... up the state pension which has angered critics stating that they are more concerned about getting re-elected rather than tackling the real issues. But is this not true of most governments? The pensions problem in welfare states is not theoretically a difficult problem. If there were an option to enter a private pension it would seem irrational that one does not take that option, as the rate of return is higher than it would be in a state pension. The Problem arises due to the inter generational contract that is extremely dependant on a high replacement ratio. With fertility rates falling and advances in medicine extending life spans also the problem of early retirement (France at 57), which has strained the intergenerational contract and it is at a point where it can not be kept. The replacement ratio for the current PAYG (pay as you go) system to work has to ...

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