comes to pensioners wealth um and how we might do that a bit better or or feed that into some of the policies that are made um and i'm thinking here about an idea that's been banning around is the idea of a household pension which i think's quite interesting and there's an argument against it because so from a female perspective it's like no we want every woman to have their own individual wealth and independent and not be reliant on somebody.

35:22But in terms of planning for the future, if you do have a household, it would be great to enable people that want to to save together for retirement and make that efficient and something that people would want to do. Would it just be two people, like the couple, like the man and the woman or whatever? Or would it be like the kids as well? Like the kids or like siblings? Yeah, multi-generational households. There's an increase in multi-generational households. But how would that work in practice for like you, when the dad gets to retirement first and he's like, okay, I want somebody to destroy a pension.

35:57And then the brother's like 10 years younger and then his son's like 30 years younger. Like how would it work in practice? Details to be, work in progress. Yeah, but I think it's one area that's worth exploring. And you could, yeah. You can pull your resources. Yeah, and make it tax efficient. So it's not, you know, if you're a high rate taxpayer, you get certain benefits. if you're not and the incentives are maybe slightly skewed at the moment depending on how your household's set up so yeah i think it's i mean i'm not for just launching a new product because there's lots of products but yeah yeah i don't want to speak for why women aren't having children um but maybe one of those reasons is that they feel that they fall behind financially well yeah the opportunity cost is huge yeah yeah yeah i read i don't think it's my place to be like oh you know all the women aren't having kids because of this this and this but you know it is the woman that has to typically step out of the workforce for that period and also you know then you have the policies though the shared parental leave maybe that doesn't work at the moment how can we incentivize people noting that it's not just having kids it's what we societally need people to do because otherwise the system quite quickly grinds to a hole doesn't work as well so um yeah at the moment maybe take too much of a personal financial hit i've got a few kids and have taken time out to look after them.

37:19But yeah, maybe there's something there. And other countries have explored that more. I mean, Hungary has done a lot when it comes to incentivising people to have more children. But with limited success, it seems like it's fairly set. And for women, the kind of decision that's made that it doesn't make sense or there's too much of a cost involved in having more. It's fascinating to me that when I was growing up, everyone was telling me that there was too many people on the planet and now it's like there's not enough yeah i mean obviously there's parts of the world that are

37:48Al Miles:driving population growth massively africa and africa yeah and the answer actually to the western world is well if you're not going to have kids and you've got an aging population you're going to have to open the doors to mass immigration to support the dependency ratio and for these people to pay tax yeah and care i mean care i think has to yeah a lot of work has been done when i'm thinking about care but if we've got increasing number of old people they will need to be looked after who's going to look after them and how are we going to make that financially viable and if it's through unpaid work but we need people to work because we've got less people of working age something doesn't add up well i want to come back to that point around fairness on the macro sense of how do we redesign a system that then means that people who have not saved at all will be supported and people who have who have done the right things because the act of investing is the sacrifice of consumption today so that you can do it in the future anyone who has saved for retirement has given up an ability to do stuff today and then you go to them at retirement oh you've done that so well we're going to give you less support but the people who didn't make that sacrifice who have just spent all of their money and got to retirement we're going to support you because you didn't save there's like a warped incentive there do you understand so in iceland i mentioned that they have mandatory saving for workplace pension so it's not opting opt out game can't game the system if they were going to do so if someone their whole life has saved five percent of their income and hasn't hit the level i'm happy to go i will help you because you've done your bit you've tried but the person who's gone oh i opted out i went to vegas every year and i'll book can you sort me out now the grasshopper you know i'm an ant i like if the grasshopper comes along i'm sorry mate you can freeze i'm joking i'm joking i don't want anybody to i want this guy to freeze what about people who don't work like throughout their lives like they might be on benefits or they might yeah they just they just don't work like do you think they deserve a pension no no i obviously i obviously think we should the measure of a civilized society is how it treats its richest people and there are people that genuinely can't work and i'm happy to carve out a little bit of my my earn is pay lots of tax so that they can live in dignity i think there's there's questions around why as a society are we seeing a growth in the amount of people that aren't working yeah why is it today that we'll have more disabled people than we ever have and it feels like the people who are working now in england are being punished more than the people like you're being punished for working like it's harder to well 10 percent of people just simply are out of work on long-term sickness and i think if you line up 10 people that's one in 10 and working adults aren't there that's a problem we need to figure that out and we need to look at the structures that exist that mean that why is it when people slip into that, that, that system, they can't get out of it.

