British ¡Afuera! is a new series of pieces applying the principles of the IEA’s ‘Sharper Axes, Lower Taxes’ and Argentinian ¡Afuera! to Britain today.
Read Kristian Niemietz’s introductory piece explaining the project here. Read part 1, on the NHS and national pay scales, here, and part 2 on higher education here.
Paid Insider subscribers receive exclusive early access to this: part three, on pensions.
The British state spends 7.5% of GDP on old-age benefits, including non-cash ones. The Australian state only spends 4.5% of GDP on equivalent benefits, a difference of three percentage points. That is despite the fact that the average life expectancy in Australia is more than two years higher than here (just over 84 years vs just under 82). The difference in public spending levels is primarily due to differences in the way the two countries organise their pension systems. If we could move to a pension system similar to theirs, we could also cut public spending on old-age benefits to a level similar to theirs.
The main difference between the two systems is that the Australian one is largely based on private savings, not state-organised intergenerational transfers. What we pay into our state pension system, they pay into private pension funds.
Continue reading this post for free, courtesy of Institute of Economic Affairs.
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