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Will there be a state pension in future?

Journalist: John Fitzsimons, Freelance

ended 17. January 2024

Hello

The GAD this week published its uprating report on the National Insurance fund (https://www.gov.uk/government/news/up-rating-report-2024), and suggests that without additional financing the fund could be dry within 20 years as a result of the projected increase in the number of state pension recipients.

What do you think this means for the future of the state pension? Will the state pension age have to be increased?

Is there a danger that the state pension will not exist, or at least not in its current form, when today's young people reach retirement?

 

5 responses from the Newspage community

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Samuel Mather-Holgate
Independent Financial Adviser at Mather and Murray Financial
The welfare state has long been the biggest spending of the governemnt and the state pension is teh largest and quickest growing part of this due to the triple lock and an aging population. A discussion need to be had as to how the governemtn gradually filter out those who do not need a state pension due to their level of wealth through private provision. A truly means tested society where we are providing benefits for only those that need them seems to be the fairest solution, but political risk is associated with this bold call and few will want to venture there.
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Daniel Wiltshire
Actuary & IFA at Wiltshire Wealth
Further increases to the State Pension age are inevitable. This is simple maths.

In 1908 David Lloyd George introduced a payment of five shillings a week for poor men who had reached the age of 70. Back then, Britons (especially poor ones) were lucky to reach 60. Life expectancy now is closer to 90.

Then there's the dependency ratio; the overall age structure of the population has become gradually older. The differences in the growth of the pensioner population and that of the working-age population has a demographic impact. There were 280 pensioners for every 1000 people of working age as of 2020. This will increase rapidly from the 2030s and will reach levels never seen before by 2070, where the ratio is projected to be 393 pensioners per 1,000 people of working age.

As a society we need to take our heads of the sand and accept that we need to take personal responsibility for our retirements. This will mean either working longer or saving more.
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David Robinson
Co-Founder at Wildcat Law
A national Ponzi scheme, is perhaps the best way to describe the state pension. It relies on those paying in to pay to those receiving it. And guess what? With fewer people paying in than receiving it the fund could be exhausted in 20 years.
This should be something that anyone currently working age should be concerned about. No amount of reductions in avocado or coffee consumption will resolve this issue. However no party of any colour appears to be willing to grasp this thorny issue because of the real threat of loosing votes, instead the triple lock remains and the baby boomer generation continues to auction the silverware.
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Chloe Phillips
Chartered Financial Planner at Pura Vida Financial Planning
Many people believe that there is a "pot of money" specifically set aside for their State Pension. They think, "I've paid into it all my life, so there should be something allocated just for me, right?" However, unfortunately that's not quite how it works.

When you're working and paying National Insurance, you're not tucking away funds into a personal pension pot. Instead, your contributions are helping to pay for the state pension of those already retired. You’ll then be dependent on future workers national insurance contributions to help fund your state pension when it's your time to claim.

With an aging population and the triple lock guarantee, it is difficult to predict what the future costs of the state pension are likely to be in its current form.

The IFS recently published their pension review report where they have recommended a new 'four-point pension guarantee’ which would address the issue of the rachet affect the current policy creates.
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Joshua Gerstler
Chartered Financial Planner at The Orchard Practice
It has been obvious for many years that the State Pension in its current form is in danger of going bust. It relies on the workers of today to pay for the pensioners of today.

With people living much longer, and it now being quite common to live to 100, if you receive your State Pension at 68, you could potentially be receiving it for 32 years!

That is simply not sustainable.

I can see the State Pension becoming a means tested benefit in the future.

It is more important than ever to be making your own provision for retirement as you cannot relay on the State Pension being around forever.