40:35And how do we encourage people into work? And people in like, there's lots of types of disability and some of them are invisible, but I think most people want to be productive and add to society. I don't know. Yeah. Which is why pension, why pension is so interesting because all aspects of working life, how people save impacts it. So if you're not working, you're not saving into pension, but then what does that mean? both at micro but then macro level and how can you incentivise people or fix the work issue so that people then are saving for retirement so i think yeah joining the dots and more a more holistic view i think is much needed because a saving or a cost somewhere could then lead to a saving somewhere else maybe not now but in the future so i think we can do more in bringing it all together to make an economic case for whatever direction we want to move in whatever change we want to make societally so you say a cost today could lead to a saving in the future an idea that i've like thrown out whilst talking is that we shift from a pay-as-you-go system to a system that uh where we we basically leverage age and we start retirement savings from birth so when a child is born they get five thousand pounds pick a figure into a like a like a pension like product that they can't touch until they're 60 and we then get that first 18 years of compounding rather than starting them at 21 you could encourage their parents to pay into it you know like junior projects you know and then at 18 21 it becomes their auto enrollment and then you say to them you're not going to get a state pension or there's going to be very minimal state pension has there any has there been any thought process around schemes like that i looked at it right it's about three billion a year with 680 ,000 kids that are born um roughly i think three billion versus 150 billion state pension yeah you would still need a state pension because what about people who move here just because you move here when you're 30 and work here your whole life doesn't mean you shouldn't get something yeah which could greatly reduce but it's been shifting to be far more preventative you know something may be coming so let's get ahead of it and it costs less today yeah yeah yeah from your perspective would that work like i know you've not fleshed it out but you know was uh does that kind of scheme work when you i think the ideas sound yeah worth exploring i also think as well if you say to everyone alive today you're all going to get a state pension you're all going to get it we'll guarantee it but your kids won't but we're going to do this for them we're going to give them five grand today i think that might be the

43:10Al Miles:political politically palatable yeah you know which is the big challenge really isn't it it's like the numbers can stack but you can't get it past the politicians yeah um yeah yeah definitely do you think on that next yeah the other thing that would love that yeah um the other thing that i've heard in the news recently is student loans yeah oh god wipe them out which is a kind of topic of interest i've seen um the interest being applied is just so vicious because of the rpi plus three percent right yeah you know like um and nine percent coming out of somebody's wage before they have a chance to do anything else with it yeah um yeah i think and then that links to how i look at pensions is like why are people not saving more into their pension well because they've got nine percent coming out of their salary before they had a chance to think about anything else they wanted to do if you look at say you're a higher rate taxpayer because you've gone to uni and you've like got a good job so you're at that 45 % band plus you've got the ni on top which isn't included in that plus you've got a nine percent graduate tax which is your student loan then eight percent what have you got left yeah well you get taking them like 30 % of your wage or the issue is that lots of people coming out maybe don't get a job where they earn enough to make it worthwhile yeah um and so they spend their working life paying back the student loan even just the interest um before it's written off at retirement but education is a surefire way to enrich a nation long term like the studies are pretty clear that if you educate your society it tends to do better well and it's kind of interesting generationally because the kind of baby boomer era many of them would have gone through further education not had the debt accrued that current generations do.

45:02So already that's kind of a signal that times have changed and maybe that contract maybe has shifted. Do you think it's easier to make these small changes and tweaks to pensions or completely do an upheaval and say, okay, everyone who's born after today gets 5 ,000? Like what's like more feasible, a small little tweak or a big change? What's more feasible? Probably the small tweaks, I'd say. But I mean, in the paper, we explore quite maybe radical ideas, which are far more like okay it's not working we know it's not working can we try something slightly different and you transition from one system to the other obviously over time um but yeah i think there will be we do need to make some changes and tweaking maybe won't be enough it feels like the uk is ready for a bit of radical i feel like the voting population like want something big yeah it's like come on you know like do something whereas like the tweaks are I don't think people think they're credible.