Ageing is a Political Economy Problem

The Pensions Commission's 2026 interim report is right about the scale of the demographic transformation underway and about the gaps in current arrangements. But it largely treats ageing as a fiscal, adequacy and design problem, when it is fundamentally a political economy problem shaped by two constraints. The economic constraint is output and its evolution. With more beneficiaries and fewer workers, only growth will ensure the pension system is adequately funded in the future, but if anything, productivity and real-wage and economic growth have collapsed since 2008. The political constraint is that older voters now represent the majority of the voting-age population in more than half of parliamentary constituencies. Because they care comparatively more about their pension, but comparatively less about long-run growth, ageing makes the public and social investments, which growth requires, electorally more difficult to deliver. Only linking older voters’ standard of living to economic performance can make pro-growth policies politically viable.